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Details Emerge in Senate Farm Bill Debate

A Reuters news article from yesterday noted that President Sarkozy also called for reforms in the EU’s Common Agricultural Policy; “Speaking at the opening of a breeding show in the western town of Rennes, Sarkozy said he would propose new aims for the bloc’s farm policy when France takes on the rotating EU presidency in the second half of 2008. ‘I want a new CAP … because I do not intend to abandon the farmers who do not want help, who do not want to live off subsidies,’ Sarkozy said.”

I. Farm Bill
II. Doha

I. Farm Bill

Reuters writer Charles Abbott reported yesterday that, “The chairman of the Senate Finance Committee unveiled a plan on Tuesday to pay for two major elements in the new U.S. farm law — disaster relief and land preservation work, which together cost as much as $10 billion.

“Chairman Max Baucus outlined a tax package that ‘will offer real support to hard-working producers’ and effectively free up money for the Agriculture Committee to use in its farm bill. The 2002 farm law expires at the end of this month.

“A Montana Democrat, Baucus proposed a disaster trust fund to offset farm and ranch losses not covered by crop insurance. In addition, land owners could take tax credits instead of cash payment for land preservation. No date was set for the Finance Committee to draft the package.”

The article noted that, “Baucus’ outline listed the Wetlands and Grassland reserves, which pay landowners to preserve land, and the Farm and Ranchlands Protection Program, which helps pay for easements to prevent urban sprawl, as programs where participants could be given the choice of a tax credit instead of a federal cash payment.”

Mr. Abbott also explained that, “Meanwhile, the Agriculture Committee chairman, Tom Harkin, Iowa Democrat, said he lacked the money to write a vote-getting farm bill. He has said he may need as much as $20 billion more than now allotted for agriculture.”

The article stated that, “Harkin and Baucus disagree over a key issue for the farm bill. Baucus and some senators from Plains states want an ever-ready program to bail out farmers and ranchers who are hit by weather disasters. Harkin says it would be more effective to refashion crop subsidies to safeguard farmer income.

“‘We’ve run the numbers on this and, frankly, it’s better for every state,’ Harkin told reporters. Harkin said counter-cyclical payments to growers could be based on state-level income for a crop. The payments now are triggered by crop prices.”

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Senate Finance Chairman Max Baucus, D-Mont., pitched the idea of a trust fund for permanent disaster assistance Tuesday, though he said his committee would be willing to convert key conservation programs such as the Wetland Reserve Program over to tax credits instead of incentive payments. These approaches could free up anywhere from $8 billion to $10 billion in farm-program spending.

“Still, Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, continues resisting a permanent-disaster fund and maintains a state-level, revenue-based counter-cyclical payment program would better serve the needs of farmers.

“‘There are better ways of protecting farm income, for example,’ Harkin said Tuesday. ‘There are better ways to provide a safety net rather than a disaster program. I will continue to argue for that.’”

Mr. Clayton indicated that, “A disaster program is not a top priority nationally, but is considered critical by lawmakers for a handful of states prone to big swings in weather and farm conditions. The problem with a $1 billion-a-year disaster fund is such spending would continue to be in flux, Harkin said. If the fund only spent $200 million a year, that would lower the future baseline spending. If a major disaster required more than $1 billion, then Congress would still have to create an ad-hoc disaster package, as is done now.

“Harkin said he is looking more closely at a counter-cyclical program being proposed by Sens. Dick Durbin, D-Ill., and Sherrod Brown, D-Ohio. Somehow, though, some farm groups have gotten hooked on a permanent disaster program, he said. Harkin said analysis shows the Durbin-Brown program would work better for farmers in every state.”

In addition, the DTN item stated that, “‘If what I heard lately that Sen. Harkin doesn’t want to move unless there is $20 billion given by the Finance Committee, then I don’t know, we are going to raise some money, but that’s a tremendous amount of money and I think we are incapable of doing it,’ said Sen. Charles Grassley, R-Iowa, in a separate telephone news conference Tuesday morning [MP3 file of Sen. Grassley’s news conference available here]. Grassley is a member of both the Finance and Agriculture committees.”

And with respect to timing, the Mr. Clayton noted that, “Grassley said there continues to be more talk about extending the current farm bill a year or two. The chances are increasing because Congress has pegged adjournment for Nov. 19. Such an extension, as a continuing resolution, would not be uncommon with farm bills, though.

“Harkin said he is planning to hold an Agriculture Committee markup the week of Sept. 24. If issues with funding cannot be resolved, Harkin said he will be forced to push a ‘baseline bill’ that offers few major changes. It would reduce the chances of more funding for conservation, nutrition or rural development, which are key Harkin funding priorities.”

