The Friday Buzz
Overtaken By Events
by Jerry Hagstrom
9/14/07
National Journal Group Inc.
This week, three Washington organizations -- the Center for Global Development, the German
Marshall Fund of the United States and Oxfam America -- held news conferences to promote the
idea that the Doha round of trade negotiations should limit U.S. and European farm subsidies and
Congress should take advantage of this year's farm bill to overhaul agriculture policy. All highlighted
how much the agricultural world has changed since the Doha round was launched in 2001 -- and
how an industry of trade and development lobbyists, academics and lawyers has grown up around
these issues and is making the same arguments even though times have changed. In 2001, world
commodity prices had plummeted and Congress passed emergency subsidies to keep farmers out of
bankruptcy. Free traders and developing countries charged that the U.S. and European subsidies
had caused overproduction and low world prices. Today, commodity prices have skyrocketed and
U.S.
farm subsidies are estimated to be about $8 billion to $9 billion per year over the next five years -less than half of what they were in the 1999-2001 period. This week, the free traders made the
same case they have been making since 2001 -- but they had to transform it into a theory.
Congress and the Doha round negotiators should cut the farm subsidies because the high U.S.
subsidies will return if prices plummet, they said. Farm lobbyists have made the same argument in
reverse -- that Congress should keep the countercyclical subsidy system so farmers would get
subsidies if prices go down.
The free trade advocates are still encouraging developing countries to initiate -- or at least threaten
-- World Trade Organization cases against the U.S. farm programs. At the Oxfam event, Stephen
Gabbert, an international rice consultant, and Bart Fisher, a trade lawyer, said they are trying to
persuade Mexico to launch a case against the U.S. rice program on the grounds that Mexican
imports of subsidized U.S. rice led to reduced Mexican rice acreage and forced farmers out of
business. Fisher said that Mexican officials are wary because they aren't sure how they could
replace U.S. rice if they managed to win the case and put the U.S. rice industry out of business.
Demand for ethanol and rising incomes in China and other developing countries may keep U.S.
commodity prices high and subsidies low for years. High commodity prices might present
opportunities for developing country farmers and challenges in feeding the urban poor. U.S. and
European policies that favor domestic ethanol production are driving a lot of the higher prices, but
the impact of ethanol was barely mentioned at these conferences. As Kimberly Elliott of the Center
for Global Development noted, ethanol hasn't been a part of the Doha round debate and most trade
advocates don't know too much about it. Some fresh research on ethanol and the opportunities and
challenges presented by it and higher commodity prices for developing countries would add more to
the farm and trade debate than repeating arguments that seem increasingly irrelevant.