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THE VOCAL POINT
THE VOCAL POINT: WTO debacle lends urgency to farm bill reform

by Dan Murphy on 8/11/2006 for Meatingplace.com

It has only been a few weeks since the World Trade Organization's Doha Round of trade talks crashed and burned last month in Geneva, Switzerland.

But resurrecting the negotiations will likely be put on hold until for years, probably until after the 2008 presidential elections.

The losers include the world's developing nations, which stood to benefit from a more level playing field, and U.S. producers and farmers, who increasingly rely on export sales (Washington state, for example, exports almost 90 percent of its annual wheat harvest).

How did the collapse occur? How did talks that once seemed to promise a win-win agreement on liberalized global trade — not only for farm commodities but for manufactured goods, lumber and even software — go so sour?

The bad blood started, if you'll remember, with President Bush's decision in mid-2002 to impose higher tariffs on imported steel as a sop to U.S. steelmakers suffering from foreign competition. The move sparked immediate retaliation from other WTO members, principally the European Union, which threatened to impose retaliatory tariffs on dozens of imports, and Russia, which temporarily blocked imports of U.S. chicken.

Less than a year later, the WTO Ministerial in Cancun, Mexico, collapsed without reaching any agreement, as Brazil and the so-called "G-20" (mid-market) countries banded together to demand significant reductions in agricultural export support by the EU and the United States, along with greatly increased market access for agricultural commodities.

The ill will that sunk the Cancun session blossomed over the next three years of meetings in Africa, Europe, China and Hong Kong into entrenched and increasingly partisan wrangling between the EU, the United States and everyone else.

It reached its apex when Pascal Lamy, WTO's director general, called a halt to the negotiations. U.S Trade Representative Susan Schwab told reporters the day the talks were disbanded that, "[USDA] Secretary [Mike] Johanns and I got [to Geneva] with sufficient flexibilities, but our trading partners did not."

Although our negotiators might be in denial, the culprit in sinking the WTO talks was evident to everyone else: U.S. and EU agricultural subsidies, particularly our bloated farm bill-financed crop supports. Over the past 10 years, according to a recent Washington Post analysis, more than $172 billion in cash payments have been handed out to agricultural operators — some of whom aren't actually farming — including about $25 billion in 2005.

Even the conservative National Center for Policy Analysis estimated that U.S. farm subsidies now cost developing countries — in many cases, our customers — somewhere around $24 billion a year, due to the artificially depressed price of crops such as wheat and corn.

By now it should be evident that livestock producers and meatpackers, while they may appear to benefit from subsidized corn and soybeans, are positioned to pay a heavier price long term if the progress made in opening up export markets over the last decades comes to a screeching halt due to U.S. farm subsidies the rest of the WTO finds unacceptable.

But our misguided approach to agricultural subsidies distorts more than commodity prices. With the bulk of the billions in annual payments going to support production of a handful of program crops, farmers are incentivized for intensive monoculture, which requires significant inputs of fertilizers and fuel that would not be nearly as economically feasible absent those regular government checks.

Evidence continues to mount that a "dead zone" stretching across more than 6,000 square miles of the Gulf of Mexico has been created, in large measure, from excessive runoff of fertilizers from intensive farming in the Midwest. Fishing, crabbing and shrimping across a huge swath of the Gulf have been imperiled, if not annihilated.

Of course, USDA's subsidies program payments impact not only the environment. The flow of federal funding has accelerated the trend toward larger, corporately held farming operations, which not only qualify for obscene payments but are increasingly geared toward less sustainable crop production practices.

Change is gotta come

Back in the good old days, packers and processors could join in the cheerleading for hefty crop subsidies, while officially sitting on the sidelines, since payment levels and program parameters were "farm issues," not food issues.

Vertical integration changed that dynamic, and more to the point, it's clearly in the industry's best interests to support policies that would sustain domestic livestock production — and that involves much more than the price of corn.

Perhaps the best blueprint for farm policy reform I've seen has been crafted by the American Farmland Trust, a Washington, D.C.-based policymaking and lobbying organization, in its "Agenda 2007: Recommendations for U.S. Farm Policy."

Rather than continuing to lavish the bulk of USDA subsidy payments – regardless of the size or income of the farm operation — on five program crops, which are then exported, arguably, at below-market prices, AFT has developed a three-pronged alternative that addresses trade distortions, environmental impact and the crush of the competitive landscape that has driven too many farmers off the land and out of the business.

A financial safety net. If there's one variable that is often crippling to the majority of farmers and ranchers, it's risk management. Drought, floods, natural disasters can wipe out an entire region's agricultural profitability. The recent heat wave could cost dairy farmers in California alone more than $150 million in lost productivity and the expense of replacement stock for the thousands of cows who succumbed to the 100-degree temperatures. Investing in a rapid recovery from such incidents is a wise investment that pays consumer dividends at the supermarket checkout.

Support for stewardship. Instead of promoting production of program crops at levels that trigger massive price maintenance subsidies, federal funds should be directed toward conservation, soil quality, watershed protection and rangeland maintenance. The consequences of "outsourcing" American food production would be disastrous, but that is exactly what will happen unless agriculture collectively takes better care of the basic resources needed to sustain productivity.

New market opportunities. This could potentially be the most important piece of a new farm bill. Direct-to-consumer marketing, exotic crops, local markets, seasonal produce and grains and such niche products as grassfed beef and organic poultry offer economic advantages to both consumers and producers.

It's accepted that government supports small business ventures as an efficient way of maintaining economic growth. Why shouldn't similar opportunities be available to the farmers and producers upon whom we depend for foodstuffs far more vital than all the consumer goods with which we surround ourselves?

If our national farm policy is serious about maintaining the security of domestic food production, Congress has to face the fact that not only are the current federal farm programs damaging our agricultural resources, and driving ranchers and farmers out of the industry, such subsidies are no longer sustainable.

Not if we want to continue to expand global trade and maintain the viability of export markets for U.S. commodities.

Bottom line, there is plenty of blame to go around in dissecting the demise of the Doha talks. Both the United States and the EU have tap danced around any real reform of their export and production subsidies, while emerging producers, such as Brazil and major importers, such as Japan, did little to sustain any momentum toward a compromise.

The good news is that Rep. Bob Goodlatte (R-Va.), chairman of the House Agriculture Committee, has already announced that in the wake of the WTO disaster, he wants to "take a fresh look" at the 2007 farm bill reauthorization, with the intention of writing a whole new bill.

Now would be a good time to contact Goodlatte's office to voice your support for exactly such a brave, bold maneuver.
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