Associated Press writer Mary Clare Jalonick noted yesterday that, “Democratic Sen. Kent Conrad, the chairman of the Senate Budget Committee and also a member of the agriculture and finance panels, said he strongly supports Baucus’s proposal.

“‘(Harkin) would like a blank check written but that’s not the way it works,’ Conrad said. ‘This is money we would not otherwise get.’

“The House passed its version of the farm bill in July with more than $6 billion extra paid for partly by a tax on some multinational companies with U.S. subsidiaries. That proposal almost derailed the normally bipartisan bill as Republicans revolted and called it a tax increase.

“Baucus, who also sits on the Agriculture Committee, has said he doesn’t think that tax would make it through the Senate. Instead, he has proposed giving farmers tax credits instead of cash payments for some conservation programs and offering tax incentives for rural economic development and bioenergy programs.

“The disaster trust fund would help reimburse farmers who have lost crops or ranchland because of weather. That assistance has been paid through emergency dollars in recent years, and has occasionally threatened to stall spending bills as Western and Midwestern members have made recovering those losses a priority.”

Congressional Quarterly writer Catharine Richert reported yesterday that, “The disaster aid proposal will probably win Baucus points with voters in his state, where he is up for re-election in 2008 and where cattle ranchers have been affected by snow and fires. Some estimates peg the cost of the program at $5 billion or $6 billion over five years. It would be paid for by provisions under the Finance Committee’s jurisdiction.

“The other $5 billion in Baucus’ plan would likely come with strings attached, aides said. Baucus will want to dictate how it can be spent, in order to win support from members of his committee who also sit on the Agriculture panel.

“Democrat Debbie Stabenow of Michigan, for example, will need assurance that part of the additional money will be spent on nutrition programs and perks for the fruit and vegetable industries, which are major constituencies in her state, aides said.”

Philip Brasher, writing in today’s Des Moines Register, reported that, “Landowners who enroll acreage in some land-conservation programs could get tax credits instead of cash payments, under a plan being developed in the Senate.

“The proposal by the Senate Finance Committee is designed to free up funding in the farm bill to pay for other agricultural programs.

“The tax-credit idea is among $8 billion to $10 billion in agricultural and rural development tax measures that the committee is considering, the committee’s chairman, Sen. Max Baucus, D-Mont., said Tuesday.”

Mr. Brasher added that, “The Senate’s work on a farm bill has been at a standstill while lawmakers try to find additional money for the legislation. A bill passed by the House last month relied on funding sources, including taxes on foreign corporations, which have not been approved by the Senate.

“As part of his plan, Baucus wants to create a permanent disaster relief fund to ensure that farmers can get payments when they lose crops to drought.”

Noting the regional pull between a disaster plan and a revenue based plan, the Register article stated that, “The chairman of the Senate Agriculture Committee, Sen. Tom Harkin, D-Ia., has raised concerns about creating a disaster relief program. He is working instead on altering an existing subsidy program to tie payments to changes in farm revenue, not just commodity prices.

“‘It’s better for every state, including the states that want permanent disaster programs,’ Harkin said Tuesday.

“The disaster program has been a priority for lawmakers from northern Plains states.”

With respect to some of the funding ideas proposed by Sen. Baucus, DTN writer Chris Clayton noted yesterday at the DTN Ag Policy Blog that, “One proposal by Baucus is shifting at least some conservation programs, notably the Wetlands Reserve Program, from program payments into tax credits. Right now, the WRP is in the budget baseline for about $228 million in 2007, but the baseline goes to zero in 2009 and beyond. Comments from senators suggest a $200 million annual spending baseline, or $2 billion over 10 years.

“Other programs suggested for these tax credits are the Grassland Reserve Program, which also has a zero baseline in 2009 and beyond. The Farm and Ranchland Protection Program has a $97 million annual baseline for the next 10 years. Baucus suggests in his news release producers could use tax credits instead of payments for these programs.

“That does lead to a lot of different questions. For instance, what is the average ‘taxable income’ for farmers who now use these programs? Does the average farmer in these programs have enough taxable income, or tax after credits to take advantage of another tax credit?”

Mr. Clayton indicated that, “Such data on taxable income of farmers in a particular program is hard to come by. The Economic Research Service just crunched some numbers looking at income eligibility for producers to continue receiving commodity payments. http://www.ers.usda.gov/… That report, however, did not examine conservation programs.

