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Harkin Previews Farm Bill
The Associated Press reported yesterday that, “The U.S. Congress is considering legislation that, critics say, could hurt the poor in developing countries, set back trade talks, contribute to environmental damage and add to the government’s budget deficit…Yet the measure, providing billions of dollars in agricultural subsidies, is expected to pass despite a veto threat from President George W. Bush…Lawmakers say the money is needed to protect America’s farmers and help to preserve the rural way of life for millions of Americans. For many members of Congress, the bill also is crucial to their own survival in next year’s elections, given the outsized political muscle of the farmers and the agribusinesses who benefit.”
I. Farm Bill
II. WTO Brazil Cotton Case
I. Farm Bill
Reuters writer Charles Abbott reported yesterday that, “The new U.S. farm law may shield farmer income from crop and market failures, the first time ‘revenue protection’ would be part of the farm program, the Senate Agriculture Committee chairman said on Tuesday.
“Chairman Tom Harkin said he also wants the farm bill to offer loan guarantees for cooperatives and other businesses to build the first commercial-scale ethanol distilleries using cellulose as feedstock. Most U.S. ethanol is made from corn now.”
Mr. Abbott indicated that, “‘I do want to move in that direction,’ said Harkin, an Iowa Democrat. He said the more he studied the revenue protection concept, the more value it held as a modification to the so-called counter-cyclical payments made when crop returns are below the targets set by Congress…[I]n January, the Bush administration proposed revenue-based counter-cyclical payments. Last week, the House of Representatives passed a bill that lets farmers volunteer for revenue-based CCPs in 2008-12.”
With respect to renewable energy, the Reuters article added that, “‘The House is pretty darn good, frankly’ on renewable energy, Harkin said during a telephone news conference. The House-passed farm bill has a $2 billion loan guarantee program for cellulosic ethanol plants and a pilot program for growing biomass crops.
“‘We’re going to do a little bit more than the House,’ said Harkin, suggesting cost-share aid to farmers to dabble in biomass crops and rental payments to offset the cost of growing the crops while the cellulosic ethanol market gets on its feet.”
Philip Brasher, writing yesterday at The Des Moines Register Online, reported that, “The Democratic-controlled Senate may pick up some key parts of the House-passed farm bill, including a tax measure that Republicans opposed.
“The chairman of the Senate Agriculture Committee, Iowa Democrat Tom Harkin, said Tuesday he supported the tax on foreign corporations that the Democratic-controlled House attached to its version of the farm bill. The tax would raise an estimated $4 billion over the next five years.”
Also on funding, the Register article noted that, “Revenue from the crop-insurance industry was earmarked in the House farm bill for international food aid.
“Critics of the insurance industry say companies and agents are making excessive profits as soaring commodity prices boost policy premiums.
“Lobbyists for the industry say the cut the House wants to make is excessive.”
In addition, Mr. Brasher stated that, “Harkin is dropping the idea of reducing the $5.2 billion in annual fixed payments that go to grain and cotton farmers;” and, “reiterated his plan to expand the Conservation Security Program, which provides payments to farmers who follow practices that reduce erosion and improve wildlife habitat. Under the House bill, no additional farmers would be allowed to enroll in the program until 2012.”
Dow Jones News writer Bill Tomson stated yesterday that, “The Senate Agriculture Committee won’t debate a farm bill proposal until at least September – a necessary step for the bill to be sent for a Senate floor vote.”
Brownfield’s Peter Shinn reported yesterday that, “Senate Ag Committee Chairman Tom Harkin told reporters Tuesday that he may issue his preliminary version of the 2007 farm bill as soon as next week, even though Congress will be in recess. But Harkin also said details of his proposal are still being fleshed out and may not be available before Congress returns.
“‘I had hoped to have something this week, but you know, these are some tough negotiations going on right now and we’re still having some conversations,’ said Harkin. ‘I’m still hopeful that maybe by next week – I know we’re not in session, but staffs work and we’re working and we’re always on the phone and that kind of stuff – that we might be able to have something that we could basically roll out for people to look at over the August break before we come back in September, but then again, I’m not going to be held to that,” he continued. ‘If we don’t reach some agreements this week then I’m going to keep it in my hip pocket until we come back in September.’”
DTN Political Correspondent Jerry Hagstrom noted yesterday (link requires subscription) that, “Harkin also said he expects to cut about the same amount of money from the crop insurance program as the House did and is looking to follow the House in using oil royalties as an offset.”
