Transcript Factors influencing the shape of the 2007 farm bill

Agricultural policy issues in
th
the 109 Congress
Stephanie Mercier
Senate Agriculture Committee
July 25, 2005
Summary
WTO process
Other trade policy issues
crop insurance
Other legislative issues
Concluding remarks
Trade policy issues
U.S. agricultural trade, 1960-2005
$bill.
70
60
50
Exports
40
30
20
Imports
10
2000
95
90
85
80
75
70
65
1960
0
How is U.S. trade policy agenda
performing?
Growth in imports occurring as result of
demographic, income changes—relentless
Growth in exports more sporadic
– Drop off in late 1990’s due to external causes
(Asian economic problems, strong U.S. dollar)
– Active trade policy effort may have forestalled
greater decline
U.S. trade policy agenda involves multiple
tracks
Doha Development Agenda
Uruguay Round (1993) envisioned continuing
negotiations to further reform agriculture, trade
in services in 1999
Doha Round launched after WTO Ministerial
meeting held in Nov. 2001
Key issue areas:
–
–
–
–
–
Agriculture
Non-agricultural market access
Trade in services
Implementation issues from Uruguay Round
Trade in intellectual property rights
WTO framework agreement
Completed in July 2004
Covers agriculture and other key areas
Long on principles, short on numbers
Reflects U.S. priorities of greater cuts from higher levels
(harmonization) in domestic support and market access
Not clear if final deal possible if value of lost domestic
support < value of market access opportunities gained
Urgent need for capacity to do rapid analysis of
implications of various proposals for reforming
agriculture in Doha Round
Success in agriculture is linchpin for success in overall
Round
Anticipated WTO timeline
Complete `first approximation’ document
by end of July
Ministers to approve broad agreement at
Hong Kong Ministerial in December
Fill out details (tariff lines, special product
designations) in 2006
Final agreement in early 2007, coinciding
with last window for Congressional
approval under TPA
WTO Dispute Settlement
Crucial aspect of Uruguay Round
U.S. frustrated with lack of enforcement
mechanism under GATT
U.S. single largest participant in WTO dispute
settlement process
– Complainant in 69 cases (21 agric.)
– Respondent in 80 cases (11 agric.)
Brazil cotton case pivotal for future of U.S. farm
policy
– First to call U.S. commodity programs into question
Brazil cotton case: timeline
Case filed by Brazil in September 2002, asserting that:
– U.S. forfeited peace clause protection by excessive spending on
domestic support for cotton
– U.S. cotton programs create serious price-suppressing effect on
world cotton market
– U.S. must change or eliminate its price-related programs
September 2004, initial panel found for Brazil on most
aspects of case
In March 2005, WTO appellate panel issued report which
upheld original panel
In June 2005 U.S. government accepted appeal verdict,
agreed to comply
Brazil cotton case--implications
Panel report indicates quick action needed on export
credit and cotton Step 2 programs—July 1, 2005
– USDA took regulatory steps to address concerns on GSM export
credit programs
– USDA sent draft legislation to Congress on July 5 that would
terminate cotton step 2 and make final statutory changes on
export credit
– Likely to be folded into Committee’s budget reconciliation
package ($492 million in savings for 5 years)
No firm deadline or guidelines on modification of
domestic support programs
Politically, it would be difficult to reform domestic
programs for cotton only
Further changes (if needed) could occur in 2007 farm bill
At stake in trade negotiations
Trade promotion authority (Trade Act of 2002),
Congress delegates authority to the President,
limiting its ability to influence provisions of trade
agreements
Greater opportunities for U.S. agriculture in
hemispheric (FTAA) and multilateral negotiations
(WTO)
If double U.S. market share in current and
planned bilateral and sub-regional negotiations,
gain of $3.3 billion
If 10 percent share increase in markets in FTAA
and WTO, gain of more than $5.5 billion
Recently completed U.S. trade deals
FTA name
Morocco
Australia
CAFTA+DR
Bahrain
Partners
1
1
6
1
Value ag.
trade
$1.7 bill.
$2.8 bill.
$3.3 bill.
$0.43 bill.
U.S. share
5%
14%
46%
7%
CAFTA-DR in the balance
Implementing legislation passed 54-45 in Senate
on June 30: narrowest margin for FTA in Senate
Vote expected in House before the end of July
—outcome uncertain
Specific concerns
– Modest benefits from CAFTA-DR
– Import-sensitive sectors such as sugar concerned
about impact
– Lack of effective labor, environmental provisions
– Will agreement really help working class in Central
America
CAFTA-DR and sugar
Text provides 110,000 tons additional access to CAFTA
countries, expanding to 150,000 tons by end of phase-in
This provision protested by U.S. sugar industry
Assert that CAFTA undermines stability of U.S. sugar
program, which is based on a support price dependent
on limiting imports
Sugar groups represent main opposition to CAFTA within
U.S. agriculture
Opposition from sugar-state members could mean
difference between winning and losing
– At least half of Senate Republicans who voted `No’ were from
sugar-producing states
Ongoing U.S. trade negotiations
Na m e
WTO
FTAA
SACU
Th a ila n d
An d e a n
c o u n t r ie s
Pan am a
Co u n t r ie s
14 5
33
5
1
3
To t a l Ag.
Im p o r t s
$3 29 b ill.
$2 8.9 b ill.
$2 .1 b ill.
$2 .8 b ill.
$2 .9 b ill.
1 $0 .4 b ill.
Source: USDA and FAO: based on 2001 figures
U.S. s h a r e
1 4%
1 5%
5%
1 8%
3 0%
4 5%
U.S. agricultural exports as
share of total receipts
0.35
0.3
0.25
0.2
0.15
0.1
1970
80
75
Source: Economic Research Service, USDA
90
85
2000
95
Other trade policy issues
BSE impact on beef trade
– U.S. border re-opened to live Canadian cattle on July
18 after court injunction over-turned
– 2nd U.S. BSE case (1st indigenous) may have
complicated re-opening markets to U.S. beef
Some markets closed in response to 2nd case
Some markets (Japan, Korea) remain closed since 1st BSE
case (Dec. 2003).
Food aid issues
– WTO developments
– U.S. budget actions
Other policy issues
Crop insurance
– PRP
– Conflict of interest rules
Soybean rust
Livestock
– Price reporting
– Animal ID
– COOL
Energy bill
Current effort is third try to get bill passed in last five
years
Now in House-Senate conference
Key agriculture-related provisions
–
–
–
–
Renewable Fuel standard (RFS)
Biomass energy provisions
Renewable portfolio standard (RPS)
Renewable energy production tax credits (wind, biodiesel)
Sticking points in conference
–
–
–
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MTBE liability provision
RFS
RPS
Tax provisions
Coments about farm bill process
Many provisions of the 2002 farm bill expire in
September 2007
USDA has already launched farm bill listening sessions
this summer (45 total?)
House Ag. Committee could begin field hearings on farm
bill yet this year
No urgency to finish early this time:
– wait for Doha process
– likely no new money at stake
If AAEA members want to do research which could have
an impact on the farm bill process, now is the time to
begin
Concluding remarks
While Committee work on farm bills is
cyclical, there are a lot of issues where
there is always something going on
Even if there is not specific legislation
needed, staff need to stay on top of all
developments that touch on U.S.
agriculture, however tangential
A Hill staffer’s work is never done