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Agricultural policy issues in the 109 th Congress

This article discusses the agricultural policy issues in the 109th Congress, including trade policy, WTO dispute settlement, and the implementation of CAFTA-DR. It provides an overview of the key issues, their timelines, and the potential implications for U.S. farm policy.

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Agricultural policy issues in the 109 th Congress

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  1. Agricultural policy issues in the 109th Congress Stephanie Mercier Senate Agriculture Committee July 25, 2005

  2. Summary • WTO process • Other trade policy issues • crop insurance • Other legislative issues • Concluding remarks

  3. Trade policy issues

  4. How is U.S. trade policy agenda performing? • Growth in imports occurring as result of demographic, income changes—relentless • Growth in exports more sporadic • Drop off in late 1990’s due to external causes (Asian economic problems, strong U.S. dollar) • Active trade policy effort may have forestalled greater decline • U.S. trade policy agenda involves multiple tracks

  5. Doha Development Agenda • Uruguay Round (1993) envisioned continuing negotiations to further reform agriculture, trade in services in 1999 • Doha Round launched after WTO Ministerial meeting held in Nov. 2001 • Key issue areas: • Agriculture • Non-agricultural market access • Trade in services • Implementation issues from Uruguay Round • Trade in intellectual property rights

  6. WTO framework agreement • Completed in July 2004 • Covers agriculture and other key areas • Long on principles, short on numbers • Reflects U.S. priorities of greater cuts from higher levels (harmonization) in domestic support and market access • Not clear if final deal possible if value of lost domestic support < value of market access opportunities gained • Urgent need for capacity to do rapid analysis of implications of various proposals for reforming agriculture in Doha Round • Success in agriculture is linchpin for success in overall Round

  7. Anticipated WTO timeline • Complete `first approximation’ document by end of July • Ministers to approve broad agreement at Hong Kong Ministerial in December • Fill out details (tariff lines, special product designations) in 2006 • Final agreement in early 2007, coinciding with last window for Congressional approval under TPA

  8. WTO Dispute Settlement • Crucial aspect of Uruguay Round • U.S. frustrated with lack of enforcement mechanism under GATT • U.S. single largest participant in WTO dispute settlement process • Complainant in 69 cases (21 agric.) • Respondent in 80 cases (11 agric.) • Brazil cotton case pivotal for future of U.S. farm policy • First to call U.S. commodity programs into question

  9. Brazil cotton case: timeline • Case filed by Brazil in September 2002, asserting that: • U.S. forfeited peace clause protection by excessive spending on domestic support for cotton • U.S. cotton programs create serious price-suppressing effect on world cotton market • U.S. must change or eliminate its price-related programs • September 2004, initial panel found for Brazil on most aspects of case • In March 2005, WTO appellate panel issued report which upheld original panel • In June 2005 U.S. government accepted appeal verdict, agreed to comply

  10. Brazil cotton case--implications • Panel report indicates quick action needed on export credit and cotton Step 2 programs—July 1, 2005 • USDA took regulatory steps to address concerns on GSM export credit programs • USDA sent draft legislation to Congress on July 5 that would terminate cotton step 2 and make final statutory changes on export credit • Likely to be folded into Committee’s budget reconciliation package ($492 million in savings for 5 years) • No firm deadline or guidelines on modification of domestic support programs • Politically, it would be difficult to reform domestic programs for cotton only • Further changes (if needed) could occur in 2007 farm bill

  11. At stake in trade negotiations • Trade promotion authority (Trade Act of 2002), Congress delegates authority to the President, limiting its ability to influence provisions of trade agreements • Greater opportunities for U.S. agriculture in hemispheric (FTAA) and multilateral negotiations (WTO) • If double U.S. market share in current and planned bilateral and sub-regional negotiations, gain of $3.3 billion • If 10 percent share increase in markets in FTAA and WTO, gain of more than $5.5 billion

  12. CAFTA-DR in the balance • Implementing legislation passed 54-45 in Senate on June 30: narrowest margin for FTA in Senate • Vote expected in House before the end of July —outcome uncertain • Specific concerns • Modest benefits from CAFTA-DR • Import-sensitive sectors such as sugar concerned about impact • Lack of effective labor, environmental provisions • Will agreement really help working class in Central America

  13. CAFTA-DR and sugar • Text provides 110,000 tons additional access to CAFTA countries, expanding to 150,000 tons by end of phase-in • This provision protested by U.S. sugar industry • Assert that CAFTA undermines stability of U.S. sugar program, which is based on a support price dependent on limiting imports • Sugar groups represent main opposition to CAFTA within U.S. agriculture • Opposition from sugar-state members could mean difference between winning and losing • At least half of Senate Republicans who voted `No’ were from sugar-producing states

  14. Other trade policy issues • BSE impact on beef trade • U.S. border re-opened to live Canadian cattle on July 18 after court injunction over-turned • 2nd U.S. BSE case (1st indigenous) may have complicated re-opening markets to U.S. beef • Some markets closed in response to 2nd case • Some markets (Japan, Korea) remain closed since 1st BSE case (Dec. 2003). • Food aid issues • WTO developments • U.S. budget actions

  15. Other policy issues • Crop insurance • PRP • Conflict of interest rules • Soybean rust • Livestock • Price reporting • Animal ID • COOL

  16. Energy bill • Current effort is third try to get bill passed in last five years • Now in House-Senate conference • Key agriculture-related provisions • Renewable Fuel standard (RFS) • Biomass energy provisions • Renewable portfolio standard (RPS) • Renewable energy production tax credits (wind, biodiesel) • Sticking points in conference • MTBE liability provision • RFS • RPS • Tax provisions

  17. Coments about farm bill process • Many provisions of the 2002 farm bill expire in September 2007 • USDA has already launched farm bill listening sessions this summer (45 total?) • House Ag. Committee could begin field hearings on farm bill yet this year • No urgency to finish early this time: • wait for Doha process • likely no new money at stake • If AAEA members want to do research which could have an impact on the farm bill process, now is the time to begin

  18. Concluding remarks • While Committee work on farm bills is cyclical, there are a lot of issues where there is always something going on • Even if there is not specific legislation needed, staff need to stay on top of all developments that touch on U.S. agriculture, however tangential • A Hill staffer’s work is never done

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