US Senate Agriculture Committee Passes Farm Bill; Cotton Spat Unresolved

2 May 2012

The Farm Bill process passed another milestone last week, after the US Senate Agriculture Committee approved its version of the omnibus legislation that supports agriculture, conservation, and nutrition. The US Congressional Budget Office estimates that the proposed legislation will involve a US$26 billion reduction in spending over ten years.

An earlier proposal by the administration of US President Barack Obama had outlined a US$30 billion cut; shortly thereafter, a budget proposal from the House Budget Committee had suggested a US$33 billion cut. (See Bridges Weekly, 21 March 2012)

The Senate Agriculture Committee's bill, or the Agriculture Reform, Food and Jobs Act of 2012, eliminates direct and countercyclical payments, making crop insurance the biggest budget item. Among the commodities, wheat, cotton, and feed grains would see the largest decrease in government payments. Although overall spending is widely expected to be lower, it is likely to become more trade distorting - moving away from direct payments to support that may influence planting decisions.

The proposed legislation also outlines reductions in outlays for direct payments and for nutrition and conservation programmes, while mandating increases in crop insurance, extension, and horticulture over a period of ten years.

To become law, a similar bill must also emerge from the Agriculture Committee of the US House of Representatives and then be reconciled with the Senate version before being put up for a vote in both chambers. The bill will then require presidential approval to become law; the 2008 Farm Bill was vetoed by then-President George W. Bush, only for Congress to override the veto.

In recent weeks, the House Agriculture Committee has been holding hearings on its version of the bill in Washington and across the country. Cuts in spending on food stamps, or the Supplemental Nutrition Assistance Program (SNAP), are expected to be a key difference between the House and Senate versions of the legislation. The Republican Chair of the House Agriculture Committee, Frank Lucas of Oklahoma, has recently put forth what he calls a "common sense" proposal that achieves savings by reducing costs and closing loopholes.

A finalised bill from the House will likely emerge in the coming weeks as legislators and the farm lobbies push to conclude a bill in both chambers before the current Farm Bill expires on 30 September.

Trade minimally important, observers say

According to some observers, discussions on trade negotiations, particularly at the WTO, have not played a significant role in the Farm Bill debate to date. In Senate testimonies earlier this year, trade or WTO commitments were only mentioned by commodity-specific lobbies and the American Farm Bureau Federation.

The Secretary of Agriculture, Tom Vilsack, referred to record exports of US$137 billion in 2011 and a historical record of 50 years of trade surpluses to underscore the importance of farming to the country's trade position. A representative of the Rice Federation observed that increased spending in some developing countries will uncover "violations of WTO commitments," while the National Cotton Council made the case that its proposals would resolve the US' WTO dispute with Brazil. More recent testimonies from the House were no different.

Urban Lehner, Vice President of DTN Progressive Farmer, summed up the attitude of legislators towards the WTO as being one of "who cares." Representative Collin Peterson, a Democrat from the US state of Minnesota, is quoted as saying that the "WTO is irrelevant" to the Farm Bill if the US is within its commitments at the global trade body. Peterson added that the Doha Round of trade talks would likely be a failure if, as a "development round," it encourages developing economies to view it as all take and no give.

Brazil weary of NCC proposal

The most discussed trade issue in the Farm Bill debate is perhaps a resolution to the United States - Upland Cotton dispute with Brazil. The high-profile dispute was put on hold in 2010, after the US agreed to pay Brazil US$147 million annually in exchange for the South American country refraining from putting into effect promised retaliation. Both countries also agreed that US farm legislation would be modified to resolve the dispute.

A Brazilian official, speaking on condition of anonymity, observed that the National Cotton Council's STAX proposal will likely "not be accepted as a solution" to the US-Brazil cotton dispute. "We were disappointed with the markup from the Senate," he added.

STAX is the Stacked Income Protection Plan for producers of upland cotton, a programme meant to make up for losses beyond what is covered under ordinary crop insurance. Ambassador Roberto Azevedo, Brazil's representative to the WTO, had earlier written to Congressional agriculture committees describing how STAX and other proposals would be trade distorting.

The final Senate Bill is "very close" to the Council's proposal, Mario Jales, a cotton expert at Cornell University, told Bridges. A minimum price, generally considered more trade distorting, is now absent from the bill and was present prior to the markup process. He added that the draft legislation does "very little" to reform the marketing loan rate program. The marketing loan provision was found to be the "most trade distorting" element in the United States - Upland Cotton case, according to Jales.

In the absence of a satisfactory resolution to the dispute, three members of the House, led by Ron Kind, a Democrat from Wisconsin, have sponsored legislation to end the US$147 million in annual payments to the Brazilian Cotton Institute. Critical of the STAX programme, Kind warned that it "will surely be challenged again by Brazil at the WTO."

ICTSD reporting; "Trade Is Traded Off in the Farm Bill Debate," THE PROGRESSIVE FARMER, 27 April 2012.

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