Congress continues its work this week on the 2007 Farm Bill with a markup of the agricultural support and commodity subsidy components of the nation’s farm policy in the House Agriculture Subcommittee on General Farm Commodities and Risk Management. Meanwhile, across the globe in Potsdam, Germany, an important meeting is taking place between high-level representatives of the United States, European Union, Brazil, and India—the G4—in an attempt to breathe new life into the moribund WTO Doha round of multilateral trade negotiations.
In Congress and at the international level, the agenda and results should be the same: Make farmers worldwide more competitive and confront the challenges of needed reform head-on.
The United States and the European Union both have the ability to make key policy decisions at home that could spur trading partners to make similar efforts. Agricultural tariffs and subsidies are the main sticking points to a final trade accord in the WTO Doha round—obstacles that the Bush administration, in league with congressional leaders on both sides of the political aisle, can overcome with creativity and nerve in the context of the 2007 Farm Bill debate.
Reauthorization of the Farm Bill provides Congress with the opportunity and the responsibility to reinvigorate our traditionally strong commitment to the support of United States agriculture by investing in innovation and the development of new agricultural markets.
A new approach to agricultural support will benefit both domestic and international development. Fiscal budgetary pressures and the relatively high commodity prices we are currently experiencing will likely reduce the inflation-adjusted value of many of the existing programs. These programs also need to be better targeted to family farmers, and to promoting sound environmental and energy policies including the next generation of cellulosic biofuels—liquid fuels sustainably produced from energy crops such as switchgrass and agricultural wastes such as corn stalks and rice hulls.
Current commodity programs do not apply to over 61 percent of U.S. farms. The U.S. government must stop subsidizing non-farming landowners; some estimates suggest that the federal government has paid over $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all. Commodity-based direct payments also inflate land values, which is a particular barrier to small farm operators and young, new farmers who rent land in order to farm.
Congress can and must improve the competitiveness of our nation’s farmers by expanding the modern safety net to serve more farmers and reinvesting a modest portion of current funding for agricultural commodity programs toward the further development of new renewable energy sources. Specifically, Congress should:
- Make green payments and reinvest direct payments toward renewable energy. Reward all U.S. farmers for environmental stewardship, including growing dedicated energy crops sustainably, by encouraging reinvestment of $5.2 billion in commodity-based direct payment subsidies into green payments for environmental programs on working lands. Enact stricter payment limitations to ensure that assistance goes to actual producers and reduce payment limits to $250,000 per farm from the current $360,000. Other WTO-member nations must make similar farm tariff and subsidy reductions in their agricultural and industrial sectors.
- Reduce the biofuel import tariff. As part of an increase in a sustainable renewable fuel standard and other initiatives, the United States must signal its willingness to begin a gradual phasedown of the current 54 cent-per-gallon tariff on imported biofuels. All other countries must take reciprocal action to remove trade restrictions and liberalize trade in biofuels.
- Promote sustainable biofuel production. In combination with improved fuel economy, an investment in advanced biofuels must be accompanied by enhanced environmental safeguards and incentives for biofuel producers to conserve land and water resources, maximize lifecycle greenhouse gas reduction methods, and grow energy crops in a sustainable manner. Any consideration of utilizing land currently enrolled in farm bill conservation programs for biofuel production must ensure the primary conservation goals of the programs are not compromised. The use of transparent certification and labeling criteria to encourage sustainable production of biofuels in a voluntary Renewable Fuels Program such as the Center for American Progress is advocating, should be implemented immediately. Farmers must have a central role in this effort.
Encouraging agriculture to diversify into renewable energy and dedicated energy crops will improve agricultural prices by slowing the oversupply of traditional agricultural commodities in global markets. Subsidies with a greater effect on production will also need to be addressed, but reforming of direct payment subsidies will have a modest impact on reducing the overproduction and dumping of agricultural commodities on global markets and minimizing the accompanying weak prices for all producers.
The market is currently experiencing better prices for corn, soybeans, and wheat, which increases farmers’ income and therefore flexibility. Yet we must put safeguards in place to ensure that a rapid ramp-up in prices does not lead to increased volatility in food costs and supply shortages for developing countries.
A sustained and consistent period of improved demand and prices will allow the United States, Europe, and Japan to meet the request of developing countries to improve their commitments to agricultural subsidy and tariff reform, thereby opening one avenue for progress in the stalled WTO Doha round. International trade challenges to U.S. farm policies, such as Canada’s recent complaint regarding U.S. agricultural support programs and the ongoing cotton subsidy dispute with Brazil, will be defused. The result would provide a modest foundation for poverty reduction, improve the competitiveness of U.S. agriculture, and strengthen the multilateral trading system.
In support of the original goals of the Doha Development Round, the United States and other nations should assist developing countries by promoting “behind the border” capacity-building such as education, transportation infrastructure, and access to private capital. A robust “Aid for Trade” program should not focus exclusively on trade efficiency-oriented measures such as new technology for customs and inspection, but also on initiatives to achieve broader economic growth and development in developing countries such as duty-free, quota-free access for exports from least-developed countries immediately and unconditionally granted. Small-scale farmers in developing countries should be eligible to have specific crops exempt from full and immediate liberalization.
This week, leaders in Congress and at the international level have an opportunity to put aside their misplaced allegiance to ideas of the past and rethink their traditional support for narrow, outdated agricultural policies in favor of win-win-win farm, energy, and trade policies that combat oil dependence, climate change, and rural poverty while fostering fair and open markets worldwide. Other countries must do their part, but success can only be achieved with dedicated U.S. leadership at home and abroad. It would be a serious mistake to pass up the opportunity to strengthen U.S. and global agriculture.
For further details on the agriculture, alternative energy, and trade policy recommendations of the Center for American Progress please see the following reports:
- Fueling a New Farm Economy, by Jake Caldwell, Director of Policy for Resources for Global Growth, Center for American Progress
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