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U.S. Agricultural Policy

U.S. Agricultural Policy. Joseph W. Glauber U.S. Department of Agriculture Silverado Symposium on Agricultural Policy Reform / Napa, California /January 20, 2004. Farm and Food Trade Policy: Historical overview. 1982 – 1998: Budget deficits => farm program reforms => trade liberalization

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U.S. Agricultural Policy

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  1. U.S. Agricultural Policy Joseph W. Glauber U.S. Department of Agriculture Silverado Symposium on Agricultural Policy Reform / Napa, California /January 20, 2004

  2. Farm and Food Trade Policy: Historical overview • 1982 – 1998: Budget deficits => farm program reforms => trade liberalization • 1998 – 2002: Budget surpluses => farm program retrenchment => disenchantment with trade policy • Post 2002: Return of budget deficits => renewed pressures on farm programs (?) => renewed interest in trade (?)

  3. Trends in U.S. Commodity Programs, 1985-2001 • Deregulation of supply • Decoupling payments from price and production • Market oriented support levels

  4. Criticisms of 2002 Farm Bill • Increased level of support and broadening of scope of support • Re-coupling of payments to price through counter-cyclical payments • Re-coupling of payments to production through base and yield updating

  5. Costs of the Farm Bill

  6. Change in Acreage Since 1990

  7. Base Updating under 2002 Farm Bill

  8. 2002 Planted Acres as Percent of 2002 DCP Contract Acres

  9. WTO Implications • Level of support • Classification of support: • Amber vs blue vs green • Product specific vs non-product specific

  10. Classification Issues • Amber—product specific • Price support (dairy, sugar) ($5-6 billion) • Loan deficiency payments ($8-9 billion) • Amber—non-product specific • Credit, water • Crop insurance • Market loss assistance/counter-cyclical payments => Below de minimis levels (5% of value of all ag prod) • Green • PFC/Direct payments

  11. Amber box levels and WTO commitments

  12. Doha Development Round • US proposal • Harmonizing cut in domestic support • Elimination of blue box • Elimination of export subsidies • Swiss formula for tariff reductions • Harbinson • EU/US paper

  13. Cancun Text—Domestic Support • Significant reduction in AMS • Product specific AMS capped • Reduction in de minimis • Modify and cap blue box • Fixed area and yield • Capped at 5% of total value of ag production w/ further annual reductions • Cap on AMS + Blue +de minimis w/ further annual reductions

  14. Implications for U.S. Domestic Support Commitments ($ bil) 1/ 5% of value of total agricultural production.

  15. Domestic Support with 50% AMS Reduction Cap at 2000 levels

  16. Domestic Policy Options to Meet New Support Commitments • Reduce loan rates • Dairy and sugar: $5-6 billion • Decrease loan rates => lower LDPs • Increase Direct Payment rates => Green • Maintain current DP rates => increase CCP => “New” Blue box

  17. Other Policy Considerations • Payment limitations: LDP vs DP/CCP • Opposition to further decoupling (e.g., Texas rice producers) • Budget implications-- DP vs LDPs

  18. Conclusions • Cancun text could lead to substantial reduction in trade distorting support • Would require US to make significant modifications in support (e.g., loan rates) • But would allow for continuation of decoupled income support

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