“Another series of questions begins with how the tax credit would be structured. Would it be a non-refundable credit, meaning it would go only to the point that it zeros out tax liability? Or would these credits be refundable, sending any amount after tax liability back to the producer? Could a farmer roll any unused credit forward into future years?

“Such credits could get costly. Some Wetland Reserve or Grassland Reserve Programs can pay producers more than their direct payments. So these farmers won’t easily convert over to tax credits unless they can take full advantage of the benefits.”

II. Doha

As the debate over the 2007 Farm Bill plays out in Washington, news regarding the Doha Round of WTO trade talks continues to garner attention.

An item posted yesterday at Forbes.com stated that, “EU trade commissioner Peter Mandelson warned that the ‘clock is ticking’ for international governments to strike a deal for the stalled WTO Doha Development Round.

“Speaking in Brussels, [text of comments available here] Mandelson said negotiations on trade liberalisation now need ‘to get down to specifics’ if there is any prospect of a final agreement.”

The article added that, “He [Mandelson] said: ‘The reality is that the distance to the finishing line, in economic terms, is fairly short. The cost of remaining concessions that both developed and some developing countries need to bring into the final package is small compared to the systemic gain of doing the deal.’

“Mandelson also said that the next two months are ‘crucial’ for the success of the round.”

An Associated Press article from yesterday stated that, “The European Union’s trade chief warned Tuesday that six years of global commerce negotiations will probably fail if negotiators can’t agree on the blueprint of a deal before the U.S. presidential campaign heats up next year… The calls for quick progress come as the WTO makes a new push to resolve disagreements over agricultural trade, such as those over proposed cuts in the billions of dollars in farm subsidies paid to U.S. farmers and the tariffs that shield European producers of beef, dairy and sugar from foreign competition.”

The AP article added that, “Trade officials in Geneva say the talks have made no significant progress since restarting last week.”

With respect to U.S. policy, the AP article stated that, “Trade officials say their efforts also have been clouded by the expiration in June of U.S. President George W. Bush’s ‘fast track’ authority to send Congress trade deals for an expedited vote, and a proposed U.S. farm bill that has passed the House of Representatives worth $299 billion over five years and offering few changes in programs for major crops such as corn, cotton, rice, soybean and wheat.

“‘The farm bill does indeed offer no conceivable basis on which the United States could table a final offer, or any basis on which an eventual agreement could be reached’ in the Doha round, Mandelson told parliamentarians.”

And a separate Associated Press article from yesterday noted that, “French President Nicolas Sarkozy said he will veto any accord reached within the World Trade Organization if it doesn’t serve French interests.

“‘WTO negotiations must start again on (a) healthy basis and on clearer targets. I will firmly oppose any agreement that doesn’t serve the interests of our country,’ Sarkozy told a meeting of agricultural workers in Rennes. ‘That’s the mandate I have received.’

“‘If Europe gives up the defense of its agriculture, its foodstuff production…what is the common agriculture policy for?,’ Sarkozy said.”

Interestingly, a Reuters news article from yesterday noted that President Sarkozy also called for reforms in the EU’s Common Agricultural Policy; “Speaking at the opening of a breeding show in the western town of Rennes, Sarkozy said he would propose new aims for the bloc’s farm policy when France takes on the rotating EU presidency in the second half of 2008. ‘I want a new CAP … because I do not intend to abandon the farmers who do not want help, who do not want to live off subsidies,’ Sarkozy said.

“He said the main principle he wanted the reform to be based on was the so-called community principle which gives European products a priority within the bloc. ‘European countries’ supply cannot depend on foreign countries,’ he said.

“Other objectives would be to contribute to world food needs, preserve rural territories, fight climate change and preserve the environment, he said. France is the largest beneficiary of subsidies under the EU’s Common Agricultural Policy.

“Former president Jacques Chirac was a tough defendant of the current CAP and but some European countries, such as Britain, say the system is outdated. Sarkozy hinted that he did not fully disagree. ‘I want a rupture … a rupture with conservatism, a rupture with immobility, a rupture with the wait-and-see policy,’ he said, stressing he did not want to wait — particularly not until 2013, the date set for the next CAP reform — to make proposals. ‘The CAP as it exists for the moment cannot answer the challenges we will have to face after 2013,’ he said.”

Meanwhile, the Associated Press reported yesterday that, “Brazil’s president said Tuesday he’s ‘convinced’ that rich and poor countries would resolve disputes that have bogged down global trade talks.”

The AP article noted that, “Lula said he was hoping the E.U. would help provide a breakthrough.

“‘We are counting on the European Union for us to once and for all be able to conclude the Doha round,’ he said.”

Keith Good