February 20, 2020

Canadian Corn Case Grows

I. Canadian Corn Case Grows / Doha
II. New Farm Bill Proposal
III. Disaster Aid
IV. Ethanol, State of the Union

I. Canadian Corn Case Grows / Doha

The Associated Press reported yesterday (“Argentina, Brazil join WTO complaint against U.S. corn subsidies”) that, “South American agricultural leaders Argentina and Brazil have joined Canada in a complaint against the United States over what they claim are illegal government handouts to American corn growers, trade officials said Monday.

“The request for consultations, filed by the two countries and Guatemala last week at the Geneva-based World Trade Organization, threatens a major commercial dispute in the Western Hemisphere at a time when global free trade talks remain stalled over agricultural tariffs and subsidies and the U.S. begins debating a new multibillion-dollar farm bill.

“Under WTO rules, a three-month consultation period is required before a country can ask the trade body to launch a formal investigation. A WTO case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.”

The A.P. article reminded readers that, “The WTO, in a case brought by Brazil, already has ruled that some cotton subsidies are illegal and the administration of President Bush has been coming under pressure to reform a number of its farm support programs.

“‘Many of the issues in Canada’s complaint we have also complained about concerning U.S. cotton programs,’ said [Clodoaldo Hugueney, Brazilian ambassador to the WTO] in a telephone interview from Geneva.

“Canada’s complaint over U.S. corn support also challenged whether the billions of dollars in overall farm subsidies paid out by the U.S. government comply with international commerce rules.”

And the A.P. story also noted that, “The U.S. says it has offered cuts as part of the WTO’s global free trade talks, but others have called the pledges largely artificial, addressing only permitted levels of government subsidies and failing to cut what Washington actually gives to its farmers.

“With the so-called Doha round of talks currently stalled, following an acrimonious collapse in July, it is unclear whether the new farm bill will change significantly from its current form.”

A nearly identical Associated Press article from yesterday included much of the same information as the story cited above; however, this A.P. article contained a different headline (“EU joins WTO complaint against U.S. corn subsidies”) and different first paragraph. The first paragraph in this A.P. article indicated that, “The European Union, Australia, Argentina and Brazil have joined Canada in a complaint against the United States over what they claim are illegal government handouts to American corn growers, trade officials said Monday.”

Meanwhile, Reuters writers Missy Ryan and Anna Mudeva reported yesterday that, “An agreement that could break a deadlock in global trade negotiations is ‘many weeks away,’ Washington’s top negotiator said on Monday, despite an urgent U.S. and EU push to salvage the talks.

“‘Quite frankly, there is no convergence among the key players,’ U.S. Trade Representative Susan Schwab told Reuters.

“European Union Trade Commissioner Peter Mandelson said progress was being made on agriculture, the issue that has long been the main sticking point in the world talks, and which forced a suspension of the current Doha round in July 2006.”

The Reuters article also explained that, “A major sticking point has been subsidies rich nations pay farmers. Washington proposed a 53 percent cut in such supports in October 2005, but the EU and developing states want more.

“Schwab said the Bush administration was committed to reforming its $20 billion in annual subsidies but could only go so far until other countries sweetened their offers. ‘The U.S. tried the ‘we go first’ exercise in ’05,’ she said. It failed, she added, to prompt other countries to offer proposals on market access amenable to the influential U.S. farm lobby.

“Shaving tariffs on farm goods is a touchy subject in Europe, as countries like France protest against large cuts.

“It is also difficult in developing countries, such as India, where Trade Minister Kamal Nath has vowed to protect subsistence farmers from a torrent of foreign imports.”

Dan Bilefsky and Carter Dougherty, in an article posted yesterday at the International Herald Tribune Online, reported that, “The European Union’s chief trade negotiator said Monday that efforts to restart stalled global trade talks were showing renewed vigor, but he sought to dampen expectations that a breakthrough could come during a meeting of trade ministers this week in Davos, Switzerland.

“‘I’m cautiously optimistic as there has been fresh high-level political engagement,’ said Peter Mandelson, the EU trade commissioner, in an interview. ‘We are in the endgame, but we are not in a situation where we have the outlines of an agreement.’”

