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Agricultural policy issues in the 109 th Congress

Agricultural policy issues in the 109 th Congress. Stephanie Mercier Senate Agriculture Committee July 25, 2005. Summary. WTO process Other trade policy issues crop insurance Other legislative issues Concluding remarks. Trade policy issues.

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Agricultural policy issues in the 109 th Congress

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  1. Agricultural policy issues in the 109th Congress Stephanie Mercier Senate Agriculture Committee July 25, 2005

  2. Summary • WTO process • Other trade policy issues • crop insurance • Other legislative issues • Concluding remarks

  3. Trade policy issues

  4. How is U.S. trade policy agenda performing? • Growth in imports occurring as result of demographic, income changes—relentless • Growth in exports more sporadic • Drop off in late 1990’s due to external causes (Asian economic problems, strong U.S. dollar) • Active trade policy effort may have forestalled greater decline • U.S. trade policy agenda involves multiple tracks

  5. Doha Development Agenda • Uruguay Round (1993) envisioned continuing negotiations to further reform agriculture, trade in services in 1999 • Doha Round launched after WTO Ministerial meeting held in Nov. 2001 • Key issue areas: • Agriculture • Non-agricultural market access • Trade in services • Implementation issues from Uruguay Round • Trade in intellectual property rights

  6. WTO framework agreement • Completed in July 2004 • Covers agriculture and other key areas • Long on principles, short on numbers • Reflects U.S. priorities of greater cuts from higher levels (harmonization) in domestic support and market access • Not clear if final deal possible if value of lost domestic support < value of market access opportunities gained • Urgent need for capacity to do rapid analysis of implications of various proposals for reforming agriculture in Doha Round • Success in agriculture is linchpin for success in overall Round

  7. Anticipated WTO timeline • Complete `first approximation’ document by end of July • Ministers to approve broad agreement at Hong Kong Ministerial in December • Fill out details (tariff lines, special product designations) in 2006 • Final agreement in early 2007, coinciding with last window for Congressional approval under TPA

  8. WTO Dispute Settlement • Crucial aspect of Uruguay Round • U.S. frustrated with lack of enforcement mechanism under GATT • U.S. single largest participant in WTO dispute settlement process • Complainant in 69 cases (21 agric.) • Respondent in 80 cases (11 agric.) • Brazil cotton case pivotal for future of U.S. farm policy • First to call U.S. commodity programs into question

  9. Brazil cotton case: timeline • Case filed by Brazil in September 2002, asserting that: • U.S. forfeited peace clause protection by excessive spending on domestic support for cotton • U.S. cotton programs create serious price-suppressing effect on world cotton market • U.S. must change or eliminate its price-related programs • September 2004, initial panel found for Brazil on most aspects of case • In March 2005, WTO appellate panel issued report which upheld original panel • In June 2005 U.S. government accepted appeal verdict, agreed to comply

  10. Brazil cotton case--implications • Panel report indicates quick action needed on export credit and cotton Step 2 programs—July 1, 2005 • USDA took regulatory steps to address concerns on GSM export credit programs • USDA sent draft legislation to Congress on July 5 that would terminate cotton step 2 and make final statutory changes on export credit • Likely to be folded into Committee’s budget reconciliation package ($492 million in savings for 5 years) • No firm deadline or guidelines on modification of domestic support programs • Politically, it would be difficult to reform domestic programs for cotton only • Further changes (if needed) could occur in 2007 farm bill

  11. At stake in trade negotiations • Trade promotion authority (Trade Act of 2002), Congress delegates authority to the President, limiting its ability to influence provisions of trade agreements • Greater opportunities for U.S. agriculture in hemispheric (FTAA) and multilateral negotiations (WTO) • If double U.S. market share in current and planned bilateral and sub-regional negotiations, gain of $3.3 billion • If 10 percent share increase in markets in FTAA and WTO, gain of more than $5.5 billion

  12. CAFTA-DR in the balance • Implementing legislation passed 54-45 in Senate on June 30: narrowest margin for FTA in Senate • Vote expected in House before the end of July —outcome uncertain • Specific concerns • Modest benefits from CAFTA-DR • Import-sensitive sectors such as sugar concerned about impact • Lack of effective labor, environmental provisions • Will agreement really help working class in Central America

  13. CAFTA-DR and sugar • Text provides 110,000 tons additional access to CAFTA countries, expanding to 150,000 tons by end of phase-in • This provision protested by U.S. sugar industry • Assert that CAFTA undermines stability of U.S. sugar program, which is based on a support price dependent on limiting imports • Sugar groups represent main opposition to CAFTA within U.S. agriculture • Opposition from sugar-state members could mean difference between winning and losing • At least half of Senate Republicans who voted `No’ were from sugar-producing states

  14. Other trade policy issues • BSE impact on beef trade • U.S. border re-opened to live Canadian cattle on July 18 after court injunction over-turned • 2nd U.S. BSE case (1st indigenous) may have complicated re-opening markets to U.S. beef • Some markets closed in response to 2nd case • Some markets (Japan, Korea) remain closed since 1st BSE case (Dec. 2003). • Food aid issues • WTO developments • U.S. budget actions

  15. Other policy issues • Crop insurance • PRP • Conflict of interest rules • Soybean rust • Livestock • Price reporting • Animal ID • COOL

  16. Energy bill • Current effort is third try to get bill passed in last five years • Now in House-Senate conference • Key agriculture-related provisions • Renewable Fuel standard (RFS) • Biomass energy provisions • Renewable portfolio standard (RPS) • Renewable energy production tax credits (wind, biodiesel) • Sticking points in conference • MTBE liability provision • RFS • RPS • Tax provisions

  17. Coments about farm bill process • Many provisions of the 2002 farm bill expire in September 2007 • USDA has already launched farm bill listening sessions this summer (45 total?) • House Ag. Committee could begin field hearings on farm bill yet this year • No urgency to finish early this time: • wait for Doha process • likely no new money at stake • If AAEA members want to do research which could have an impact on the farm bill process, now is the time to begin

  18. Concluding remarks • While Committee work on farm bills is cyclical, there are a lot of issues where there is always something going on • Even if there is not specific legislation needed, staff need to stay on top of all developments that touch on U.S. agriculture, however tangential • A Hill staffer’s work is never done

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