February 28, 2020

Doha, Farm Bill & the CAP


Yesterday, President Bush and Prime Minister Kevin Rudd of Australia held a joint press appearance at the White House.

In his opening remarks, President Bush stated that, “We spent a great deal of time talking about the economies. One thing we spent time on is talking about the benefits of trade between our two nations, and the benefits of a world that trades freely and fairly. And the Prime Minister was asking me about my views on Doha. I said it’s possible to achieve a Doha round. He, too, believes we should work to achieve a Doha round. However, I informed him that it’s — we’re willing to make serious concessions on the agricultural front, but we expect other nations to open up their markets on manufacturing, as well as services. And to this end, Prime Minister Rudd — Kevin Rudd said that he would be more than willing to help. And that’s — very grateful.” (Audio clip, MP3-0:50).

And Prime Minister Rudd stated that, “As the President has just indicated, we also spoke about the Doha Round. My own view is that if ever the global economy needs a psychological injection of some confidence in the arm, it’s now, and that can be delivered by a positive outcome on Doha. Takes more than two to tango. Takes a lot of people to tango when it comes to the Doha Round — combination of ourselves and the Cannes Group, the United States, the Europeans, Brazil, India, others. But what we have agreed, again, as strong, long-term supporters of free trade around the world, as one of the best drivers of global economic growth, is to work very closely together in the months ahead to try and get a good, positive outcome for Doha — good for our economy, good for the American economy, good for the global economy.” (Audio clip, MP3-0:56).

Reuters writer Doug Palmer reported yesterday that, “European Union Trade Commissioner Peter Mandelson told reporters in Paris he was encouraged by Bush’s remarks.

“‘It’s about time,’ Mandelson said after meeting with French Prime Minister Francois Fillon.

“‘George Bush says … the United States needs to make fair, reasonable payment into these negotiations,’ Mandelson said. ‘I always said they would. The time has come for this to happen.’”

Mr. Palmer added that, “On Monday, Brazil’s chief Doha negotiator Robert Azevedo said negotiators were closer than ever to an agreement, but there still was no certainty of success.

“The United States and the EU both face demands to make deep cuts in their agricultural subsidies and tariffs, but want major developing countries such as India and Brazil to open their markets in exchange.

“Negotiators have been working in Geneva toward a possible ministerial-level meeting in April or May, where it is hoped a long-awaited breakthrough would occur.”

An AFP article from yesterday added that, “President George W. Bush said Friday his administration is prepared to make ‘serious concessions’ to help achieve a global trade liberalization pact if other countries reciprocate… [D]eveloping countries have been pressing for greater access to agricultural markets in the industrialized world while wealthier nations are in return seeking better access for their manufactured products.”

In a related item, Dow Jones writer Tom Barkley reported yesterday that, “Completing a successful Doha round of global trade talks is the top U.S. trade priority, the U.S. Trade Representative said Friday.

“The yearly National Trade Estimate Report on Foreign Trade Barriers said it is also working with Congress to get free-trade agreements signed with Colombia, Panama and South Korea approved.”

Meanwhile, Reuters writer Jonathan Lynn reported yesterday that, “Major countries in the World Trade Organisation (WTO) hope to resolve a key technical issue in agriculture next week that is holding up progress towards a new global trade deal, diplomats and officials said on Friday.

“Leading food importers such as the European Union and Japan, and exporters such as Australia and Brazil, will get together on Monday to show whether they have agreed on a scheme to allow countries to shield politically sensitive products from the full force of tariff cuts.

“The issue has bedevilled the Doha round of trade talks for months, but after importers and exporters spent the weeks on either side of the Easter holiday crunching numbers there were signs they were ready to move ahead, diplomats said.”

The article added that, “WTO Director-General Pascal Lamy will meet ambassadors from major trading powers and representatives of trading alliances on Tuesday to discuss how a meeting of ministers should be organised, officials and diplomats said.”

Farm Bill

The Bush administration continues to promote reform principles in the current negotiations on the U.S. Farm Bill.

An item posted yesterday at The Mulch Blog pointed to a Talk Radio News Service report from Friday that stated, “Responding to a question on the Farm Bill Stanzel said that the president has said that he wants a Farm Bill that is reform-minded that does not raise taxes. Since farmers are doing very well we think this is a good time to reform our agriculture policies. The president would veto a bill that is not reform-minded, or one that raises spending. Stanzel mentioned that the next deadline is April 18th, instead of relying on extensions the Congress should work to pass new legislation and not extend current law piecemeal.”

