U.S. Agricultural Policy
Joseph W. Glauber
U.S. Department of Agriculture
Silverado Symposium on Agricultural Policy
Reform / Napa, California /January 20, 2004
Farm and Food Trade Policy:
Historical overview
• 1982 – 1998: Budget deficits => farm program
reforms => trade liberalization
• 1998 – 2002: Budget surpluses => farm program
retrenchment => disenchantment with trade policy
• Post 2002: Return of budget deficits => renewed
pressures on farm programs (?) => renewed interest
in trade (?)
Trends in U.S. Commodity
Programs, 1985-2001
• Deregulation of supply
• Decoupling payments from price and
production
• Market oriented support levels
Criticisms of 2002 Farm Bill
• Increased level of support and broadening
of scope of support
• Re-coupling of payments to price through
counter-cyclical payments
• Re-coupling of payments to production
through base and yield updating
Costs of the Farm Bill
25
15
10
5
0
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Billion dollars
20
Baseline
2002 Farm bill
Current estimate
Change in Acreage Since 1990
20
10
5
Wheat
Minor feed grains
Soybeans
0
-5
-10
2002
2000
1998
1996
1994
-20
1992
-15
1990
Million acres
15
100
90
80
70
60
50
40
30
20
10
0
ea
ns
e
So
yb
R
ic
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to
C
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Ba
So
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um
n
C
or
he
a
t
2002 PFC base
2002 DCP base
W
Million acres
Base Updating under 2002 Farm
Bill
2002 Planted Acres as Percent of
2002 DCP Contract Acres
ea
ns
So
yb
e
R
ic
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to
C
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Ba
So
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um
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C
or
W
he
a
t
160%
140%
120%
100%
80%
60%
40%
20%
0%
WTO Implications
• Level of support
• Classification of support:
– Amber vs blue vs green
– Product specific vs non-product specific
Classification Issues
• Amber—product specific
– Price support (dairy, sugar) ($5-6 billion)
– Loan deficiency payments ($8-9 billion)
• Amber—non-product specific
– Credit, water
– Crop insurance
– Market loss assistance/counter-cyclical payments
=> Below de minimis levels (5% of value of all ag prod)
• Green
– PFC/Direct payments
Amber box levels and WTO
commitments
30
Billion dollars
25
20
de minimis
AMS
15
10
5
0
1995 1996 1997 1998 1999 2000 2001 2002
(e)
(e)
(e)
Doha Development Round
• US proposal
–
–
–
–
Harmonizing cut in domestic support
Elimination of blue box
Elimination of export subsidies
Swiss formula for tariff reductions
• Harbinson
• EU/US paper
Cancun Text—Domestic Support
•
•
•
•
Significant reduction in AMS
Product specific AMS capped
Reduction in de minimis
Modify and cap blue box
– Fixed area and yield
– Capped at 5% of total value of ag production w/ further
annual reductions
• Cap on AMS + Blue +de minimis w/ further
annual reductions
Implications for U.S. Domestic
Support Commitments ($ bil)
Current
AMS
Proposed
Change
19.1
9.6
-9.6
De minimis
9.6
4.8
- 4.8
Blue 1/
---
9.6
9.6
28.7
24.0
4.7
Total
1/ 5% of value of total agricultural production.
Domestic Support with 50% AMS
Reduction
40
Cap at 2000 levels
35
30
25
Blue
de minimis
AMS
20
15
10
5
0
2000
2006
2007
2008
2009
2010
Domestic Policy Options to Meet
New Support Commitments
• Reduce loan rates
– Dairy and sugar: $5-6 billion
– Decrease loan rates => lower LDPs
• Increase Direct Payment rates => Green
• Maintain current DP rates => increase CCP
=> “New” Blue box
Other Policy Considerations
• Payment limitations: LDP vs DP/CCP
• Opposition to further decoupling (e.g.,
Texas rice producers)
• Budget implications-- DP vs LDPs
Conclusions
• Cancun text could lead to substantial
reduction in trade distorting support
• Would require US to make significant
modifications in support (e.g., loan rates)
• But would allow for continuation of
decoupled income support