Dan Morgan, writing in today’s Washington Post, reported that, “The House yesterday passed a far-reaching new farm bill that preserves the existing system of subsidies for commercial farmers and adds billions of dollars for conservation, nutrition and new agricultural sectors.
“Passage of the 741-page bill by a vote of 231 to 191, after partisan battling unusual for farm legislation, was a major achievement for the new Democratic leadership.
“With most Republicans opposing the five-year bill over a tax issue, House Speaker Nancy Pelosi (D-Calif.) hammered out a compromise that held together a shaky majority of Democratic farm-state lawmakers committed to the entrenched farm subsidy system, together with urban liberals and reformers seeking sweeping changes.”
After detailing some of the specifics of the legislation, Mr. Morgan noted that, “Nonetheless, major hurdles remain before the massive legislation becomes law.”
The Post article stated that, “Rep. Robert W. Goodlatte (Va.), the ranking Republican on the House Agriculture Committee, accused Democrats of ‘poisoning the well’ by adding the tax provision to what had been a bipartisan farm bill. Business lobbies, including the National Association of Manufacturers, warned that the action could discourage foreign investment and cost jobs.
“Democrats said the provision merely closes a loophole that allows a limited number of U.S. subsidiaries of foreign companies to avoid taxes. Aides said it is aimed at companies headquartered in tax havens such as Bermuda, with which the United States has no tax treaty. Subsidiaries avoid a tax bite by funneling earnings through European countries that have reciprocal tax-reduction arrangements with the United States.”
And, the article added that, “But Democrats acknowledged that the entanglement of business issues in the farm bill could cause problems down the line.”
In a broader sense, Mr. Morgan explained that, “Last week, a coalition of business groups, including the U.S. Chamber of Commerce and Business Roundtable, urged Congress to reject a farm bill that did not make major cuts in agricultural subsidies, so as to expedite a global trade deal benefiting manufacturers.
“Developing countries are demanding a reduction in U.S. and European agricultural protections before opening their markets to American manufactured items.
“Peterson responded hotly yesterday, saying farm-state lawmakers were in no mood to appease big business. Previous trade deals, such as the North American Free Trade Agreement (NAFTA), have been tailored mainly to help manufacturers and have not been good for U.S. agriculture, he said.
“In defiance of international trade rules that discourage price supports that lead to overproduction, the bill raises price guarantees for wheat, soybeans and sugar.”
The article also pointed out that, “Farm-state lawmakers also united yesterday to defeat an amendment by Minority Leader John A. Boehner (R-Ohio) aimed at preventing farmers from reaping unintended windfalls from a key subsidy, the loan deficiency payment. In 2005, the subsidy cost nearly $5 billion.”
David Rogers, writing in today’s Wall Street Journal, reported that, “A five-year, $286 billion farm bill cleared the House, giving Speaker Nancy Pelosi a much-needed victory as she tries to put more punch in her party’s domestic agenda before going home for the August recess.”
Mr. Rogers indicated that, “Fourteen Democrats, chiefly liberals who had wanted more cuts in farm subsidies, opposed the package; only 19 Republicans finally supported the measure, which the House Agriculture Committee had unanimously approved just a week ago.”
Like the Post article, the Journal article also mentioned developments in the WTO cotton case brought by Brazil.
“Even as the bill was passing, a new WTO ruling related to U.S. cotton subsidies appears to have gone largely in the favor of cotton industries in Brazil and West African nations that have claimed to have been harmed by U.S. payments.
“House Agriculture Committee Chairman Collin Peterson (D., Minn.) said later that he was unfamiliar with the details of the reported ruling, but expected an appeal would consume months more time and have little immediate impact on the farm bill.
“‘We will deal with issues as they come up,’ he said, not hiding his frustration with the U.S. Trade Representative’s office. ‘We just seem to be willing to give up subsidies before anyone else,’ he said. ‘The committee is going to do what they think is right, and a lot of times that is not in sync with the trade representative’s office.’”