The DTN article pointed out that, “Harkin said he has been speaking on an almost daily basis with Senate Budget Committee Chairman Kent Conrad, D-N.D., on the policy and offset issues. Harkin said the savings proposals from within the farm bill that Conrad has proposed would probably total $5 billion rather than the $7 billion Conrad has suggested — although a Conrad aide said later that Conrad contends he has found a full $7 billion in savings within the farm bill.
“There has been speculation among lobbyists that Conrad and Harkin are at odds due to Conrad’s emphasis on the commodity title and Harkin’s emphasis on conservation programs, but Conrad disputed that view Monday in an interview. ‘It’s always a challenge due to big regional differences. We’ve come together in the past. We’ll do it again,’ Conrad said.”
***
Recent news and editorial items have also provided additional analysis and perspective regarding the House version of the Farm Bill.
DTN’s Chris Clayton reported yesterday (link requires subscription) that, “One of the major reforms missing from the farm bill that passed the House of Representatives last week is improvements to simplify conservation programs for producers, the chief of USDA’s Natural Resources Conservation Service said Tuesday.
“‘That is probably the thing I am most disappointed in,’ said Arlen Lancaster, who took over as head of NRCS last August.”
Mr. Clayton noted that, “USDA had proposed consolidating its cost-share funding programs into one major application process. That would simplify the work for farmers and make it easier to fund producers rather than having several programs with different objectives and requirements. The House bill last week did not include such language and even added more specific niche cost-share programs for peanut farmers and producers who have ‘muck’ ground.”
However, the DTN article added that, “Ralph Grossi, president of American Farmland Trust, said conservation groups in general should feel positive about the House bill because of an overall 35-percent increase in conservation spending. That includes more money for increasingly popular programs such as the Farm and Ranchland Protection Program.
“‘I’ve been telling people the conservation groups ought to see a lot of positives in what the House passed,’ Grossi said.”
The Associated Press reported yesterday that, “The U.S. Congress is considering legislation that, critics say, could hurt the poor in developing countries, set back trade talks, contribute to environmental damage and add to the government’s budget deficit.
“Yet the measure, providing billions of dollars in agricultural subsidies, is expected to pass despite a veto threat from President George W. Bush.
“Lawmakers say the money is needed to protect America’s farmers and help to preserve the rural way of life for millions of Americans. For many members of Congress, the bill also is crucial to their own survival in next year’s elections, given the outsized political muscle of the farmers and the agribusinesses who benefit.”
The AP article stated that, “”If you are representing a rural district in Iowa and you vote to cut corn and soy payments, you will probably lose,’ said Marc Cohen, a researcher at the International Food Policy Research Institute, a Washington-based policy group that focuses on world hunger.”
Later, the article explained that, “They are a big issue in the latest round of global trade talks, known as the Doha round, in which rich and poor countries have been wrangling over trade barriers. Other countries are looking to the United States — as well as the European Union — to slash agricultural subsidies before they take big steps to open their markets.
“‘The bill under consideration signals to other countries that the United States is not serious about cutting its agricultural subsidies,’ said Daniel Sumner, director of the University of California Agricultural Issues Center.”
Concluding, the AP article said that, “Farm states also could be crucial in elections for Congress, where Democrats hold only narrow majorities in both chambers. The top Democrat in the House, Speaker Nancy Pelosi, once advocated revamping the farm bill, but she helped push through the bill as it stands.
“Farmers also are adept at making their views known in Congress and have effective lobbyists, such as Charlie Stenholm, a former congressman who, until 2005, was the top Democrat on the Agricultural Committee.
“Stenholm argues that the United States cannot stop helping its farmers while other countries and the European Union maintain their support programs.
“‘If you don’t maintain a competitive structure with the rest of the world, the prices would fall and you would see collapses around the world,’ he said.”
A separate AP story reported recently that, “North Dakota’s two Democratic senators praised farm legislation passed by the U.S. House Friday, though both would like to see more reform of agricultural subsidies and a permanent fund to compensate farmers for weather-related losses.
“The Senate is expected to take up their version of the legislation in September, and both of the state’s senators, Byron Dorgan and Kent Conrad, will be heavily involved in the negotiations. Conrad is on the Senate Agriculture Committee and Dorgan is leading a push to lower the limits on the total amount of subsidies a farmer can receive.”
However, the AP article stated that the House bill “doesn’t contain money for a permanent disaster program, which has been a top priority for the state’s congressional delegation.
