Farm Bill Implementation and the International Trade Agenda

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Farm Bill Implementation and the International
Trade Agenda

• National Cotton Council
• Board of Directors
• September 12, 2002
• Memphis, Tennessee

J. B. Penn Under Secretary
Farm and Foreign
Agricultural Services
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Introduction

• Remarks today will focus on
• Farm Bill Implementation
• International Trade Agenda

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I. Farm Bill Implementation

• Enormous attention given development of new farm
  bill over 2 years in the making.
• Focus now on implementation applicable to the
  2002 crops in an election year!
• USDA anticipated much began early steady
  progress since passage.

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Farm Bill Implementation

• Two aspects to implementation
• The Internal Aspects Enormous behind the scenes
  work to get to the public part
• The Public Aspects Announcements/Information

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Farm Bill Implementation

• Internal Aspects
• USDA-wide Implementation Coordination Team
• Expedite decisions prioritize regulations
  coordinate negotiations with OMB etc.
• Streamline process to extent possible.

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Farm Bill Implementation

• Internal Aspects cont.
• Stakeholder Meetings
• Expedited/Compressed process
• Opportunity to be heard numerous meetings
• Deliberately vague language USDA in the middle

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Farm Bill Implementation

• Internal Aspects cont.
• Instructions/Guidance
• Program handbooks, rules, directions
• Unprecedented training
• Software/IT, e-Gov directive

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Farm Bill Implementation

• Internal Aspects cont.
• Resources
• Decadelong trend reversal

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Farm Bill Implementation

• Progress
• Loan rates for 2002 crops market oriented
• Acreage Bases and Yields Updates
• Information development
• Signup begins Oct. 1 Payments Thereafter
• Direct Oct. 1 (Final 2002) Dec. (1st 2003)
• CC October December February
• Dairy (new) Peanuts (new) Pulses (new) Sugar
  Apples FV regs etc.

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Farm Bill Implementation

• Progress
• Generally on schedule on track to meet targets
  (internal and legislative)
• Generally well pleased with progress
• Appreciate producer patience and cooperation with
  county office personnel

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II. The Policy Environment

• Playing much larger role than in mid -1990s
• Promises to remain important perhaps in
  different ways
• New developments
• US farm bill
• New farm laws elsewhere
• The trade agenda
• New US WTO proposal

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Farm Security and Rural Investment Act of 2002

• Generated unusual barrage of criticism at home
  and around the world
• Much of the criticism is unfounded used by
  others to support their agenda or deflect
  criticism
• USG mounted aggressive defense

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Farm Security and Rural Investment Act of 2002

• Major Criticisms
• Will depress prices to the detriment of global
  farmers
• 4-year funding unchanged so, no supply response
  surprises output changes marginal, at most
• Is protectionistic not so changes no tariffs,
  quotas, market access whatsoever
• Violates URAA WTO Agreement not so! Stays
  within allowable limit US relatively low
  19.1B vs 62B EU, 32B Japan circuit breaker

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Farm Security and Rural Investment Act of 2002

• The real concern
• Would the US still be able to provide strong
  leadership for Doha Round? Would we be
  compromised have lost our zeal for reform?
• U.S. remains a strong leader. New US WTO proposal
  is evidence enough!

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Domestic Farm Policies Elsewhere

• Japanese (recent)
• Multifunctionality
• Food self sufficiency
• Canadians
• Decided shift
• Multifunctionality Fed to provincial
• EU (Mid-term Review)
• Decided shift
• Budget/EU Expansion
• Multifunctionality

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The Policy Environment the Overall Trade Agenda

• Ambitious in scope and schedule
• 3 major thrusts
• Multilateral Doha Development Agenda
• Regional FTAA and CAFTA
• Bilateral FTAs Singapore Chile in
  negotiation growing waiting list (Morocco, S.
  Africa, Australia, etc.)
• A competition for liberalization - If progress
  stalls on one, shift attention and efforts to
  others

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U.S. WTO Agriculture Proposal

• Comprehensive reform package addresses all 3
  pillars export competition, market access, and
  domestic support.
• Results in
• reductions in trade barriers
• greater equity across world agriculture and
• expanding sales opportunities for low cost
  producers

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U.S. WTO Agriculture Proposal

• Export Competition
• Elimination of export subsidies in 5 years
• Market Access
• Reduce all tariffs using Swiss 25 formula
  approach over 5 years global avg. 62 to 15 -
  maximum 25
• Increase TRQs 20 over 5 years
• U.S. market already open avg. tariff 12 Japan
  50 Cairns 32 EU 30.

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U.S. WTO Agriculture Proposal

• Domestic Support
• Reduce trade distorting support to 5 of value of
  ag production over 5 years
• Negotiate Date Certain termination of all
  tariffs and domestic supports.

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Proposed Tariff Reductions
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Proposed Domestic Support Reductions
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Negotiations Timeframe

• Ambitious overall
• Doha 1 Jan 2005
• FTAA 1 Jan 2005
• FTAs As completed
• Doha Round
• March 31, 2003 Establish Modalities
• September, 2003 5th Ministerial Cancun,
  Mexico
• January 1, 2005 Negotiations conclude
• Trade environment could be significantly changed
  in relatively short time

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III. Summary Observations

• Implementation of new farm bill
• Trade Agenda has considerable momentum
  significant potential change possible in near
  future.

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Farm Bill Implementation and the International
Trade Agenda

• National Cotton Council
• Board of Directors
• September 12, 2002
• Memphis, Tennessee

J. B. Penn Under Secretary
Farm and Foreign
Agricultural Services