DTN Special Correspondent Don Wick reported yesterday (link requires subscription) that, “Meeting with farmers in his home state [North Dakota] for the first time in official capacity, Agriculture Secretary Ed Schafer emphasized the importance of lawmakers settling their funding issues for the farm bill before Congress returns from its Easter recess next week.

“‘We’re pretty confident now that we can come together on those funding sources and if they get that in place by the time they get back, we’ll have a couple weeks to get it wrapped up,’ said Schafer at a forum Friday morning with representatives from about 20 North Dakota farm groups.

“Rep. Earl Pomeroy, D-N.D., also participated in the roundtable discussion and said if the funding concern isn’t resolved by Monday, there will be tremendous pressure to finish the bill early in the week.”

Mr. Wick indicated that, “While funding remains a hurdle, the White House was also seeking policy reforms. Schafer said more work remains on the reform issue. The administration has moved off its demand for a $200,000 adjusted gross income cap for people to continue collecting commodity payments. The administration now supports a $500,000 AGI cap.

“‘That’s not the reform we want, but that’s kind of the realistic deal about getting a bill, and we’re willing to do that,’ said Schafer, ‘However, we have taken the strong stance that any increase in spending now has to come from reform. It can’t come from tax increases. It can’t come from chopping other programs. It has to come from real reform in the farm bill, and we should be able to do that.’”

Jenny Michael reported at the Bismarck Tribune Online today that, “North Dakota farm and ranch group leaders told U.S. Agriculture Secretary Ed Schafer they want a permanent disaster relief program to be included in the 2007 Farm Bill.”

Ms. Michael stated that, “Schafer said the Bush administration is committed to providing reform, a stronger safety net for farmers, and continued growth in trade in the new farm bill, which will last five years.

“A permanent disaster relief program, which has been pushed by farm-state politicians and producers, could be part of that safety net. Such a program would take the place of congressional funding to producers following natural disasters.”

“Schafer said Bush’s OK of the proposed $4 billion program in the $285 billion Farm Bill will depend on how it fits into the finished bill. Such a program could be viewed as a subsidy by the World Trade Organization, which could hurt the United States in trade discussions, he said.”

The Bismarck Tribune article added that, “Also discussed at the roundtable were pending trade agreements, support for beginning farmers, conservation and the sustainability of high market prices.”

With respect to high market prices, USDA’s National Agricultural Statistics Service (NASS) released their monthly Agricultural Prices report yesterday.

In part, the NASS report stated that, “The preliminary All Farm Products Index of Prices Received by Farmers in March, at 150 percent, based on 1990-92=100, increased 3 points (2.0 percent) from February.”

The NASS document also included these illustrative graphical indicators depicting prices received for corn, wheat, soybeans and cotton.

Some farm policy observers have noted that with commodity market prices at such robust levels, reforms regarding direct payments should be considered- particularly since a reform in this area could also free up additional funding for other Farm Bill priorities.

Recall that back on February 27, DTN writer Chris Clayton reported that, “Policymakers and groups that have sought to reshape farm policy are again calling on Congress to reconsider tax changes to fund the farm bill while also paying direct payments to producers during these times of soaring commodity prices.”

Mr. Clayton explained that, “Most farm groups have defended direct payments as a safety net that would be there if hard times return. Others have noted that the payments, which are not tied to actual production, are compliant with World Trade Organization rules. The American Farm Bureau backs keeping direct payments, and the National Association of Wheat Growers wanted an increase in direct payments because, in many cases, direct payments were the only safety net for wheat producers over the past farm bill.”

The February 27 DTN item noted that, “[U.S. Rep. Ron Kind D-Wisconsin] and cohort Rep. Jeff Flake, R-Ariz., have sent a 10-point plan to House Speaker Nancy Pelosi, D-Calif., and other congressmen proposing to rollback any potential changes in target prices or loan rates, as well as reduce direct payments and establish tighter criteria for farmers to receive commodity payments. Given the current commodity markets, the Kind-Flake proposal particularly targets direct payments, which pay $5.2 billion annually to producers and are not tied to market conditions.”

