U.S. trade officials, already engaged in difficult negotiations for freer world farm trade, could face an even more onerous task due to a $45.1 billion farm bill ready to become U.S. law, say farm trade analysts.
Passed by the House of Representatives last week and facing a Senate vote this week, the bill would increase U.S. crop and dairy subsidies to farmers by 62 percent. It would also require a country-of-origin label on meat, fruit, vegetables, fish and peanuts.
President George W. Bush has promised to enact the bill with its "generous and reliable" safety net for U.S. farmers. It is the "generous" part that runs the risk of complicating World Trade Organization trade talks, where agriculture plays a central role.
"It will be harder to achieve significant trade liberalization in agriculture after this farm bill than with one that was more trade-friendly," says Daniel Sumner, an economics professor at the University of California-Davis and an Agriculture Department official a decade ago.
The trade negotiations, designed to conclude in 2005, aim for an international agreement to expand trade in farm goods by phasing down subsidies that distort farmers' planting decisions or unnaturally boost exports.
The talks would also discourage use of quotas, tariffs and other barriers to foreign grains, oilseeds and meats.
American diplomats, Sumner said, now will be thrown into Geneva negotiating sessions where "everyone is yelling 'hypocrite"' at them.
Canadian Agriculture Minister Lyle Vanclief, speaking in Ottawa on Friday, may have provided a preview. Americans, he says, are "not walking the talk that they gave in Doha" (Qatar) last November, when the WTO trade round was launched.
As a world leader in agriculture, the United States has been the premiere advocate of the free market – from cajoling Europeans into abandoning their beloved export subsidies, to persuading developing countries to lower import barriers and cut subsidies for their own farmers.
Along comes a new law dictating U.S. farm policy for the next six years, one that EU agriculture commissioner Franz Fischler argues will shield American farmers from low prices, resulting in trade-distorting over-production.
Depending on the direction of crop prices, this farm bill could throw U.S. spending over WTO limits, $19.1 billion a year in trade-distorting subsidies.
Audrae Erickson, a trade specialist for the American Farm Bureau Federation, acknowledges that "under extreme price conditions," the U.S. subsidy limits could be breached. But she adds that there will be mechanisms to guarantee U.S. farm law complies with WTO rules.
Besides the possibility that expanded U.S. farm subsidies could be challenged in the WTO, there are also worries over the country-of-origin labeling rule. Labeling would be voluntary for two years and then become mandatory for meat, fruit, vegetables, fish and peanuts.
While some trading partners – and U.S. lawmakers – see that as a back-door barrier to foreign foods, Erickson defended the labels. "The U.S. is doing it in a transparent nature. We're not automatically imposing it today. It's being done in a process consistent with the WTO and NAFTA," she says.