COVER STORY: by Patrick J. ByrneNews Weekly
U.S. Farm Bill ends free trade illusion
, May 18, 2002
While Australia continues to pursue the policies of deregulation and free trade, US President Bush has declared that US agriculture is a strategic industry. His statement was made to justify the latest, massive $200 billion Farm Bill for the next six years.
President Bush announced in January that US self-sufficiency in food is a "national security" issue. He said:
"One of the things about America is that we're self-sufficient in food. It's a national security interest to be self-sufficient in food. It's a luxury that you've always taken for granted here in this country" (Australian Financial Review,
January 17, 2001)New Bill
US congressional negotiators recently agreed to the new Farm Bill. It will be worth about $33 billion a year to US farmers, $14 billion per annum above current farm subsidy levels. It is yet to be ratified by the White House.
According to Agricultural Policies in OECD Countries: Monitoring and Evaluation 2000,
in 1999 the average farm subsidy as a percentage of total farm income was 6 per cent for Australian farmers, 24 per cent for US farmers, 49 per cent in the EU and 65 per cent in Japan.
The new US subsidies are going to be applied in various ways - in reviving target prices for crops, generous loan programs covering new sectors of agriculture and more support payments to cotton rice, corn, wheat and soybean farmers.
There will also be a tax on dairy imports to fund research and development for US dairy farmers and compulsory country of origin labelling for imported fish, meat, fruit and vegetables.
About $4 billion will be made as conservation payments to farmers.
Agriculture Minister, Warren Truss, has said that Australia "will not hesitate to take [the US] to the World Trade Organisation if we find any inconsistency [with WTO rules]."
The WTO rules on agriculture are written full of loopholes to allow the developed nations to subsidise and protect their agricultural industries in the face of cheaper imports from low cost producers like Australia and the developing world.
The WTO rules were written by the US and the EU to allow a host of assistance packages to their farmers.
Annex II of The Uruguay Round Final Act: Agreement on Agriculture
(the Uruguay round WTO agreement) is entitled, "Domestic Support: the basis for exemption from the reduction of commitments".
It allows for a host of Government programs like those in the US Farm Bill - environmental, research, advisory and marketing programs; direct payments for various reasons such as farmers suffering low incomes; income insurance and safety-net programs; crop insurance schemes and disaster relief programs; and structural adjustment programs etc.Farmer response
The determination of the US to massively increase farm subsidies will send a signal to struggling US farmers to produce more so as to reduce their debts and improve their incomes. The effect will be to force prices down in both the US domestic market and in their export markets.
Notably, US-Australia moves for a free trade agreement have excluded agriculture.
Such an agreement would only marginally affect Australian manufacturing industries, as we have unilaterally made Australia a virtual free trade zone in manufactures. Except for motor vehicles, tariffs have been cut to five per cent. Our manufacturing sector is now one of the smallest of the advanced economies.
Meanwhile, the US substantially subsidises its manufacturers through tax concessions and government contracts.
However, a free trade arrangement could have a major impact on our service industries, banking, insurance, health and education.