For more perspective, see this audio podcast from February 27 (MP3- 6:00) which features audio clips from Rep. Kind, Rep. Flake, President of the Grocery Manufacturers Association and former U.S. Rep. Cal Dooley, and Ken Cook. The audio podcast lasts six minutes and is available here (MP3).

For a closer look at the distribution of federal direct payments, see this Environmental Working Group webpage.

Meanwhile, David Bennett, in an item posted yesterday at the Delta Farm Press Online, provided a Question and Answer transcript with Senator Blanche Lincoln (D-Ark.) from a conversation the Senator had with the Delta Farm Press on March 20.

Direct payments were a topic that Sen. Lincoln addressed.

According to yesterday’s Delta Farm Press update, Sen. Lincoln stated that, “One (politician) was up here talking about cutting direct payments — that the payments weren’t needed because (ag commodity) prices are so high.

“There was a gentleman in central Arkansas who let us know that he uses the direct payment to buy supplies in the off-season, when prices are cheaper. However, now that (input) prices are going sky-high the direct payment won’t cover as many of those expenses.

“We cut back on the counter-cyclical program. People said, ‘Well, no one will use that.’ Well, they won’t need to since prices are high. But everyone knows that those prices won’t stay high.

“And this is a five or six-year bill. And if there is a big problem (that develops during the bill’s life), farmers need to know there are programs that will be available…

“They need to know that direct payments will be there for them…They need to know that this bill isn’t something just for this year, when prices are high. They need to know the bill is a long-term insurance plan that makes sure we have a safe, abundant, domestically supplied food source, that it provides Americans the kind of food they’ve grown accustomed to and appreciate.”

EU Common Agricultural Policy

Reuters writer Jeremy Smith reported yesterday that, “Latest EU plans for revamping farm policy are headed in the right direction but more attention should be given to developing the countryside, Europe’s former agriculture chief said.

Mr. Smith explained that, “Franz Fischler said a blueprint for the European Union’s latest shake-up of its Common Agricultural Policy (CAP) took a realistic approach towards adapting it for new challenges, given the likely level of resistance.

“‘If I look at what the challenges are, and at how far one can go so that the package is finally accepted by the member states, I think the proposal meets a good balance,’ he told Reuters in an interview late on Thursday.

“Fischler, a former Austrian minister who served two consecutive stints as the EU’s agriculture commissioner from 1995 to 2004, was behind two major reforms of EU farm policy.

“One of his major successes was in 2003 when he persuaded the bloc’s farm ministers to agree to breaking the link between how much subsidy a farmer receives and the amount he produces, a concept known in EU jargon as decoupling.”

The Reuters item added that, “Fischler’s successor, Denmark’s Mariann Fischer Boel, wants to take those ideas further and, in a plan called the ‘health check’ of the CAP, has suggested gradual increases in the amount of compulsory modulation that EU countries should do.

“Fischer Boel has also taken aim at big farms and wants to reduce handouts to larger holdings according to income bracket.

“‘In my view, the health check is okay,’ Fischler said. Referring to the degressive cash capping suggested in the plan, he said: ‘The way the Commission addresses this point in the health check is maybe a very practical solution.’”

For more detail and additional context with respect to EU reform of the Common Agricultural Policy, including the historic reforms sought by Franz Fischler, and an explanation of compulsory modulation, see, this exclusive update from March 21, “‘Analysis From Brussels’ –By Roger Waite – CAP Backgrounder.”

In a separate Reuters article from yesterday, Jeremy Smith reported that, “France hopes to mark its stint as European Union president from July by presenting ambitious ideas on how to reform the bloc’s agricultural policy.

“But some diplomats fear President Nicolas Sarkozy’s suggestions to spur domestic production and make Europe less dependent on imports masks a protectionist stance that does little to change the Common Agricultural Policy (CAP).”

Mr. Smith noted that, “EU diplomats and officials have monitored a stream of rhetoric from Paris that they say suggests a desire to modernise farm policy, but which also hints at old-style protectionism… [D]iplomats say the French president clearly wants to ‘do something’ about the CAP, but they remain to be convinced that anything much will change under the six-month French presidency.”

“‘The most likely outcome is something that will enable the French to say they kicked off the debate on what the CAP should look like,’ one EU diplomat said.”

Keith Good

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