Later, the article pointed out that, “EU officials said Monday that the bloc had signaled its willingness to make concessions by cutting barriers to foreign agricultural products by an average of 54 percent. This would bring the EU to a level demanded by the world’s big developing countries, though it would be only a fractional improvement from what Mandelson hinted the EU could offer last year. Its commercial value would depend heavily on how specific tariff cuts are arranged.

“The EU offer is contingent on Washington cutting its annual farm subsidies to a level of $15 billion or less, EU officials said Monday. EU officials have suggested that the United States would limit subsidies to $17 billion, but a U.S. official denied that offer had been made.

“U.S. officials have countered that for the offer to be politically viable, the EU has to raise its offer significantly above last year’s proposal, and above 54 percent. ‘At the very least, we need to see something in the high 50s or low 60s,’ one U.S. official said.”

Financial Times writer Alan Beattie reporting yesterday on the upcoming World Economic Forum, noted that, “[T]his Saturday’s meeting of trade ministers is likely to be more of a consultative session than the moment for a make-or-break decision. But if the European Union and US can agree a common position on agricultural reform, the meeting will have something substantive to discuss. Or at the very least, with the looming expiration of the White House’s authority to negotiate trade deals concentrating minds, it can set a timetable for advancing the Doha talks with a harder deadline than last year’s talks-about-talks agreement, which fell apart almost as soon as it was announced.”

II. New Farm Bill Proposal

Peter Shinn of Brownfield reported yesterday that, “[R]alph Grossi, Executive Director of American Farmland Trust, told Brownfield Monday he sees both the request for consultations over the U.S. farm program by multiple countries and progress toward a new WTO deal as factors that will, indeed, have an impact on the 2007 farm bill debate.

“‘I think the developments in the last week in the Doha negotiations, as well as the request by Brazil and Guatemala to join the Canadians on the corn case, continue to validate the argument that many of us have been making for some time that it’s going to be very difficult to maintain a status quo farm bill,’ Grossi said. ‘The current farm bill is out of compliance, not just with the Doha Round, but with the existing Uruguay Round agreements, and so change to the structure of the farm programs is going to be necessary.’

“Grossi made his remarks at a Washington D.C. press conference held by a coalition of farmland, food and nutrition and social justice groups calling themselves Farm and Food Policy Project. The Project is comprised of groups, including American Farmland Trust, Environmental Defense and others, that have not had much of a voice in farm bill debates in the past. 

“Project coordinator Allen Hance told reporters Monday the coalition hopes to change that. ‘We’re calling for a new direction in U.S. farm and food policy,’ Hance said. ‘Because what we want and need from our food system, and what we actually get from our agriculture and food policies are increasingly out of balance.’

“The coalition of groups outlined their farm bill wish list in a report released Monday called ‘Seeking Balance in U.S. Farm and Food Policy.’ According to a press release from the Project, more than 350 groups representing the interests of ‘family farm, rural, conservation, sustainable and organic agriculture, anti-hunger, nutrition, faith-based, public health’ have endorsed the report. Among many other things, the groups want an increased emphasis on working lands conservation programs and much tighter farm program payment limits.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Small-farm, conservation and nutrition interests that have been hoping to shift money from the commodity-subsidy section of the farm bill to other areas such as conservation, nutrition and rural development are growing increasingly concerned that such money may not be available.

“Representatives of these groups worry the Congressional Budget Office will soon conclude that the commodity programs would cost so little in future years that the budget will not include much money that could be diverted to their programs, according to a key farm environmental leader speaking Monday at a news conference with other groups.

“The farm bill baseline is ‘evaporating,’ said American Farmland Trust President Ralph Grossi, and groups that want the farm bill to change will have to convince congressional budgeters to provide the money for it.”

Mr. Hagstrom explained that, “Under congressional budget rules, the Congressional Budget Office estimates how much money current farm programs would cost in future years if they are continued. Congress then usually uses this amount of money to determine how much money it has to spend in future years.

“Groups critical of the direct payments, marketing loans and counter-cyclical payments that have been going to cotton, rice, corn, wheat and other crops have been hoping to convince Congress to reduce those subsidies and spend more on conservation, food for poor people, programs for minority farmers and other programs such as farmers’ markets. But grain prices are so high and the expected payout of commodity subsidies is so low that the Congressional Budget Office will lower its estimate of future farm spending.

“That means money for other programs could not come from the commodity account, but would have to be established as new spending.”

