FarmPolicy

August 20, 2019

Senate Farm Bill: Financing Issues Remain

Reuters news reported yesterday that, “A U.S. offer to slash its maximum farm subsidies is insufficient for a world trade deal to be reached, French Agriculture Minister Michel Barnier said in an interview published on Monday…France has repeatedly called on the United States and developing countries to make more concessions in order to salvage the Doha round of world trade talks, calling for more ‘reciprocity’ from other parties…’The European Union has no more concessions to make — it has made many.'”

I. Farm Bill
II. WTO / Doha Considerations

I. Farm Bill

Sarah Lueck reported in today’s Wall Street Journal that, “A dispute over tax changes under consideration in the Senate to fund new tax breaks for farmers shows that Congress has its work cut out meeting new pay-as-you-go budget rules.

“The Senate Finance Committee had been looking into whether to require certain temporary foreign workers — ranging from agricultural workers and physicians to students and au pairs — to pay Social Security and Medicare taxes and to require contributions from their employers. Such workers and their employers now are exempt from those taxes on the theory that many of the workers aren’t in the U.S. for long.

“The change, which would raise an estimated $7.1 billion over 10 years, was proposed as a major way to offset the cost of a farm bill the tax panel was planning to vote on this week. Under the principle of pay-as-you-go, or pay-go, reinstated when Democrats took control of Congress this year, new spending or tax cuts must be offset with spending cuts or tax increases.”

The Journal article pointed out that, “When word of the Social Security proposal leaked out of the normally secretive pay-go talks, agricultural interests and others pushed back. As of yesterday, tax aides had moved away from the proposal and were considering other ideas.

“One of those new ideas, still under discussion yesterday, would eliminate or limit the tax deduction that some businesses now get for the wages they pay certain temporary foreign workers. The change would apply to businesses that employ temporary agricultural workers that hold H2A visas, now fewer than 60,000 workers.”

In a related article, DTN writer Chris Clayton reported yesterday (link requires subscription) that, “The farm bill and connected finances just keep getting pushed back.

“A tax package from the Senate Finance Committee was held up at least another day because committee members did not receive details of the Chairman Max Baucus’ proposed tax cuts and other provisions for the farm bill.

“Under committee rules, Baucus, D-Mont., has to provide committee members a draft of his proposed bill mark-up at least 48 hours before the committee meeting. As of Monday afternoon, that had not happened. So a long-expected Wednesday mark-up for the Finance Committee will be pushed back at least until Thursday.”

Mr. Clayton added that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, was also planning to mark up the farm bill this week, but he has been waiting on offsets from the Finance Committee to give a full financial picture to the Agriculture Committee members. More delays in the Finance Committee will continue to push back the farm-bill mark-up.”

“Congress takes a week-long recess next week due to Columbus Day on Monday, so if the farm bill does not move out of committee by the end of this week, it could be pushed back to mid-October,” the DTN article said.

As the financing details of the Senate Farm Bill continue to be worked out, Anne Cook reported in Sunday’s News Gazette (Champaign, IL) that, “[S]ens. Dick Durbin, D.-Ill., and Sherrod Brown, D-Iowa, have introduced a farm bill proposal – one approved by the Illinois Farm Bureau – that changes farm policy direction.

“Spencer [Chuck Spencer, Illinois Farm Bureau director of national legislation and policy development] said under the program now expiring, which ties supports to low prices, farmers who have crop failures lose when market prices are strong, as they are this year.”

“That concept is not easy to sell in the Senate,” the article said, adding that, “Lawmakers from states where crop failures are common, and from southern states where direct payments for some crops are much higher than they are for corn and soybeans, don’t want to scrap that system in favor of revenue supports.

“To compare economic scenarios under both the House bill and the Durbin-Brown bill, University of Illinois agricultural economist Gary Schnitkey has posted a program [available here, under the heading, “Farm Bill Scenario Analyzer”] so farmers can run numbers for their operations.

“‘We did it to give people a feel for the House bill, which is pretty much status quo, and evaluate the option to switch to revenue-based payments,’ Schnitkey said. ‘Which you prefer will depend on what you believe prices will do. If you believe corn prices will be above $2.35 a bushel, you’ll prefer Durbin-Brown.’

“He said he never predicts what politicians will do. ‘But it does appear that revenue component is gaining in popularity,’ Schnitkey said.

“The Durbin-Brown legislation has one other provision farmers like. The federal government would provide a payment when a farmer’s actual revenue falls below 90 percent of the forecast revenue for a specific crop and private insurance would cover losses beyond what the government paid.

“Mark Lambert, communications director for the Illinois Corn Growers Association, said his organization and the National Corn Growers Association both support the Durbin-Brown approach to farm legislation.”

For additional background and analysis regarding the spreadsheet developed by Dr. Schnitkey, listen to this audio report (MP3), which was aired yesterday on WILL- AM 580 radio (Champaign, IL).

