U.S. cuts farm subsidies $10 billion -- Doom for Doha

February 7, 2007

Last week, the U.S. Department of Agriculture (USDA) released the 2007 Farm Bill Proposal. The 2007 Proposal would spend $10 billion less than the 2002 Farm Bill spent over the last five years. In addition, spending priorities would be shifted to beginning farmers, renewable-energy crop research, and specialty crop producers through purchases for the food assistance programs.

On January 9, European Commissioner Manuel Barroso met with President Bush to lay out the grounds for an agreement in farm subsidy cuts. At that time, the EU asked the U.S. to cut $8 billion from its current ceiling of $23 billion, resulting in a total subsidy expenditure of $15 billion. In return, the EU would cut tariffs on agricultural imports of 39%, which is close to the cuts requested by the G-20, which represents developing nations.

According to the International Herald Tribune, the EU said that although the plan did not reduce subsidies to dairy and sugar farmers. The EU called on the U.S. to" propose more ambitious cuts,"  if the Doha round were to succeed.

What the EU’s criticism of the U.S. Farm Bill means:
Basically, very little has changed, despite recent high-level meetings and statements from the Bush Administration. The U.S. does not seem willing to really cut agribusiness subsidies, despite record budget deficits and increased pressure from the EU, Brazil and other global trading partners.

Success of the Doha Round becomes even more unlikely due to the fact that the President’s Trade Promotion Authority is due to expire in July, 2007. Without an extension, all trade negotiations must be approved by Congress, thereby allowing them to add amendments that would help local industries, but jeopardize the agreements.

Action steps:
Make sure you really enjoy the low prices on corn, wheat and beef you buy at the grocery store, since the Farm Bill subsidies go towards reducing the prices of these particular foods. Don't think about what the Farm Bill, and the failure of Doha, is making you miss -- low-cost imported food, a trade surplus and a healthier economy.

Source: USDA 2007 Farm Bill Proposal ; Doha Development Agenda, January 6, 2007; EU Initial Reaction to U.S. Farm Bill, 2/1/2007.