| Posted September 28,
2004: For seven decades, U.S. farm policy has basically
followed one track. Some farmers get a subsidy check from the
government when prices are low. However, for the first time
in memory, a real chance to debate and change that track now
seems possible. Surprisingly, the impetus for change is coming
from an unlikely source—the World Trade Organization—rather
than our own legions of disgruntled farmers and environmentalists.
The primary purpose of farm policy has been to stabilize
farm income. Because weather and markets will always be volatile,
it is in the public interest to ensure a relatively stable
farming sector to ensure adequate food production.
But three flaws are continually embedded in farm policy.
First, from the beginning only a few chosen commodities were
selected for support. Corn, wheat, cotton, rice, and soybeans
are the anointed crops. Livestock, dairy, fruits and vegetables
are left out. So farmers who want to grow other crops must
operate at an economic disadvantage. Unfortunately, the designated
commodities tend to be row crops that require the greatest
soil disturbance and use of chemical inputs, leading to vast
environmental degradation.
The second great flaw is that we reward for each bushel produced.
So farmers naturally try to maximize production of the protected
crops in order to maximize their income and minimize their
risk. This has led to a cycle of ever greater supplies with
little change in demand, which results in lower prices and
thus the drive to get more ‘efficient’ with expensive
technology and inputs in order to grow more and get a bigger
check from the government. The unintended consequence is more
environmental harm and loss of biodiversity as every available
acre—hilly, wet, wooded, or marginal—is drawn
into production.
The third great flaw in commodity policy is that farmer payment
limits have proven impossible to enforce, whether because
of a lack of political courage or the legal creativity of
some farmers. Essentially, the government continues to underwrite
the great consolidation in farms that’s been under way
for the past century. The big get bigger using their enormous
commodity checks, and, again, care of the land suffers.
An ill-fated attempt to break this cycle of overproduction
was adopted in the 1996 farm bill. Unfortunately, “decoupling”—the
policy to gradually eliminate payments until we got the government
out of production agriculture—forgot about the original
purpose of U.S. farm policy. When income stability disappeared
with dropping prices a few years later, the old system of
subsidies came right back bigger than ever in the 2002 farm
bill.
Now something has happened that has agriculture groups of
every stripe looking for a new approach. In a landmark ruling
this summer, the World Trade Organization affirmed a challenge
from Brazil that most U.S. cotton subsidies are illegal. Driven
by hopes for export markets, U.S. commodity groups had pushed
for a level playing field for free trade by reducing the various
financial advantages countries give to their own producers.
Now, those same agriculture groups seem surprised that their
own commodity subsidies (even the direct payments) are being
challenged as unfair by other countries. Brazil argued that
the subsidies led to overproduction, U.S. dumping (selling
below the cost of production) on global markets, and suppressed
prices, thus giving the U.S. an unfair share of the world
market. While the decision will likely be appealed and has
already influenced new trade negotiations, it nevertheless
brings into question the future of subsidies for corn and
other commodities
What is suddenly very much in demand is an alternative policy
that could contribute to basic farm income, but without driving
overproduction of commodities. The WTO designates such allowable
subsidies as being in their ‘green box.’ Of course,
we already have the essence of such a policy in the Conservation
Security Program. When fully implemented, this new program
will be a green payments program that offers farmers willing
to meet high conservation standards a yearly paycheck in return
for producing conservation benefits such as clean water, healthy
soil, and wildlife habitat. In effect, we will pay for conservation
produced instead of commodities produced.
Powerful farm and commodity groups are sensing a real threat
to subsidies and are looking for options. As Bob Stallman,
President of the American Farm Bureau Federation, testified
recently, “International trade issues and budget pressures
may cause a future evaluation of the means of supporting agriculture.
The conservation programs authorized under Title II of the
farm bill, which fit within the ‘green box’ of
the World Trade Organization Agriculture Agreement as non-trade
distorting programs, are important to these policy considerations”
(U.S. House Agriculture Committee’s conservation subcommittee,
June 15, 2004).
It is not too early to begin shaping the discussion for the
next farm bill in 2007. It will take time to build a comfort
level, support and detailed proposals for green payments.
The Minnesota Project intends to be there every step of the
way.
Published in the Autumn 2004 edition of Community Connections,
newsletter of the Minnesota Project, by Senior Policy Analyst
Loni Kemp.
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