Los Angeles Times writer James Gerstenzang reported this morning that, “Reflecting the partisan tenor of debate, House Minority Whip Roy Blunt (R-Mo.) said the House Democratic leadership took a measure that the agriculture committee had approved unanimously ‘and used it as a vehicle to raise taxes — both on foreign companies who invest capital in America and create jobs here, and domestic energy producers who explore for natural gas in the deepest waters offshore.’
“House Majority Leader Steny H. Hoyer (D-Md.) argued that the bill was fiscally responsible, saying it would impose ‘real payment limitations’ that would begin reducing farm subsidies over time.”
David M. Herszenhorn noted in today’s New York Times that, “House Democrats voted on Friday to approve a farm bill that would continue generous farmers’ subsidies at a time of record crop prices, ignoring a veto threat and yowls of protest by Republicans over a tax provision that they said spoiled bipartisan support for the bill.
“The bill passed, 231 to 191, with 19 Republicans joining 212 Democrats in favor, after a morning of rancorous debate and some hooting and howling that focused not on agriculture policy but on the tax provision inserted to pay for a $4 billion increase in food stamps.”
Mr. Herszenhorn added that, “The House vote sets the stage for complicated negotiations when the Senate takes up its version of the farm bill in the fall.
“In addition to the veto threat by the White House, which is demanding that Congress lower the farmer’s income-eligibility ceiling, the World Trade Organization is expected to rule on complaints by countries like Brazil and Canada that the subsidies violate free trade agreements.
“In an interim report this week, the W.T.O. ruled that the United States had failed to change cotton subsidies, allowed under the previous farm bill, enough to conform to global trade rules.”
The Times also pointed out that, “Agriculture Secretary Mike Johanns repeated on Friday the administration’s displeasure with the current farm bill, especially the tax provision;” (full transcript of Sec. Johanns’ speech yesterday available here), and added that, “Senator Tom Harkin, Democrat of Iowa and chairman of the Agriculture Committee, hinted of the challenges ahead in a statement giving lukewarm praise to the House bill and some criticism,” (Sen. Harkin’s full statement available here).
Philip Brasher reported yesterday at the Des Moines Register Online that, “Disputes over farm legislation usually break down along rural-urban or regional lines. And the House bill has broad support among farm organizations, including the Iowa Farm Bureau, because it maintains subsidies for corn and soybean growers while adding new money for fruit and vegetable growers and bioenergy development.
“However, the Republican defections over the tax measure forced Democratic leaders to throw in a number of provisions to attract Democratic votes.
“One of those provisions, an increase in international food aid, required Democrats to double to $2 billion the amount the farm bill would cut from the crop insurance industry.”
In an article from today’s Register, Mr. Brasher added that, “House Democrats seized on the bill as an opportunity to reach rural voters, and House Speaker Nancy Pelosi, D-Calif., threw her support behind the legislation despite liberal criticism that it wouldn’t alter the tilt of U.S. farm programs to grain and cotton farms.”
Bloomberg writer Alan Bjerga reported yesterday that, “Subsidies under the current farm bill are estimated to average about $12 billion a year. They would fall to about $7 billion annually under the House bill, which projects high commodity prices and less need for government payments. Overall spending goes from $49.5 billion a year to $56.8 billion because of increased funding for conservation and nutrition.”
Mr. Bjerga also indicated that the Senate is “[e]xpected to shift more funds to conservation and food-aid programs. Senate Agriculture Committee Chairman Tom Harkin says he’ll introduce a bill in September.”
In more news on potential Senate action, a Reuters news article from yesterday (via DTN, link requires subscription) stated that, “Hopes for deep reform in U.S. farm policy were dealt a blow this week when House lawmakers rejected a plan to slash subsidies, but champions of broad change were already setting their sights Friday on more propitious politics in the Senate.”
The Reuters article added that, “Scott Faber, an attorney with Environmental Defense, was part of the coalition backing [Rep. Ron Kind (D-Wisconsin)], but he too said Kind and his allies had been able to force some ‘steady albeit modest’ steps in the right direction.
