U.S. Agricultural Policy

1
U.S. Agricultural Policy

• Joseph W. Glauber
• U.S. Department of Agriculture
• Silverado Symposium on Agricultural Policy Reform
  / Napa, California /January 20, 2004

2
Farm and Food Trade Policy Historical overview

• 1982 1998 Budget deficits gt farm program
  reforms gt trade liberalization
• 1998 2002 Budget surpluses gt farm program
  retrenchment gt disenchantment with trade policy
• Post 2002 Return of budget deficits gt renewed
  pressures on farm programs (?) gt renewed
  interest in trade (?)

3
Trends in U.S. Commodity Programs, 1985-2001

• Deregulation of supply
• Decoupling payments from price and production
• Market oriented support levels

4
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

5
Costs of the Farm Bill
6
Change in Acreage Since 1990
7
Base Updating under 2002 Farm Bill
8
2002 Planted Acres as Percent of 2002 DCP
Contract Acres
9
WTO Implications

• Level of support
• Classification of support
• Amber vs blue vs green
• Product specific vs non-product specific

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Classification Issues

• Amberproduct specific
• Price support (dairy, sugar) (5-6 billion)
• Loan deficiency payments (8-9 billion)
• Ambernon-product specific
• Credit, water
• Crop insurance
• Market loss assistance/counter-cyclical payments
• gt Below de minimis levels (5 of value of all ag
  prod)
• Green
• PFC/Direct payments

11
Amber box levels and WTO commitments
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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

13
Cancun TextDomestic 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

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Implications for U.S. Domestic Support
Commitments ( bil)
1/ 5 of value of total agricultural production.
15
Domestic Support with 50 AMS Reduction
Cap at 2000 levels
16
Domestic Policy Options to Meet New Support
Commitments

• Reduce loan rates
• Dairy and sugar 5-6 billion
• Decrease loan rates gt lower LDPs
• Increase Direct Payment rates gt Green
• Maintain current DP rates gt increase CCP gt
  New Blue box

17
Other Policy Considerations

• Payment limitations LDP vs DP/CCP
• Opposition to further decoupling (e.g., Texas
  rice producers)
• Budget implications-- DP vs LDPs

18
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