President Bush signed a six-year law boosting U.S. crop and dairy subsidies by 67 percent on Monday over the protests of U.S. trade partners and possibly swaying this fall's congressional elections. The new law adds an estimated $6.4 billion a year to crop and dairy spending and marks a further retreat from free-market reforms begun in 1985.

The larger subsidies will become available at harvest – just weeks away for the drought-withered winter wheat crop.

“Success of farmers and ranchers is essential to success of the American economy," Bush said. "This bill is generous and provides a safety net for farmers. It will do so without encouraging overproduction and depressing prices. Written every few years, farm bills bundle crop subsidy, anti-hunger, land stewardship, rural development and farm export programs totaling tens of billions of dollars a year.

Besides larger crop subsidies, the new law raises conservation spending by 80 percent and restores food-stamp eligibility to legal immigrants in the United States for five years.

Canada, Australia, the European Union and Brazil have complained the new law contradicts U.S. calls for freer farm trade. But no one has vowed to challenge it before the World Trade Organization. Australian Prime Minister John Howard said he will seek U.S. concessions to protect his farmers.

"This begins to level the playing field," responded Sen. Kent Conrad, North Dakota Democrat, who said EU subsidies were vastly larger than U.S. outlays. The new law sets crop supports higher than the White House wanted but Bush said spending will stay within WTO limits. The United States was a very strong voice in ongoing world trade talks to remove trade barriers and reduce reliance on trade-distorting farm subsidies. Agriculture Secretary Ann Veneman said farmers would see an an "information-friendly" implementation of the new law, including use of the Internet to keep growers up to date. While a lightning rod for criticism, larger subsidies were intended to remedy the commonly cited failing of the "Freedom to Farm" law that deregulated agriculture in 1996 – scanty shelter for grain, cotton and soybean growers from low prices.

The law's backers – and Bush – said the legislation would end a series of stop-gap farm bailouts costing $30.5 billion since late 1998. Under the law, support prices rise to comparatively high levels for two years and then drop to lower levels in 2004, a presidential election year. Some analysts say lawmakers will be tempted greatly to block the reduction in support prices during an election year.

"If we need to, we will step in and make changes," Senate Agriculture Committee chairman Tom Harkin said last week. House Agriculture Committee chairman Larry Combest, Texas Republican, said he believed the step-down would occur. "That's not money lost," he said, because the law revived "target prices" to release additional payments during hard times.

Dissidents like Indiana Sen. Richard Lugar, the Republican leader on the Agriculture Committee, said the new law put election-year imperatives – "to try to help individual senators and House members" – ahead of rational policy. With control of the House and Senate hinging on a very few seats, rural "swing" districts are considered crucial.

By most accounts, vulnerable Democratic senators running for re-election were all from farm states – Iowa, Minnesota, South Dakota, Georgia and Missouri. Some of them had major initiatives at stake in the farm law. For example, Harkin, Iowa Democrat, won creation of "green" payments for land, water and wildlife stewardship, although on a much smaller scale than he originally asked. Iowa's other senator, Republican Charles Grassley, voted against the bill, as did the party's likely Senate nominee, Rep. Greg Ganske. Both said farm bill authors fumbled away meaningful reform of crop subsidy limits and a chance to ban meatpackers from competing with farmers in raising livestock. Farmers would be limited to no more than $360,000 a year in subsidies, down $100,000. Growers still could circumvent the limits altogether with so-called generic certificates. Reformers say they will try again for stricter rules.

A University of Missouri think tank calculated, despite a "circuit-breaker" to curtail spending, the law posed a one-in-five chance of violating WTO rules that limit U.S. spending on trade-distorting to $19.1 billion a year. Besides higher U.S. subsidies, competitors were troubled by a provision to require country-of-origin labels in three years on meat, produce, fish and peanuts as well as creation of price supports for dry peas, lentils and garbanzos – a possible violation of a global "peace clause" against new crop subsidies.

You can find information on the bill at:
House Committee: http://agriculture.house.gov/farmbill.htm

Senate committee: agriculture.senate.gov/Briefs/2001FarmBill/2001farmbill.html

Reuters