Commentary

A Raspberry for Free Trade

By Sallie James
This article appeared in the Billings Gazette on May 21, 2006.

Although most provisions of the current U.S. farm bill won’t expire until September 2007, a group of senators recently proposed extending it until after the Doha Round of global trade negotiations is complete.

Extending the farm bill — damaging though it is — will “send a signal to our trading partners,” says one of the legislation’s sponsors. It certainly will. At a time when leadership in the global trade talks is sadly lacking and desperately needed, the signal will be a big fat raspberry. An extension will also delay for yet another year the opportunity to reform a policy that is not in the interests of the U.S. economy.

One of the reasons given for the extension was the familiar cry for a “level playing field” in global agricultural trade. Usually that plea can be heard from developing country exporters who receive no subsidies from their governments and who cannot compete with the coffers of the U.S. or European treasuries. This time, it was Sen. Blanche Lincoln, D-Ark., who insisted that U.S. farmers need this support to compete in the world market.

According to Lincoln, U.S. farmers are at a “severe disadvantage.” Oh, really? In 2005, net farm income was $82.8 billion, a record surpassed only by the previous year’s figure of $85.5 million.

Every year we delay reform is one more year that Americans are stuck bearing the costs of unjust and ineffective farm programs. Those costs are significant. The higher prices U.S consumers pay for food prices transferred over $16 billion from consumers to producers last year. Then there are the not inconsiderable transfers from taxpayers in the form of subsidies to farmers — many of them large agribusinesses. U.S. agricultural policy also imposes costs on other U.S. industries that use agricultural inputs to produce final goods for domestic consumption and export.

The last time the Doha Round talks showed encouraging signs of movement was in October, when the United States showed considerable leadership by putting on the table a credible offer for reducing the support it is allowed to give to its farmers. That offer drew strong support from other members, and put the onus squarely on the European Union to improve its market access offer. Going back on the proposal to cut allowable levels of support at this crucial stage of the round is entirely the wrong tactic for securing further improvements in market access, or indeed any meaningful results from the Round.

The proposed legislation will keep the current farm bill in place for “at least” one crop year after the congressional approval of any Doha outcome. Given that the “emergency” aid given to farmers as part of the New Deal in the 1930s is still with us, largely intact, more than 70 years later, there is little reason to hope that the opportunity to reform U.S. agricultural policy will be seized any more forcefully a year after negotiations are over than now, when there is so much to be gained from stepping up to the plate.

Sallie James is a trade-policy analyst for the Cato Institute’s Center for Trade Policy Studies.