Can US defend farm aid payments?

06 August 1999

Can US defend farm aid payments?

By Philip Clarke, Europe Editor

US claims that low world prices are caused by the European Unions high internal support for farmers and aggressive export subsidies are starting to wear thin

Washingtons subsidies are often less visible than those in the EU, but there is no denying that the USA throws a huge amount of money at its food and farming industries.

The latest tranche was agreed on Wednesday (4 August), when the Senate voted for another $7.4 billion (£4.6bn) emergency aid to bail out beleaguered farmers.

Although the White House must still decide the final amount, it seems certain US farmers can look forward to another slug of aid cash before the year is out.

This latest package comes hot on the heels of another $6bn (£3.7bn) paid out in emergency assistance at the end of last year.

On that occasion the USA insisted the pay-out was a “one-off”, and did not signal an end to its free trade principles enshrined in the 1996 Farm Act.

That has now been exposed as a myth.

The latest package will double flat rate area payments to farmers, introduced by the 1996 Act as a replacement for deficiency payments, worth $5.5bn (£3.4bn) this year.

There will also be $850m (£525m) in direct payments to soya bean, oilseed and livestock farmers.

Furthermore, an extra $400m, (£247m) will help farmers buy crop insurance, and increased loan deficiency payments.

But the extra money heading to US farmers is still quite small compared with the overall budget for food and farming, which this year approaches $60bn (£37bn).

That amount is more than the Euro40.5bn (£27bn) spent by Brussels.

Much of the US money is aimed at fighting hunger, regenerating rural areas and expanding home ownership, dealt with under separate budgets in the EU.

But the $5.5bn (£3.4bn) in US “freedom to farm payments” is supplemented by $5bn (£3.1bn) in export credits and $1.3bn (£800m) in long-term set-aside payments.

With such a large budget, and expenditure rising rather than falling, the USA can no longer claim the moral high ground when it comes to subsidising agriculture.

That is highly significant as the next round of World Trade Organisation talks approaches.

For most of the last two years, the USA has said the EU must do more to cut support to farmers, slating the Agenda 2000 reforms for not going far enough.

But it is interesting to note that the USA has gone quiet on the subject of direct income payments, since it realises it too has a strong vested interest in this area.

With so much of EU farmers incomes now tied up in this form of support, there is hope they will be less vulnerable to attack than seemed the case just months ago.

See more