A View from the Hill--A Senate Staffer's Take on Agricultural Policy

1. A View from the Hill--A Senate Staffer's Take on Agricultural Policy Stephanie Mercier Lubbock, TX May 14, 2004

2. Summary • Attitudes toward U.S. farm policy • Budget considerations • International factors • Concluding Remarks

3. Why is it better to not discuss long-run agricultural policy? John Maynard Keynes, British economist 1883-1946

4. “In the long run, we are all dead.”

5. U.S. farm policy • Farm bills are the primary vehicle for setting medium-term U.S. agricultural policy • Scope of farm bills expanded over time • 1981-1990 farm bills separate titles for each commodity; 2002 single commodity title, total of 11 • Margin of victory shrinking over time • Senate passed 1977 Act 63-8; 58-40 for 2002 bill

6. Demographic considerations • At the same time that U.S. population has been growing, the number of farmers has been shrinking; during the 20th Century, • U.S. population grew 270%, while • Number of U.S. farms fell 60 percent • Share of U.S. counties in which agriculture is important is declining • As recently as 1960, a substantial share of non-metro counties nationwide received at least 20 percent of their income from farming • Since 1989, most such counties are located in narrow belt between Eastern Montana and NW Texas

8. Agricultural voting impact • These demographic changes have had an impact on the farm voting bloc in Congress • Almost all Senators represent some farmers, but not so in the House • By my calculation, at least half of Congressional Districts in 1997 Census of Agriculture had fewer than 2,000 farms (farms w/ >$1,000 market receipts) • Given most state legislatures’ targeted re-districting after 2000 Census, that number now probably higher

9. U.S. media disdain for farm policy • Among metropolitan newspapers, the 2002 farm bill almost universally panned: --“…I am referring to the 2002 Farm Security Act, which recently emerged from the legislative process very much the way a steaming wad of processed vegetation emerges from the digestive tract of a cow,” Dave Barry, Miami Herald columnist • “But last week, a 280-141 majority of the House voted to slide backward some 70 years, choosing socialism and abandoning market-based reforms in the nation's Stalinesque farm policy,” Las Vegas Review Journal • “The farm bill just signed by President Bush shows all the courage of a wilted cabbage.” Providence Journal. • “The 2002 farm bill that President Bush signed yesterday doesn't have a catchy name like the 1996 law. It also contains not so much as a nod to the idea of rolling back ag supports.” Seattle Post Intelligencer.

10. Drum beat against U.S. farm programs widespread • Foreign governments • International organizations and think tanks • IFPRI • WTO U.S. and international NGO’s • CATO Institute • Environmental Working Group • Oxfam • Agricultural Economics profession

12. Long-term budget outlook not rosy for farm programs • In less than three years,10-year federal budget outlook worsened by $9 trillion cumulatively • Tax cuts • Soft economy • Higher spending (Defense, Homeland Security, etc.) • Beyond ten-year horizon, Federal government faces cost of baby-boom retirement • 80 million Americans to retire between 2011-2029

13. Short-term budget picture • Farm programs managed to escape budget reconciliation for fiscal 2004 • President’s FY05 budget proposes $1.1 billion cuts in Farm bill programs, $700 million in discretionary spending • No agreement yet on fiscal 2005 budget resolution; if no budget, then no budget reconciliation • Generally agreed that there will be cuts to mandatory programs in FY2006—how much not known at this time

14. Developments in WTO • WTO Ag. Chairman Harbinson provided draft `modalities’ proposal in March, 2003; rejected by member countries • U.S. and EU generated compromise framework in August, 2003 • September WTO Ministerial in Cancun failed to make progress • Member countries struggling to agree on framework by July 2004 • market access is sticking point between Developed and Developing countries

15. 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 • On April 26, 2004, WTO dispute panel issued interim report which found for Brazil in most aspects of case • Final report due mid-June; likely to be appealed

17. Brazil cotton case--implications • Reluctant to discuss particulars of panel’s findings • Report is confidential to U.S., Brazil governments • Media reports basically correct, but some details are not • If findings stand through appeal process, Agriculture Committees will have to re-visit certain farm programs and export programs • This case puts U.S. under additional pressure in Doha Round negotiations • Cotton was major target but other programs now vulnerable • Provides opening for additional cases to be filed against U.S. if negotiations stall

18. At stake in trade negotiations • Trade promotion authority (Trade Act of 2002), limits Congressional ability to affect shape of FTA’s; must influence before completion • 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

21. Other international factors • Tension between free trade and secure borders (consequence of September 11) • FDA rules on bioterrorism • SPS concerns • BSE • Avian influenza • Soybean rust • U.S. withdrawal from other multilateral organizations and treaties • Globalization concerns, including wariness of GMO products

22. Concluding Remarks • All of these factors will shape the farm bill debate in 2006 or 2007, either directly or indirectly • Framers of the next few farm bills will have to embrace a broader view of agricultural policy than in the past • I have always said that agricultural policymaking is an `evolutionary process’ rather than a `revolutionary process’. Evolution may speed up in the next 5-10 years, but changes will still likely be based on policies we are already familiar with.