The House has just killed a reform version of the new Farm Bill and instead passed a highly protectionist bill, as had widely been expected. President Bush vowed to veto this version. Now, the ball has been passed to the Senate. (See NY Times, Still Waiting for Farm Reform, July 28, 2007, http://www.nytimes.com/2007/07/28/opinion/28sat3.html?th&emc=th)
Importantly, such protectionism mostly serves the interests of big agro-businesses, not necessarily mom and pop farmers. Half of all federal farm spending goes only to 22 congressional districts. (Remember Mr. Madison’s economic factions?) The situation is frustratingly the same across the Atlantic. While only 2% of all European workers are farmers, about 40% of EU’s budget (under the euphemistically labeled Common Agricultural Policy) is allocated to farming. Yet, 80% of farm support goes to the upper 20% of farmers.
The final shape of the new Farm Bill is likely to influence, if not decide, the destiny of the Doha Round. If the Senate and the White House should revive the original reform bill which aimed to reduce trade-distorting subsidies (such as counter-cyclical payments) and instead increase green-box subsidies (conservation subsidies), the USTR could find more to offer to the negotiation table. Of course, there could be yet another criticism that rich countries like the U.S. and the EU attempt to simply change the label of their subsidies while they do not actually cut the overall amount of money distributed to their farmers. (“box-shifting”) Any way, if the final Farm Bill ends up with something similar to the current House version, it may be vulnerable to a litigation spree under the WTO.
The ultimate political frontier surrounding Doha is of course the U.S.’ upcoming presidential election. The increasingly populist tone of major presidential candidates tends to bring enough doom and gloom for Doha. All these are happening when a number of U.S. farmers are enjoying high crop prices contributed partly by high international prices and partly by the ethanol fever. Could law (the U.S. Constitution and/or the WTO norms) change this distressing political dynamics?