“Faber is optimistic that Sen. Tom Harkin, the Iowa Democrat who chairs the Senate Agriculture Committee, will map out a Senate farm bill more to their liking.
“‘Harkin has laid out a vision for agriculture that would help many more farmers and do more to help the environment,’ Faber said. Harkin wants to reduce direct subsidies farmers receive and boost land stewardship programs.”
Darwin Danielson, in an item posted on Thursday at Radio Iowa, reported that, “Iowa Senator Tom Harkin isn’t surprised the White House has threatened to veto the farm bill put together in the U.S. House. The Administration says it doesn’t like the way the House bill plans to raise taxes to pay for the farm programs. Harkin says that’s one of the problems they face in coming up with the farm bill funding, and he says the Senate is continuing to work to ensure they have the proper funding before they report the bill out.
“Harkin says the Senate bill will not be an exact copy of the House bill, as he has some different priorities — namely conservation. Harkin, a Democrat, leads the Senate Agriculture Committee, and says the House bill could also create some trouble when both sides try to put together a compromise bill.”
In editorial developments regarding yesterday’s House action, The New York Times noted today that, “Doling out last-minute benefits as only a speaker can, Nancy Pelosi managed to kill a progressive farm bill on the floor of the House. The House then passed a bill that further enshrined an outdated and excessively costly system of guaranteed subsidies. It is now up to the Senate, which will address the issue in September, to devise a new and improved bill that eliminates the old subsidies and uses the savings for food stamps, conservation and other causes worthier than making big farmers even richer.”
Financial Times writers John Rumsey, Frances Williams and Eoin Callan reported on Friday that, “Brazil on Friday claimed victory in its latest assault on US cotton subsidies at the World Trade Organisation, underscoring warnings by the Bush administration that the subsidy-laden farm bill under consideration by Congress risks triggering a wave of trade disputes.
“Brazil said a confidential interim ruling by a WTO panel had gone in its favour.
“The panel, due to issue its final decision in September, was set up last year to judge whether the US had fully complied with a 2005 WTO appeal verdict condemning several subsidy programmes for cotton farmers.
“In response to that verdict, the US scrapped or amended programmes considered to be illegal export subsidies. However, Brazil says this left untouched some of the most trade-distorting subsidies, such as marketing loans and counter-cyclical payments that compensate farmers for low prices.”
The FT article added that, “Pedro Camargo Neto, ex-secretary of production and trade at the Brazilian Ministry of Agriculture, dismissed the likelihood of Brazil bringing further cases, such as against soy, sugar and rice, where it would be more difficult to prove damages.
“The Brazil ruling should embolden other countries, such as Mexico and Uruguay, to seek redress over rice subsidies.
“A US trade official confirmed on Friday that the WTO panel had found that the changes made by the US ‘were insufficient to bring the challenged measures into conformity with US WTO obligations . . . we are very disappointed with these results’”.
Bloomberg writers Mark Drajem and Carlos Caminada reported yesterday that, “The World Trade Organization ruled that the U.S. failed to overhaul its cotton subsidies enough to comply with global trade rules, the U.S. Trade Representative’s office said.
“Under trade rules, Brazil can submit a list of U.S.- exported products on which it wants to raise tariffs in retaliation. The South American country may boost duties on some products should the U.S. fail to comply with a final ruling the WTO will issue by Oct. 1, said Roberto Azevedo, secretary for economic affairs at Brazil’s Foreign Ministry.”
And Reuters writers Missy Ryan and Raymond Colitt reported yesterday that, “Brazil on Friday pushed the United States to bring cotton subsidies in line with world trade rules, threatening retaliation if the world’s largest cotton exporter does not comply with a new WTO ruling.
“‘We expect the United States to comply fully and immediately … Brazil reserves its right to retaliate,’ Roberto Azevedo, a top Brazilian negotiator, said in Brasilia.
“Brasilia issued its warning after a World Trade Organization panel found certain supports for U.S. cotton producers continued to violate trade rules, despite changes Congress made last year after an WTO earlier ruling,
“‘Some of the main domestic programs are still in place,’ Azevedo said.”