Skip to comments.House passes bill to boost farm spending (by 70%)
Posted on 05/02/2002 1:43:56 PM PDT by Alan Chapman
The House on Thursday passed an election-year farm bill that will increase spending by 70 percent and increase subsidies to grain and cotton farms while adding thousands of other producers to the federal dole.
Shortly before the 280-141 vote, President Bush said the legislation wasn't everything he wanted but will "help ensure the immediate and long-term viability of our farm economy." A Senate vote was likely later Thursday.
The bill marks the reversal of the market-oriented policy of the 1996 Freedom to Farm law that was supposed to wean farmers from government subsidies.
"We all know that Freedom to Farm didn't work," said Rep. Jo Ann Emerson, R-Mo. "While no farmer wants to depend on the government for anything, it is critical that we provide a safety net to our producers."
The bill would authorize $180 billion in spending over the next 10 years, a $73.5 billion increase over existing programs. The legislation provides new payments for everything from milk and lentils to honey and wool.
Also, there is an 80 percent increase in land-conservation programs that will benefit livestock farms and fruit and vegetable growers who have historically received little federal cash.
The bill would pump billions of dollars into the economies of Plains and Southern states that are critical for Republicans. It has been praised by groups including the National Milk Producers Federation, United Fresh Fruit and Vegetable Association and the American Farm Bureau Federation.
The administration's support for the bill is a "complete flip-flop" from its earlier criticism of farm subsidies, said Ken Cook, president of the Environmental Working Group.
In a 120-page policy statement last fall, the administration said the subsidies stimulate excess production, inflate land rents and largely benefit a relatively small number of big farms. Economists say the new bill does little to address those complaints.
The bill's increased subsidies have angered foreign competitors. The European Union said Thursday it was considering challenging the payments before the World Trade Organization. Under WTO limits, certain U.S. farm subsidies cannot exceed $19.1 billion annually.
"The United States is increasing trade-distorting support for (American) farmers that will harm developing countries. This is what we are fiercely opposed to," EU spokesman Gregor Kreuzhuber.
Canada's agriculture minister, Lyle Vanclief, said the higher subsidies wee a "serious blow to the U.S.'s credibility" to negotiate lower international trade barriers.
The House rejected a last-minute proposal by the bill's opponents to set new limits on payments to big farms and use the savings for conservation needs and other programs. A similar proposal passed the House 265-158 last month, but that vote was not binding on congressional negotiators who wrote the final bill.
The Freedom to Farm law, which ended a Depression-era system of production controls, was supposed to bring some control to farm spending and discourage overproduction of surplus crops. But when commodity prices plummeted in the late 1990s, Congress responded with a series of multibillion-dollar bailouts.
Critics of the new bill say that the free-market policy wasn't given a chance to work.
"We're going back to what we know didn't work for 60 years," said Rep. John Boehner, R-Ohio.
Environmentalists say the $17 billion increase in spending on land-conservation programs over 10 years was inadequate, given that crop subsidies also would grow substantially under the bill.
Animal-welfare groups lamented the rejection by congressional negotiators of several Senate-passed provisions, including one that would have set tougher standards for dog breeders. The legislation also would exclude small research animals such as rats and mice from a federal law that sets animal-handling standards. The bill would, however, ban the interstate shipment of fighting birds.
The bill is H.R.2646.
I guess the budget woes are not real - the fed has all the money it needs and is looking for places to well spend our money!</sarcasm off>
Where Is EU Agrarian Policy Headed?
Commissioner Fischler Proposes a Middle Way
The imminent mid-term review of the EU's agrarian policy by the European Commission raises the question of additional reforms. A conversation with the EU's Agriculture Commissioner Franz Fischler puts the spotlight on some partial steps which will affect certain market organizations and strengthen "rural development."
The European Union's agriculture ministers will be meeting on Sunday (April 28) in Murcia, Spain. In preparation for the meeting, Spain, which currently holds the EU presidency, has prepared a series of questions dealing with "rural development," a major element in the so-called second pillar of the EU's common agricultural policy (CAP see box below). Concrete decisions are not expected from the meeting, but the discussion among the EU commissioners should provide some indications of what may be expected from the mid-term review (MTR) of agriculture policy for the period 2000-2006 which is supposed to be submitted by mid-June. The medium-term EU financial planning for the period 2000-2006, which was agreed upon in 1999, included agrarian reforms, but the member states at that time approved only part of the Commission's proposals. Since then, pressure has increased. First of all, in the World Trade Organization's new round of liberalization talks the EU will be urged to make further cuts in its wide-ranging program of farm subsidies; secondly, EU enlargement will further burden the Union's agricultural budget by adding countries with large, inefficient farm sectors; and thirdly, what with all the recent livestock disease and food scandals, there is heavy public pressure for corrections.
No End to Agricultural Policy
The direction was provided by the agrarian reforms of 1992 and '99. Subsidies are being paid out progressively less for the production of agricultural products and increasingly for such public services by farmers as tending the landscape. The "old" agricultural policy, which linked subsidies to output, resulted in over-regulation, trade distortions, lakes of surplus milk, mountains of surplus meat, and environmental problems. On the other hand, if farm income is no longer secured by artificially raised prices but instead by compensating farmers for public services involving the environment and other matters, then farm prices can sink to world market levels and export subsidies can be eliminated.
