Disbelief greets US subsidy cut pledge

22 June 2001

Disbelief greets US subsidy cut pledge

By Robert Harris

US farmers can expect sharp cuts in subsidies before the next round of World Trade Organisation talks, starting in Qatar this autumn, are completed.

But America faces a tough time convincing other WTO participants that it is serious about cutting direct support.

Alan Tracy, president of US Wheat Associates, speaking at a recent International Grains Council conference in London, said the current Farm Bill, introduced in 1996, was due to expire in 2002. But a clash with mid-term elections meant the government would attempt to rewrite it this year.

Sympathy in the US Congress for farmers was likely to cool, Mr Tracy believed. "There is a $1.35 trillion tax cut locked in over the life of the Budget Bill just passed. There wont be a lot of surplus in 2002."

"Baseline" farm spending was projected to increase by 60%, but he maintained overall support would fall by 20% because recent expenditure had been boosted by disaster payments and conservation packages. A record $28bn was paid in direct support to US farmers last year.

The new programme would accelerate the move from production-based payments to income support, said Mr Tracy.

Emergency packages

This would include a "rebalancing" of loan rates and renewed insurance programmes. "There is also a desire to include contra-cyclical income payments," he said. These would pay more when prices were low, and vice-versa. "Obviously, these have a more direct effect on production. This could set us up for a fall at the WTO. It is something the US is going to struggle with."

However, David Roberts, deputy director general in the European Commission, reckoned pressure for emergency packages in the US could persist.

If the $ remained strong, this would reflect a "fundamental strength" in the US economy due, he assumed, to the countrys lead in high-tech industries.

"On that reading, US agriculture will have lost comparative advantage within the economy. If so, we have to ask whether the US will want to mask this indefinitely by subsidies through the so-called emergency packages." &#42

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