II. WTO / Doha Considerations

Reuters writer Missy Ryan reported yesterday that, “A new challenge from Brazil against U.S. farm subsidies, if successful, could show the United States exceeding WTO limits on farm subsidies in at least four recent years, a U.S. government report found.

“The recent report from the Congressional Research Service, a nonpartisan analyst, examines charges Brasilia put forward this summer that threaten to put Washington on the defensive once more at the World Trade Organization court.

“In its challenge, presented in July, Brazil contends the United States sailed past its WTO spending limits for trade-distorting subsidies — in its bound ‘aggregate measure of support’ — in 1999, 2000, 2001, 2002, 2004 and 2005.”

Ms. Ryan added that, “Brazil, which requested preliminary consultations on the subsidy issue on the heels of a similar challenge from Canada, has yet to formally request a case on the matter, according the office of U.S. Trade Representative Susan Schwab.

“The challenges are another twist to ongoing negotiations in the WTO’s Doha round of trade talks, still struggling after six years to find consensus on reductions to subsidies and tariffs in agriculture and other areas.

“They also come as debate culminates in Congress over the future of U.S. farm policy.”

Meanwhile, with respect to the Canadian WTO case on U.S. farm subsidies, a separate CRS report, (“Canada’s WTO Case Against U.S. Agricultural Support: A Brief Overview,” by Randy Schnepf (September 18, 2007)) stated that, “On June 7, 2007, the Canadian government requested the establishment of a World Trade Organization (WTO) dispute settlement panel to consider two charges against U.S. farm programs — first, that the United States has exceeded its annual commitment levels for total Aggregate Measurement of Support (AMS) in each of the years 1999, 2000, 2001, 2002, 2004, and 2005, and second, that the U.S. export credit guarantee program operates as a WTO-illegal export subsidy. Both charges stem from a previous negative ruling against U.S. farm programs in a case brought by Brazil against the U.S. cotton program.

“The United States blocked Canada’s request from proceeding at the June 21, 2007, meeting of the WTO’s Dispute Settlement Body (DSB). According to WTO rules, a panel can only be blocked once, implying that a second request by Canada would have to be honored at a subsequent DSB meeting. However, Canada has since refrained from pursuing its panel request at subsequent biweekly DSB meetings. Canadian officials appear to be deliberating the merits of further action, particularly in light of a similar case against U.S. AMS limits being pursued by Brazil. Should any eventual changes in U.S. farm policy be needed to comply with a WTO ruling in Canada’s favor, it would likely involve action by Congress to produce new legislation.”

The CRS report also included this background on Canada’s action, “On February 7, 2007, Canada and the United States held consultations concerning the three charges raised by Canada. Under WTO rules, for subsidy complaints alleging adverse effects, a minimum 60-day consultation period is required before a country can ask the WTO to establish a dispute settlement panel. Although the consultations failed to resolve the dispute, the Canadian International Trade Minister, David Emerson, announced on May 2, 2007, that the Canadian government would temporarily hold off on taking any further action in its WTO dispute settlement proceeding (DS357) against U.S. corn subsidies until at least the end of the year, pending the outcome of current Doha Round trade negotiations. However, on June 7, 2007, Canada requested the establishment of a WTO dispute settlement panel to consider two of the three initial charges against U.S. farm programs. The specific charge against U.S. corn subsidies was dropped. The United States blocked Canada’s request at the June 21, 2007, meeting of the WTO’s Dispute Settlement Body (DSB). According to WTO rules, a panel can be blocked only once, implying that a second request by Canada, if made at one of the subsequent biweekly DSB meetings, would have to be honored. However, to date Canada has refrained from pursuing its panel request. Canadian officials appear to be deliberating the merits of further action, particularly in light of a similar case against U.S. AMS limits and the export credit program being pursued by Brazil.”

For more background on the Brazil and Canada WTO cases, see this FarmPolicy.com update from September 20.

Reuters news also reported yesterday that, “A U.S. offer to slash its maximum farm subsidies is insufficient for a world trade deal to be reached, French Agriculture Minister Michel Barnier said in an interview published on Monday.

“France has repeatedly called on the United States and developing countries to make more concessions in order to salvage the Doha round of world trade talks, calling for more ‘reciprocity’ from other parties.

“‘The European Union has no more concessions to make — it has made many. If we are one reform ahead, the Americans are one behind. I do not think that the new agricultural law in the United States can make up for that,’ Barnier told the French newspaper La Tribune.”

The article indicated that, “The mood at the talks has brightened recently after reports that Washington could be willing to discuss capping its subsidies at a level as low as $13 billion, provided other countries also make concessions.

“Diplomats said the shift in the U.S. position on agriculture could spur advances in other contentious areas of the talks, including industrial goods.

“Barnier, however, remained skeptical.

“‘I do not sense the reciprocity that we expect not only from the Americans but also from the large developing countries,’ Barnier said.”

Keith Good

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