“Western and Midwestern lawmakers have fought for emergency disaster aid several times in the last several years, most recently winning $3 billion for farmers affected by weather-related disasters earlier this year. But they would rather have a permanent fund that could be tapped when losses reach a certain threshold.
“Conrad, also chairman of the Senate Budget Committee, is working in ways to find money for the program in the Senate. He says his current thought is to include a program that operates as part of crop insurance.”
Rapid City Journal (South Dakota) reporter Steve Miller noted recently that, “Tightening the income eligibility for federal farm payments, as outlined in the new House farm bill, would affect fewer than 30 farmers in South Dakota, according to government estimates.”
Mr. Miller indicated that, “Rep. Stephanie Herseth Sandlin called the $1 million eligibility rule part of important reforms in the House bill while retaining a safety net for ag producers.
[Sen. John Thune (R-SD)] believes the House took a good first step in lowering the eligibility level, according to Kyle Downey, Thune’s communications director.
“‘He thinks that in the Senate that we could do even better,’ Downey said. However, Thune doesn’t have a target figure, he said.
“Sen. Tim Johnson, D-S.D., said he also hopes the Senate version of the farm bill can improve on the House version regarding the payment limitations.”
On Monday, Brownfield’s Julie Harker reported that, “Northwest Missouri Congressman Sam Graves says on a scale of one to 10, he gives the House-passed farm bill a six. The Republican says the bill that came out of the most bipartisan committee in Congress, the House Ag Committee, unfortunately turned into a partisan fight when it hit the House floor, on tax increase issues and labor standards issues.
“Graves says he’s concerned that a lot of money was pulled out by Nancy Pelosi and others in House leadership, reducing farmers’ safety net, like the crop insurance program.
“‘That’s a program we continue to try and make a better program. Farmer’s would much rather help themselves than depend on themselves than the federal government for assistance.’”
Recent editorial opinion on the House version of the Farm Bill has included the following,
* “Pelosi’s bad farm bill.” The Los Angeles Times. 7.31- “There are three ways to undo the damage Pelosi and company have wrought. First, the Senate could craft a more sensible farm bill when it takes up the matter in September. Second, Bush could make good on his veto threat. And third, Canada and Brazil could win their cases at the World Trade Organization challenging some U.S. farm supports. Because options two and three would only confuse the issue, the best hope for real reform lies with the Senate.”
* “Growing farm subsidies.” The Washington Times. 7.31- “With the prices of many subsidized row crops at or near record levels and with farm incomes very strong and likely to remain so for some time, this was the perfect moment for Congress to begin reforming the trade-distorting, welfare-laden farm-subsidy programs. Regrettably, the House balked last week. Real reform will now be up to the Senate, where Republican Richard Lugar of Indiana and Democrat Tom Harkin of Iowa could lead a bipartisan reform agenda. The Senate will be considering its own five-year farm-overhaul legislation after the August recess. However, if the Senate follows the House’s path to failure, President Bush will need to exercise his veto threat and force Congress to reconsider. Otherwise, an opportunity for real reform will have been lost for at least another five years, and the prospects for rescuing the multilateral Doha trade negotiations will suffer another major blow.”
* “How subsidies look from the family farm.” By William McKenzie, a Dallas Morning News editorial columnist. 7.31- “Despite the House vote on Kind-Flake, there’s no reason a Republican like Dick Lugar couldn’t push a similar amendment in the Senate. He’s equally interested in overhauling American farm policies. And we all could benefit.
“Limiting subsidies to those who need them – and encouraging more land conservation – can protect our food supply, improve our land and help those farmers who actually deserve it.”
* From “The Editorialist”- A daily roundup of the nation’s opinion pages by Rob Andersion posted at The Washington Post online. From yesterday’s update, “The Farm Bill: USA Today criticizes House Democrats for passing a ‘business-as-usual farm bill’ last week instead of a comprehensive overhaul of the ‘nation’s Depression-era system of farm subsidies.’ ‘Although the House-passed farm bill does include worthwhile provisions to overhaul the food stamp program, bolster land conservation and promote biofuels, the Democratic majority botched its opportunity to wean farmers from government handouts’ … the [Wall Street Journal] argues that President Bush’s promise to veto the ‘overstuffed farm bill now waddling through Congress’ is ‘looking more attractive by the moment.’ The editors criticizes the fact that the ‘bill is flush with subsidies to produce ethanol, the corn-based alternative fuel that still can’t compete on a free-market basis.’”
