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Budget, WTO part of farm bill debates

Even on life support, barely breathing and not expected to survive, the Doha Round of trade talks continues to affect U.S. farm bill debates.

The specter of Doha, along with a significantly reduced farm bill budget, makes maintaining the level of protection provided in the Farm Security and Rural Investment Act of 2002 highly unlikely, according to three panelists leading a round table discussion during the 10th annual National Conservation Systems Cotton and Rice Conference in Houston.

Panelists Craig Brown, vice president for producer affairs, National Cotton Council, Louie Perry with Cornerstone Government Affairs, and Pat O'Brien, economist with the economics analysis team for the American Farm Bureau, outlined the challenges legislators face to craft the next farm law.

Current legislation must be extended or rewritten this year. Otherwise, it reverts back to permanent law, which would be a “train wreck,” Brown said.

“WTO litigation pressure will continue to affect farm bill debates, with or without a Doha,” O'Brien said. Trade disputes will weigh on legislators' minds as they try to develop a farm law that's not vulnerable to the kind of litigation Brazil successfully pursued against the U.S. cotton program, he said. Few believe litigation-proof farm law is possible, but a shift in world trade disputes from negotiation to litigation may affect how the U.S. Congress develops the next farm program.

O'Brien said expiration of the Peace Clause, a provision that prevented WTO signers from suing each other, opened the door to lawsuits. The Brazil case followed soon after the 2004 Peace Clause expiration date. Canada is currently initiating a corn case and other WTO participants, including the European Union, Australia and New Zealand, may follow suit.

Litigation may put pressure on the marketing loan, a staple of the 2002 law.

O'Brien said to reduce U.S. vulnerability to trade litigation the next farm bill would have to remove the fruit and vegetable replanting provisions, restructure crop insurance and disaster programs and change the way the current credit program operates to make certain it does not count as a subsidy.

“In 2002 Congress made a conscientious effort to craft a farm bill that was compliant with WTO,” Brown said. The Brazil case against cotton showed that, at least to a WTO panel, the law was vulnerable. “I'm not certain any new farm bill can be in compliance,” he said.

“We hear rumors of renewed efforts to revise the Doha Round of talks. It's uncertain. The Senate and House are not hopeful of an agreement. And agriculture is a key to getting an overall agreement.”

Brown said trade promotion authority for the president also poses a challenge for Congress. “It's critical for the president to have this authority to continue negotiations on Doha or other trade agreements.”

“Trade disputes will be used to pressure Congress to change the farm bill,” Perry said. “Some want a farm bill without challenges. I believe that's an impossible task.”

An equally daunting task will be to maintain the level of protection provided in the 2002 law.

“Spending authority will be the overriding influence on the farm bill debate,” Brown said. “The budget resolution will set spending authority.”

“The budget will define the farm bill debate,” Perry said. And that budget is shrinking.

“We're something of a victim of our own success,” he said. “High grain prices result in less spending.”

O'Brien said the commodity spending for the 2002 law was $8 billion. Continuing that level of protection in the 2007 bill would require from $11 billion to $12 billion. Add to that requests for new spending, such as:

  • Research and promotion for fruit and vegetables, $1 billion.
  • Environmental programs, $3 billion.
  • Ancillary programs (insurance, trade, etc.), $4 billion to $6 billion.
  • New initiatives such as renewable fuels, $1 billion.
  • Total spending, $20 billion to $25 billion.

Projected budget figures are $12 billion to $13 billion.

O'Brien said the target price would need to rise to $11.88 for rice and 76 cents for cotton to keep protection at 2002 farm law levels.

“We have a budget disconnect,” he said. “We want to continue support from the 2002 bill and we have to live within the new budget proposal. The two do not fit.”

None of the three panelists expects Congress to meet its optimistic schedule to have a farm bill ready to sign by September.

“I think it will be Thanksgiving and maybe Christmas before we get a farm bill,” Brown said.

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