With the future of the new framework legislation guiding U.S. agricultural policy from 2007 to 2012 still up in the air, the Farm Bill, passed in 20021 and initially slated to expire on September 30, 2007, has been extended to March 15, 2008.
And for good reason, as talks over the bill continue to be heated...
Indeed, the draft legislation introduced in the House of Representatives this past July already had some "up in arms" for presenting no fundamental reforms of the original Farm Bill, while the bill passed by the U.S. Senate on December 14, 2007 also maintains the agricultural subsidy structure and the assistance payments scheme as they exist today. It also inspired a heated reaction from the Bush administration, which finds the legislation to be too costly and too distant from the World Trade Organization's concerns with regard to the Doha Round.
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The Senate legislation, billed "The Food and Energy Security Act," passed with a strong majority (79 percent), a first for any agricultural legislation since 1973.
Specifically, the Senate is in favor not just of improving farmer income support measures, but also extending the scope of the Farm Bill to the areas of energy (in anticipation of increased production of agrofuels), nutrition and rural development and strengthening environmental conservation programs.
This proposed legislation is therefore expected to be quite costly – estimated at approximately 286 billion dollars over five years, it is 20 billion dollars above the budget cap set by the White House.
Some experts suggest that additional funding related to the 2002-2007 Farm Bill will amount to more than 100 billion dollars over the next five years.
And these estimates, which are based on the currently increasing prices of agricultural raw materials, could be even higher if prices dropped. Marketing loans, which constitute the bulk of the agricultural supports, indeed are based on the granting of loans. With these loans, American farmers can defer the sale of their harvest if prices fall below a minimum price (the loan rate, or intervention price). According to this logic, the lower global prices drop, the wider the gap to fill will be; funding allocated to marketing loans therefore increases as global prices fall.
For now, the House of Representatives and the Senate must agree on one version of the legislation, which will soon be submitted to the President for signature.
The United States Department of Agriculture (USDA), whose recommendations were largely disregarded, had nonetheless previously stressed the need to tighten the criteria for granting subsidies and to decrease the amount of assistance provided. Today, the USDA deplores the fact that the funding mechanism called for in both versions of the draft legislation requires new tax revenues.
Of the same opinion as the USDA, the Bush administration has expressed its disagreement with both the House of Representatives and the Senate versions, and has already invoked the possibility of vetoing any legislation from Congress that would turn out to be too expensive and in full contradiction with the complaints lodged with the WTO by Brazil and Canada over what they see as the country's excessively high subsidies.
With the presidential elections nearing, some observers have pointed out that the Republicans would be remiss to oppose a generous Farm Bill, as a considerable share of their supporters are farmers.
And should the President veto the legislation, a two-thirds majority in the Senate and the House of Representatives would be enough to override the veto, in which case the bill would become law. The strong majority seen in the December 14 Senate vote (79 percent in favor) suggests this is a possibility.
At a time when the Common Agricultural Policy is moving toward increased "WTO compatibility," the Farm Bill, as it currently stands, has taken the opposite route, granting priority to the defense of national interests.
In this context, the possibility of reaching a positive outcome in the Doha Round negotiations appears increasingly compromised...
Stéphanie Laffargue, Study executive MOMA
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