*EPF312 05/08/2002
Senate Sends Bush Farm Bill Opposed by U.S. Trading Partners
(WTO violations considered unlikely by supporters) (790)

By Bruce Odessey
Washington File Staff Writer

Washington -- The Senate has given final passage to a six-year farm bill that will increase U.S. agricultural subsidies sharply although without violating international agreements, its supporters say.

Senators voted 64-35 May 8, sending the bill to President Bush, who has embraced it. The House of Representatives passed the bill 280-141 May 2.

The bill reverses the market-driven reforms passed in the 1996 farm bill by a Republican-majority House and Senate. Congress changed direction after three consecutive years when it passed additional spending to assist farmers reeling from depressed commodity prices.

Governments in Canada, Brazil, Australia, the European Union (EU) and elsewhere have denounced the bill, some viewing it as harming World Trade Organization (WTO) negotiations aimed at reducing trade-distorting agriculture subsidies.

"Our world trading partners are already outraged," Senator Richard Lugar, an Indiana Republican opposed to the bill, said in May 7 debate. "Some members of the conference have already dismissed this and said, essentially, that's simply too bad."

Senator Tom Harkin of Iowa, Democratic chairman of the Agriculture Committee, defended the bill, arguing that it complies with all existing WTO commitments.

"Under a worst-case scenario, there is only minimal possibility that we violate our WTO agreements," Harkin said.

Under WTO agreement, the United States can spend no more than $19,100 million a year on trade-distorting domestic support for agricultural commodities. Under the farm bill, Harkin said, that spending would rise from about $11,000 million a year now to about $12,000 million a year -- perhaps as much as $16,700 million in a year with "absolutely devastating circumstances."

Other supporters of the bill argued that even after it becomes law the EU will still be spending far more that the United States on farm subsidies.

The spending authorized by the bill is mandatory, not subject to annual congressional appropriations decisions.

The 1996 farm bill, which expires in October, attempted to move government support away from traditional crop subsidies based on market prices to annual fixed payments that were supposed to be phased out.

The 2002 farm bill moves government support back in part to a crop price basis. Over 10 years it would increase spending for farm support by about $82,000 million, roughly 70 percent of it for commodity crops.

The bill continues fixed annual payments. It also creates a new countercyclical program designed to supplement farm income in years when commodity prices drop, the payments triggered when the crop market price falls below a target price set in the bill -- $3.86 per bushel of wheat, for example. It also continues marketing loans, allowing producers to use crops as collateral to borrow money from the government.

It limits to $360,000 a year the amount of total payments to individual farmers, down from the existing $460,000 cap.

The bill has a number of trade-related provisions. One will require country-of-origin labeling in stores for meat, fruits, vegetables, fish and peanuts; that provision will become mandatory after two years.

The bill continues the Market Access Program, which assists in sales of U.S. agricultural products abroad. It continues the Food for Progress program, which provides credits or grants to developing countries to buy excess U.S. commodities.

Deleted from the final bill is a Senate-passed provision that would have lifted existing restrictions against providing private credit for food sales to Cuba.

The bill also continues programs for food stamps for low-income families and individuals and rural development and sharply increases spending on agricultural land conservation.

In Ottawa May 3, U.S. Secretary of Agriculture Ann Veneman reiterated administration support for the farm bill while still pressing for successful conclusion of the WTO agricultural negotiations re-launched in November by trade ministers in Doha, Qatar.

"We remain committed to continuing to aggressively pursue trade reform in the Doha Round," Veneman said. "The farm bill does not in any way change that .... We will conform our farm laws to encourage new Doha Round agreements and particularly ones that have substantial results in market access."

Voting against the bill were some fiscal conservatives such as Lugar, who argued that its subsidies will aggravate the federal budget deficit by encouraging even more overproduction.

Opposition was stronger from senators like Lugar from states in the Midwest, where the relatively smaller farms will receive less-generous support than the giant corporate farms in the South and California. Senator Trent Lott, the Republican minority leader from the Deep South state of Mississippi, strongly supported the bill, for example.

"We know in this bill where the money will go," Lugar said. "We even know that it's money we do not have."

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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