The US Farm Bill: What implications for Africa?

30 May 2014

Earlier this year, the United States Agricultural Act 2014 (Farm Bill) was finally approved by the Senate after a nearly two-year effort to update it. The Farm Bill is the most important US legislation on agricultural support. The new legislation will slash direct payments to farmers and institute new crop insurance subsidies.

 The new Bill combines two programmes - namely Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) - into a final agreement, with farmers able to make a one-time choice for either system. Some experts have argued that these types of crop insurance programmes are likely to be considered trade-distorting support, and therefore should be subject to the WTO limits within the “amber box” category. Others maintain that the Bill was developed specifically to bring the United States into compliance with WTO rules and that the trade - distorting elements of the programme can be minimised.

 

The US Farm Bill includes a supplemental insurance mechanism specific to cotton, the Stacked Income Protection Plan (STAX). Since the STAX is a government programme, cotton growers elsewhere are therefore watching to see the kind of incentives the US Congress will provide US farmers. At the same time, one needs to bear in mind that global cotton production, trade, and support have changed dramatically in recent years, with cotton prices increasing dramatically, patterns of trade shifting, and new countries stepping in with subsidies of their own. For example, payments in the US have declined from historical heights and are projected to be lower in the future, and the European Union (EU) has changed its support system by eliminating the worst forms of subsidies. However, if prices were to fall again, some observers note that the minimum prices as established in the new Farm Bill could lift US production and hurt some of the poorest farmers in the world.

 At risk is not only the annual US$147.3 million provided to Brazil under a framework agreement with the US on the cotton dispute, but also the livelihoods of West African farmers. In fact, discussions between US and Brazilian officials to resolve their dispute over illegal US cotton subsidies are still ongoing, with Brazil considering whether to request a WTO compliance panel in the coming months.

 This month, Bridges Africa brings you insightful analyses related to the implications of the US Farm Bill for the trade and production of cotton of African countries, the impacts of the Bill on food aid, as well as the food security challenges for Africa.

 As usual, we welcome your substantive feedback and contributions. Write to us at bridgesafrica@ictsd.ch.

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