II. WTO Brazil Cotton Case
Associated Press writer Betsy Blaney reported on Monday that, “South Plains cotton producer Doug Hlavaty is dumbfounded by the World Trade Organization decision last week that went against U.S. growers — again.
“The interim decision contends changes made last year in what the trade body says are illegal subsidies to American producers were insufficient.
“‘It doesn’t make sense,’ Hlavaty said Monday. ‘The (cotton) farmers here aren’t getting rich. As long as we make a crop, we get by.’”
After noting various perspectives on the WTO development, the article stated that, “Others working with the cotton industry said the interim ruling shouldn’t be part of Congress’ debate on the new farm bill. Larry Combest, the chairman of the House Agriculture Committee during the writing of the last farm bill in 2002 who now represents farming interests, said it’s ‘impossible to anticipate what the rules of the game may be.’
“‘When we wrote the 2002 bill, we only made sure we were in compliance with existing rules that were on the books,’ he said in an email response.”
The AP article noted that, “Farm support payments have long been a source of contention in trade negotiations between wealthy and developing nations. The disagreement contributed to the collapse of world trade talks in 2003 in Cancun, Mexico.
“In April 2004, the WTO ruled that U.S. cotton subsidies were unfair to farmers in developing nations. Siding with a complaint first lodged by Brazil in 2002, the WTO said the subsidies boost U.S. production and exports while lowering world cotton prices.
“A spokesman for U.S. Sen. Kay Bailey Hutchison, Matt Mackowiak, said she ‘strongly opposes’ the interim ruling. When the Senate takes up the farm bill in September, Hutchison will work to ensure Texas producers get the safety net they deserve, he said.”
On Monday, Pedro de Camargo Neto, the former secretary of agricultural production and trade for Brazil, filed a post at the Trading Ideas Blog (A Blog from the International Food & Agricultural Trade Policy Council) entitled, “WTO Cotton Panel Ruling-Has the US Made Progress?”
In part, Pedro de Camargo Neto stated that, “In November 2002, Brazil filed the beginning of consultations in Geneva regarding two important disputes on agricultural subsidies–a dispute with the US on cotton subsidies, and a dispute with the European Union on sugar subsidies. The reactions by authorities in Europe and the US were completely different.
“Brazil was extremely successful in both cases. Today, nearly five years later, the European Union has undertaken changes in its sugar regime basically eliminating injury to Brazil and other sugar exporting countries. The US, however, insists on ignoring the panel result, and continues to be a major exporter of cotton with the strong help of the US Treasury. The result of the compliance panel confirms this – it has been reported that the panel’s interim decision found that the US has largely failed to address what the original panel found not to be in compliance with its WTO obligations.”
After noting that the EU has reformed its sugar program, the update stated that, “The situation in the US, however, continues to be different. After a long delay, the US eliminated its Step 2 program, which was a completely illegal export subsidy program notified erroneously to the WTO. It is hard to understand how the program survived years unnoticed. The panel decision included provisions requiring that the US reform in a manner such that it no longer causes injury to Brazil through its countercyclical and marketing loan programs. Through these programs, cotton farmers can and have received more money from the Treasury than from the market.
“Although the final scope of the 2007 farm bill is not yet known, the bill that emerged from the House of Representatives last week presents more of a status quo for US cotton programs, with the continuation of extensive subsidy payments and planting restrictions that benefit cotton growers and other commodity producers. It appears as if the US believes that receiving more money from the Treasury than from the market, while remaining the world’s largest cotton exporter with around 40% of the international market is right. The US Administration, USTR, USDA, and Congress seem content to continue on this path regardless of what injury they cause to the Brazilians, or even the economies of African countries.
“This path of ignoring the WTO panel ruling is reminiscent of an Empire essentially disinterested with the impact of its actions on the rest of the world.”
In conclusion, Pedro de Camargo Neto stated that, “Brazil has recently filed a new consultation request regarding US agriculture subsidies. This happened immediately after the G-4 meeting in Potsdam when prospects for the Doha Round negotiations seemed to have collapsed.
“This time Brazil is saying that the US is exceeding the Uruguay Round’s Agreement on Agriculture limitation of $19 billion for trade distorting domestic support when direct payments are counted as amber box along with counter-cyclical payments and production flexibility contract payments.
“Unfortunately, there is a need for litigation, although it may still not be enough to bring about essential changes in US agriculture policy. Negotiation is always preferable, but it seems that progress in the US on agriculture may only come about through litigation.”
Press reports indicate that the European Union would like to join Brazil as a third party in their case regarding domestic subsidy support levels.
Keith Good
