A New Farm Bill Could Help Trade and So Much More

Farm subsidies derailed the Doha round of international trade negotiations last summer. Next year’s Farm Bill offers a way to get trade talks back on track, helping not only farmers, but rural manufacturers and service providers who account for the lion’s share of the rural economy. Done right, the bill could even free up billions to revitalize the nation’s rural communities. Here’s a quick overview of the train wreck and needed repairs.

First, the way some spin it, the United States is negotiating from the magnanimous stance of how much we’re willing to give up. In truth, we’re violating agricultural trade pacts we signed and are essentially negotiating how much cheating we’re willing to curtail. In 1995 we agreed to remove trade-distorting subsidies by 2003; in 2005 we provided some $24 billion in trade-distorting subsidies.

Yes, other countries share in this duplicity. But according to Bob Thompson, Chairman of the International Food and Agricultural Trade Policy Council and Professor of Agricultural Policy at the University of Illinois, we’re being two-faced: telling everybody else to cut their agricultural subsidies, then increasing our own.

Second, hypocrisy aside, we’ve opened ourselves up to legal action such as Brazil’s successful challenge of our cotton subsidies. Those subsidies must stop or the US will be penalized. Interesting and largely unnoticed is the fact that the penalty doesn’t have to target the offending sector. Indeed, it probably won’t. According to analysis by Georgetown University’s Matt Porterfield, rather than retaliate against U.S. cotton growers for damage done to its own farmers, Brazil will likely take revenge on our pharmaceutical or manufacturing sectors.

Why these sectors aren’t screaming bloody murder is a mystery. But they will be when Brazil—with WTO sanctioning—begins availing itself of US patents, software design and other intellectual property rights worth as much as $4 billion. Pharmaceuticals and manufacturing will scream even louder when other countries with potential cases against US farm subsidies start to file their claims. (There is even the possibility of Brazil reaping huge public relations benefits by distributing US patented drugs for HIV/AIDS at low or no cost to developing countries.)

Third, trade agreements for all other sectors are on hold because of the agricultural stalemate. Georgetown’s Robert Stumberg likens this to the proverbial tail wagging (and in this case killing) the dog. He cites a Ford Motor Company Vice President’s complaint that agriculture was “sucking all the energy out of the debate.” And that was last year, before the talks fell apart.

What can be done? By carefully crafting a new Farm Bill next year, the Congress could achieve multiple wins: avoid further WTO challenges; stop undercutting farmers in developing countries and keeping them from earning a living; better help our own farmers (two-thirds get no payments under the current legislation); promote renewable energy; and free up billions of dollars to invest in fostering innovative and sustainable rural economies here at home.

That approach makes sense to Secretary of Agriculture Mike Johanns, who, at a recent Washington event, said, “We can sit back and watch our farm policy be disassembled piece by piece, or we can begin a discussion about how to craft farm policy that provides a low-risk, meaningful safety net for our farmers and ranchers.”

It also makes sense to three former USDA Secretaries who testified before Congress a few months ago on the need to change the Farm Bill. As Clayton Yeutter put it, “why not enact legislation that will meet the domestic and global needs of American agriculture for years to come—irrespective of what is now happening, or not happening, in the Doha Round.” We can do that, he said, with programs that won’t distort trade. That, in turn, will enhance our negotiating leverage if Doha starts up again and will ultimately open up new markets for US agricultural exports.

Obvious and sensible, however, are not necessarily politically expedient. The minority of farmers who stand to lose big subsidies are lobbying hard for an extension of the existing Farm Bill. How that will play out in Congress is anybody’s guess. As former Secretary Dan Glickman put it, “If nothing else, farm bill debates have produced creativity and imagination—most for the good, some just bewildering.”