Although not directly mentioning federal farm spending, Office of Management and Budget director (and former U.S. Trade Representative) Rob Portman indicated in an Op-Ed published in today’s USA Today that, “The president’s budget will demonstrate how balance can be achieved by using cautious economic and revenue projections in line with forecasts by outside experts. On spending, the president will propose realistic restraint, while increasing funding for the global war on terror, including all costs of Iraq and Afghanistan over the next two years.”

III. Disaster Aid

Philip Brasher, writing in Sunday’s Des Moines Register, reported that, “A battle could be brewing in Congress over whether farmers should be guaranteed disaster checks every year they have a significant crop loss.

“The new chairman of the House Agriculture Committee, Rep. Collin Peterson, D-Minn., has made it a top priority to write a permanent disaster program into this year’s farm bill

“Several senators who represent disaster-prone states have proposed a permanent disaster program modeled after the temporary but multibillion-dollar emergency aid bills that Congress has passed previously. Under the senators’ plan, farmers could claim a check any year in which they lose more than 35 percent of their crop.”

Mr. Brasher added that, “However, the nation’s largest farm organization, the American Farm Bureau Federation, voted overwhelmingly at its recent national convention against endorsing a permanent disaster plan.”

In a related matter, FarmPolicy had a chance to speak very briefly with U.S. Senator Richard Durbin (D-Illinois) on Saturday after a Farm Bill listening session he held with Illinois farmers. I asked Senator Durbin his thoughts on a correlation between disaster aid and revenue insurance, to listen to his answer, just click here (MP3 about 90 seconds).

IV. Ethanol, State of the Union

Chris Serres, in an article posted yesterday at the Minneapolis Star Tribune Online, reported that, “Across Minnesota, ethanol producers are hoping that President Bush will utter three words in his State of the Union speech tonight: Renewable Fuels Standard.

“For weeks, speculation has built that Bush would propose a dramatic increase in the renewable fuels standard — one that possibly would increase the nation’s ethanol production twelvefold.

“An increase in the renewable fuels standard would boost demand for ethanol and help producers survive the harmful effects of skyrocketing corn prices. Prices have grown rapidly, from $1.80 a bushel this summer to more than $4.20 a bushel lately, on fears that this year’s crop will be weak. Corn is the main ingredient for ethanol in the United States and accounts for about one-third of an ethanol plant’s production costs.

“The stakes are particularly high in Minnesota, which ranks as one of the nation’s largest ethanol-producing states with 16 plants and more under construction. An April analysis by the Minnesota Department of Agriculture estimated that the ethanol industry supports 6,400 jobs in the state.”

Alexei Barrionuevo, noted in an article posted yesterday at the International Herald Tribune webpage that, “After three decades of surviving mostly on tax subsidies, the ethanol industry is poised on Tuesday to get its biggest endorsement yet as a potential homegrown alternative to gasoline.

“In his State of the Union address, President George W. Bush is expected to call for a huge increase in the amount of ethanol that refiners mix with gasoline, perhaps to as much as 60 billion gallons, or 227 million liters, annually by 2030 — an amount equal to more than 40 percent of the country’s current gasoline consumption.”

The IHT article also indicated that, “Some analysts, though, say politics already has trumped economics. ‘Once we have a corn-based technology up and running, the political system will protect it,’ said Lawrence Goldstein, a board member at the Energy Policy Research Foundation. ‘We cannot afford to have 15 billion gallons of corn-based ethanol in 2015, and that’s exactly where we are headed.’

“Goldstein said that rather than speeding the process of producing more ethanol, Congress should ‘step back and reflect on the damage we have already done.’ By contrast, ethanol advocates in Congress are pushing to accelerate research into cellulosic sources with the stated goal of speeding the timetable for when corn can be supplanted as the chief ethanol crop.”

Wall Street Journal reporter John Harwood did an excellent job of synthesizing several issues, including ethanol, in this paragraph of a story that was published in today’s paper (“President Faces Skeptical Public”): “Mr. Bush’s higher target for renewable fuels jibes with Democrats’ stated aims. A U.S. diplomat held out hope that the higher renewable fuels standard also would create a steady demand for agricultural products that will keep prices high and hold down U.S. subsidies, thereby helping satisfy international demands in the Doha round of trade talks.”

-Keith Good

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