The Bush Administration’s new Farm Bill is receiving far more negative attention than it would like. Global commentators have accused the US of “obscene protectionism” in the Bill’s increasing agricultural subsidies, and others have questioned whether its unilateralist outlook will do more harm than good for neighbouring countries. A team of just-food.com correspondents take a look at the Bill, and the criticism it has provoked.
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If there is one striking characteristic about Washington’s Bush Administration, it must be its almost unprecedented ability to infuriate the entire world with its unilateralist outlook, especially its self-serving trade policies.
For years, the US government has actually played Mary Poppins on food production subsidies, claiming that its handouts do not encourage farmers to overproduce when prices are low. Now it is not really trying to pretend. President Bush has signed the US Farm Bill onto the American Statute Book: welcome home protectionism.
It is probably not the detail that counts. After all, the EU still hands out plenty of euros to its producers and the US has not (yet) broken its World Trade Organisation (WTO) commitments on protecting its agricultural markets.
Farm Bill fuels debates
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By GlobalDataRather it was the sentiment that fuelled debates in Washington on the Farm Bill. The best place to start is Bush himself: “The farm bill will strengthen the economy over the long term. It helps farmer independence, and preserves the farm way of life for generations. It helps America’s farmers, and therefore it helps America.”
This chimes neatly with much of the Bush administration’s interaction with the rest of the world. Where perceived US interests are at stake, hang the consequences for foreigners. That is what has happened with the erection of US duties to protect its steel industry, the abandonment of the Kyoto Protocol on global warming, the International Criminal Court and now, many believe, with the Farm Bill. European and other farm exporting countries have expressed surprise and dismay at both the content of this legislation and the apparent philosophy behind it.
Back to old policies
Dieter Mirdach, manager of the Frankfurt-based European Dairy Farmers Club, which represents 270 dairy farmers across 16 European countries, said the US Bill “will of course stir up the whole industry and worldwide trade relations, and will have effects on the next WTO negotiations”.
He told just-food.com: “It is bad news because European farmers are now getting away from the old policy of asking for subsidies and are turning to more market-oriented production. But now, surprisingly, the US is going back to the old policy and supporting the farmers, even the big ones, in a way which is not agreeable and not consistent with the current WTO negotiations,” he said.
Indeed, COPA (the Committee of Agricultural Organisations in the European Union) says there is “much to be criticised in the new US Farm Bill” The organisation has told the US that: “The trade-distorting elements of the new Farm Bill could not be accepted.”
Increase in US crop support
Luis Portugal1, senior policy analyst in the agricultural directorate of the OECD, said that the amount of support to be provided for US farmers would depend on world prices but all things being equal “we should expect an increase in support in the crops sector of about US$2bn”.
In percentage terms this is relatively small. The level of support relative to farm receipts is currently 21% in the US and the new farm bill could put this up to 22%. “But despite the relatively small increase in support, what really matters is that the way they will now provide support is more linked to production and the capacity to distort markets is greater,” he added.
Global dairy market to suffer?
In Australia, the United Dairy Farmers of Victoria said that the international dairy market in 2002-2003 would be worsened by the possibility of increased US dairy subsidies arising out of the Farm Bill. There was a 400,000 tonne stockpile of skimmed milk powder in the US, equivalent to more than half of the US annual dairy output, it claimed.
Meanwhile, there has also been criticism in Canada, which is particularly exposed to any harmful effects of the bill. Richard Doyle, from the Dairy Farmers of Canada, said: “The (Canadian) tariff rate quotas depending on the dairy product is roughly 200% which is significant, no question, but if the price for dairy in the US is dropped too significantly along with currency exchange rates there is the concern that the ability to control imports through these tariffs will no longer be effective.”
And Myles Frosst , executive director of the Canadian Agrifood Marketing Council, added: “We disapprove of the farm bill. It’s putting a chill on trade negotiations. The new farm bill’s impact on commodity prices in the short term undermines the economic sustainability on primary production.”
“Obscene protectionists”?
In south and central America, the criticism has been sharper still. The Brazilian government said that the Farm Bill would cost the country approximately US$2.4bn in yearly export revenues (US$9.6bn, its own farmers estimate) and could very well jeopardise bi-continental free trade agreements.
Argentine President Eduardo Duhalde did not mince his words when he talked to reporters: “We strongly condemn this move because the US promotes free trade only when it suits them; later they change into obscene protectionists.” His beleaguered economy, which depends on agricultural exports for 52% of it total export income, estimates its eventual losses at US$1.4bn. Chile, meanwhile calculates a US$1.5bn loss. Uruguay, Guatemala and Nicaragua have also condemned the bill.
On the other side of the world, Asian food producers are also unhappy. Take the Indian Dairy Association. It has attacked the Bill’s continuation of the existing Milk Price Support Programme, which commits USDA’s Commodity Credit Corporate to buy unlimited quantities of butter, cheese and skimmed milk powder from dairies at minimum prices. Association president Animesh Banerjee told just-food.com: “The US move, far from helping to reduce trade distorting subsidies, would unleash a fresh wave of subsidies by competing countries.”
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Criticism falls on deaf ears
All of this criticism is falling on deaf ears in the US, however. Christopher Galen of the US National Milk Producers Federation says the criticism of the Farm Bill by the EU is a case of the pot calling the kettle black, citing Brussels’ continuing support of subsidies through the (admittedly reformed) Common Agricultural Policy (CAP). “The biggest impediment to trade has been the use of export subsidies. The EU is the most egregious users of those programmes,” he said.
Meanwhile, the Bush administration has been trying to argue – perhaps disingenuously – through its under-secretary of agriculture that it remains pro free trade, claiming that because it would be counter-productive to enact legislation that prevents it from gaining greater market access, the bill must be OK. However, the free trade being considered here seems to be US exports, with the rest of the world getting short shrift.
“Twenty-five percent of every dollar of gross income comes from exports. So you can see that this industry has to be committed to further liberalization of trade in food and agriculture,” said under-secretary J.B. Penn, who also countered criticism that the Farm Bill will increase US production, saying the bill offers no incentive to evoke booms.
Other lobby groups echoed the government’s stance. “We believe the farm bill and its programs represent a balanced law that provides much needed support and stability for the bulk of the US farm families,” said American Farm Bureau Federation president Bob Stallman.
And the National Corn Growers joined the chorus of commodity growers. It claims that with foreign tariffs on agricultural goods sometimes more than five times higher than US tariffs, US farm policy helps level the playing field so its farmers can compete in a world market that is not free or fair.
Country of origin concerns
That said, US food processors have not seriously entered the subsidy arguments. “Country of origin is what processors are concerned about,” says Mike Gill, vice president of legislative affairs at the American Frozen Food Institute, who illustrates the complex nature of processed foods, using a typical frozen lasagna that “has 32 ingredients from 16 different countries”.
The new completed bill says that for a commodity to be labelled a US product, it must be born, raised and processed in the US. However, the food processing industry was relieved that the final law stated that if those commodities are ingredients for processed products, they will not fall under the labelling requirement.
By just-food.com correspondents Keith Nuthall, Alan Osborn, Monica Dobie and Philip Fine
1 Luis Portugal will be speaking at Congrilait, the 26th World Dairy Congress in September.
