Food policy is critical for the farm community and the nation. Continued U.S. backing of our current farm programs is one of the major reasons the Doha round of World Trade Organization negotiations collapsed. U.S. farm groups that view the collapse as a positive development are short-sighted. That's according to Modernizing America's Food and Farm Policy, a report of the Agricultural Task Force of the Chicago Council on Global Affairs.
To be efficient and environmentally sustainable, agricultural production must be flexible and responsive to market opportunities. The biggest opportunity for U.S. farmers today is in the new markets created by:
- Economic growth in developing countries.
- Population growth and evolving consumption patterns in both the U.S. and developing countries.
- The expanding role of agriculture in energy production.
To secure these new markets, farm production must reorient itself to today's changing world, and public policy must support this goal.
Redistribute rather than cut. Most U.S. farm program participants will be better off if negotiators can restart-then successfully conclude--the Doha round of WTO negotiations rather than defaulting to Uruguay round rules.
"The Doha round is not so much about cutting farm subsidies as it is about moving subsidies from trade distorting to non-trade distorting mechanisms," says Bob Thompson, University of Illinois economist.
Negotiate or litigate? If the Doha round fails, trade disputes will be settled under Uruguay round rules. Brazil has challenged U.S. cotton program payments. WTO litigators ruled in favor of Brazil on that challenge. International competitors are preparing similar challenges to our rice, corn and soybean programs.
"The United States risks losing marketing loans, loan deficiency payments and countercyclical payments," says Marshall Bouton, Chicago Council on Global Affairs president. "If we give them up through trade negotiations we have a chance to get something in return. Specifically, U.S. negotiators want to obtain better market access for U.S. agricultural products around the world. If we lose those payments through litigation under Uruguay round rules we will likely get nothing in return."
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Non-trade distorting options. The Chicago Council on Global Affairs agricultural task force proposes replacing the entire group of product-specific, trade-distorting income and support programs, including countercyclical and loan deficiency payments, price supports, federal crop insurance and disaster payments. The new portfolio of approaches would be nondistorting and comply with the WTO green box rules. They include:
- Direct farm program payments that are not linked to specific types of production and market conditions to move them from the amber box to the green box.
- A universal revenue insurance program covering all commodities on a multiproduct basis.
- A new land stewardship program that rewards farmers for the value of environmental contributions from working lands.
- Farmer savings accounts similar to tax-deferred 401(k) accounts that are backed by government matching contributions.
- More investment in agricultural research and infrastructure to improve cost competitiveness of U.S. agriculture and rural America.
- Transition measures to protect farmers and owners of rented farmland from investment losses such as declining land values as a result of the proposed changes to support programs.
You can access the full report at: