NAWG: Beware Farm Subsidy Dealmaking Euphoria

Sherman Reese explains that many changes EU is proposing to make the U.S. has already done. Compiled by staff

Published on: Jul 11, 2005

News stories are cropping up from all over with talk of various proposals between the European Union and the United States on farm subsidies. U.S. President George W. Bush has been quoted as offering to drop U.S. farm programs if Europe will do the same, and a story Friday afternoon reported that Europe has offered to lower import tariffs if the U.S. dismantles specific parts of its domestic farm program.

National Association of Wheat Growers President Sherman Reese warns that before everyone gets caught up in some euphoric sense of a breakthrough, to remember that, in many ways, the United States has already made the reforms that Europe is now reportedly offering to make.

"The United States has not used our export subsidy program for grain in nearly 10 years, and while Europe has offered to give up export subsidies in the Doha negotiations, they have restarted export restitutions in the current marketing year," he says. "Export subsidies are widely agreed to be the most distorting and egregious form of subsidy, and Europe’s decision to restart its export subsidy regime this year was universally criticized."

Likewise, Reese explains that the United States has a tariff schedule for imported agricultural goods that is among the lowest in the world. "Are we now supposed to give up our domestic programs as well in order to achieve equal treatment? Why must we give twice in order to get one result," he asks.

NAWG is committed to a federal farm program that provides a safety net for producers with minimal market distortion. This is the recommendation of the Commission on 21st Century Production Agriculture, chartered by the 2002 Farm Bill, and Reese says the group believes it is a sound principle.

NAWG is also supportive of a comprehensive and balanced result from the Doha negotiations that provides reforms across all three pillars: export competition, market access and domestic supports. "But we cannot give up major components of domestic policy unless and until that gesture is reciprocated entirely by competitors and trading partners," says Reese.

The wheat group says the Doha Round must produce a harmonization in aggregate support levels; the disparity between what the United States and Europe pay their producers per acre or per unit of production must be closed. "U.S. producers cannot accept another agreement that reduces everyone’s support threshold by a fixed percentage, because if we’re out-subsidized by Europe at a ratio of 6:1 at the beginning, we’ll still be out-subsidized 6:1 at the end," Reese says. "Doha must produce meaningful improvements in market access that cannot be stymied with new non-tariff barriers, such as Europe’s continuing obstacles to biotechnology. It must produce meaningful disciplines on export state trading enterprises, causing them to trade at risk in the marketplace and compete on that basis. And it must eliminate export subsidies for everyone, not just those who have already and voluntarily laid them down."

Nearly everyone hopes to see the Doha negotiations achieve a positive result. "But on the path to that outcome, we must beware that we don’t offer up a loaf of bread and receive a bag of chaff in return," Reese says.