But the EU has not reached that point yet. In an interview with the Neue Zürcher Zeitung, EU Agriculture Commissioner Franz Fischler said that it will probably be about another 15 years before all export subsidies can be eliminated. Even after that, Fischler noted, a CAP will continue to be necessary as long as the public goods provided by farmers have not been integrated into the normal market system. The question, he said, is not whether support should be continued, but how it should be done.
But what interim steps may be expected from the MTR? The reforms instituted so far, notably the shift from "classical" subsidies to direct payments, have defused the problems but not solved them. Since direct payments, while no longer linked to output, are dependent on the area under cultivation or the number of livestock held, over the long haul this does not completely achieve either decoupling from production or WTO compatibility. And there is still overproduction of some products, surpluses of which must either be destroyed or sold below cost.
More "Rural Development"
Consequently, Fischler foresees three major directions of policy thrust: First, he has long been urging a strengthening of the so-called second pillar (see box below). And since costs are to be simultaneously trimmed (budget ceilings have been fixed until 2006), this would mean shifting funds from the first to the second pillar. Under Agenda 2000, EU member states are already permitted to cut direct payments to large farms which need them less, thanks to their higher productivity by as much as 20 percent and to apply those savings to the second pillar. At present, only France, Britain and Portugal are taking advantage of that option; Germany plans to start doing so in 2003. And Fischler feels that a "modulation" mandatory for all member states would be a good idea.
The Commission is also considering whether such individual measures as expansion premiums for cattle can be shifted from the first to the second pillar. Another possibility would be the phased cutback of direct payments over time (known as "degressivity"), as Germany recently proposed. At the same time, Germany wants to shift only part of the savings to the second pillar, in order to trim back overall costs. But officials associated with Fischler point out that degressivity was already discussed prior to approval of Agenda 2000 and was rejected.
Secondly, direct payments should be more strongly "decoupled" from production. According to Fischler, this is especially urgent in the case of grains and beef, which account for 80 percent of direct payments. The mid-term review, he says, must at least launch the debate on this matter. And thirdly, the MTR should serve the cause of individual market reforms. No fundamental changes are needed in the case of grains, Fischler notes; all that needs deciding in the MTR is whether a final lowering of intervention prices should be implemented starting in 2002/03. Corrections are needed, the commissioner adds, with respect to rye (two thirds of which ends up in storehouses) and hard wheat for pasta production (where there is overproduction and a quality problem). With regard to beef, a final step to be taken as of July 1st is replacing mandatory intervention with a "safety net" intervention system. In the realm of dairy products, according to Fischler, the three-step 15 percent price reduction, which was decided on in 1999 and will begin in 2005, will not be enough to do away entirely with export subsidies for butter; but, with the "chiefs" having extended the quota system to 2008 back in 1999, the entire matter is coming up against political limits. As to sugar, which Fischler regards as his "main problem child" along with milk, the commissioner wants to await the results of a study and submit proposals during 2003.
A Political Tightrope Act
Although these reforms may seem rather modest, they constitute a political tightrope act between opposing demands. One side, says Fischler, would prefer to do away with the CAP entirely, while the other camp advocates "a Nirvana policy: all is well as it is." A German position paper, which proposes degressivity among other things, points more in the former direction. In it, the ecological concerns of Agriculture Minister Künast are coupled with the grave concern of the EU's largest net payer (i.e., Germany) that the Union's enlargement could force it to finance massively expanded farm budgets. Thus Germany has joined forces with the so-called "gang of four" Britain, Denmark, the Netherlands and Sweden in advocating major reforms before enlargement takes place. The other end of the spectrum is represented by a recent Italian paper which calls for more, rather than fewer, subsidies. France, a major beneficiary of the CAP, has thus far refrained from taking a position, but is likely to be adamant about holding onto its present benefits.
Instruments of EU Agricultural Policy
According to the EU budget for 2002, some 44 billion Euros (close to 50 percent of the budget) will be consumed by the Union's common agricultural policy, or CAP. The money is divided between two "pillars" or sectors:
1st Pillar: There is a "common market order" (CMO) for most agrarian products. In its complete version, this includes: sales and price guarantees, accomplished by state intervention authorities purchasing goods at a predetermined "intervention price" and warehousing them; external protection by means of import tariffs and export subsidies to equalize the gap between the domestic and the world market price; and, in the instances of milk and sugar, production quotas. Not all CMOs now include all these elements, however. Ten years ago, 91 percent of the EU's agricultural budget went into these sorts of "market measures," but since the price reductions in the agrarian reforms of 1992 and 1999, the figure has declined to 28 percent. To compensate for the resulting losses of farm earnings, direct payments are now made calculated on the basis of either the area under cultivation or the number of livestock held; these payments now account for 62 percent of the agriculture budget.
2nd Pillar: This mix, which accounts for 10 percent of the EU's agricultural spending, embraces measures to develop rural areas and to promote the competitiveness and multi-functionality of the farming sector. It includes assistance for environmental measures, for the settlement of young farmers, for pre-retirement, reforestation and village renewal. All these programs are co-financed from national budgets.
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