What could be done on farm subsidies?

If the Doha round is ever to be resuscitated, it will require the United States to rethink its agricultural subsidies. The Financial Times' Doug Cameron reports on one possible rethink: The US should offer to end distorting farm subsidies within five years in a bid to revive global trade talks and avoid a clampdown by the World Trade Organisation, according to a report released on Wednesday by an influential group of economists and agriculture officials. Agricultural subsidies have emerged as the key barrier to progress in the stalled Doha round of multilateral trade talks, though such unilateral action by the US would face fierce opposition as the administration weighs new farm legislation next year.... The year-long study by the task force recommends a raft of measures to replace the existing US subsidy programme, which fed around $20bn to farmers last year, most of it focused on commodity crops such as cotton and corn. Mike Johanns, the US agriculture secretary, has already stated that the system instituted by the existing farm bill in 2002 may have to change, targeting support at emerging sectors such as biofuels and avoiding further challenges by the WTO. Brazil has already won at a case against US cotton subsidies through the WTO, and there are fears that this could trigger further challenges against crops such as rice and soyabeans. ?If we don?t take the lead in reducing and eventually ending trade-distorting subsidies, the WTO legal system will do it for us,? said Gus Schumacher, a task force co-chair and former USDA under-secretary who managed the farm subsidy programmes. ?We?ll lose control of key farm policy tools and miss the export expansion opportunities in emerging markets that a successful Doha round could bring.? The health of the US farm economy has improved after two years of bumper crops, rising exports to emerging markets and the boom in corn-derived ethanol, but influential lobbyists such as the American Farm Bureau are pushing for the existing subsidy regime to be extended. The task force called for the system to be reformed to comply with WTO rules by introducing alternatives such as subsidised insurance programmes to counter poor harvests and sharp falls in global commodity prices. Other measures include new tax-efficient savings accounts for farmers and payments to support environmental initiatives.Here's a link to the report from the Institute for International Economics and the organization formerly known as the Chicago Council on Foreign Relations the Chicago Council on Global Affairs. This is the interesting part from the executive summary: We propose that the entire grouping of product-specific, tradedistorting income and support programs, including countercyclical and loan deficiency payments, price supports, and federal crop insurance and disaster payments, be replaced with a new portfolio of approaches that are nondistorting and compliant with WTO green box rules, including: Direct payments that are delinked from specific types of production and from market conditions so as to comply fully with green box standards and that are only used during a transition period until other approaches are fully developed A universal revenue insurance program covering all commodities on a multiproduct basis that allows farmers to purchase coverage at subsidized rates to protect against losses in price and in production A new land stewardship program that recognizes and rewards the value of the environmental contributions made by farmers and pays producers according to the kind and amount of environmental goods and services they provide Farmer savings accounts similar in structure to tax-deferred 401(k) accounts that are backed by government matching contributions and that could be tapped for a variety of farm household costs, including health care, education, or retirement savings A significant investment in public goods that benefit the entire farm sector, including research and infrastructure projects; not less than 20 percent of the federal baseline funds currently committed to trade-distorting domestic support programs (in addition to money spent on stewardship and conservation programs) should be redirected to investments in these sectorwide public goods Transition measures to protect farmers and owners of rented farmland against investment losses such as declining land values as a result of the proposed changes to support programs The proper development, experimentation, and implementation of these new programs will take time, but should be accomplished within the five-to-six-year term of the next farm bill. If it was up to me, I'd transfer more money away from agricultural progams, but that's a political nonstarter. The Chicago Council ask force has a lot of pragmatic ideas. Unfortunately, given the American Farm Bureau's happiness with the status quo and opposition to any change in subsidies prior to Doha's completion, I fear this approach is a nonstarter as well.