farm bill implementation and the international trade agenda national cotton council board of...
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Farm Bill Implementation and the International Trade Agenda
National Cotton Council
Board of Directors
September 12, 2002
Memphis, TennesseeJ. B. Penn
Under Secretary Farm and Foreign Agricultural Services
September 12, 2002 2
Introduction
Remarks today will focus on:
Farm Bill Implementation
International Trade Agenda
September 12, 2002 3
I. Farm Bill Implementation
Enormous attention given development of new farm bill – over 2 years in the making.
Focus now on implementation – applicable to the 2002 crops – in an election year!
USDA anticipated much – began early – steady progress since passage.
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Farm Bill Implementation
Two aspects to implementation
The Internal Aspects – Enormous behind the scenes work to get to the public part
The Public Aspects – Announcements/Information
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Farm Bill Implementation
Internal Aspects
USDA-wide Implementation Coordination Team
Expedite decisions; prioritize regulations; coordinate negotiations with OMB; etc.
Streamline process to extent possible.
September 12, 2002 6
Farm Bill Implementation
Internal Aspects cont.
Stakeholder Meetings
Expedited/Compressed process
Opportunity to be heard – numerous meetings
Deliberately vague language – USDA in the middle
September 12, 2002 7
Farm Bill Implementation
Internal Aspects cont.
Instructions/Guidance
Program handbooks, rules, directions
Unprecedented training
Software/IT, e-Gov directive
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Internal Aspects cont.
Resources
Decade–long trend reversal
Farm Bill Implementation
September 12, 2002 9
Farm Bill Implementation
Progress Loan rates for 2002 crops – market oriented Acreage Bases and Yields Updates
Information development Signup begins Oct. 1 – Payments Thereafter Direct: Oct. 1 (Final 2002); Dec. (1st 2003) CC: October; December; February
Dairy (new); Peanuts (new); Pulses (new); Sugar; Apples; F&V regs; etc.
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Farm Bill Implementation
Progress Generally on schedule – on track to meet
targets (internal and legislative) Generally well pleased with progress Appreciate producer patience and cooperation
with county office personnel
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II. The Policy Environment
Playing much larger role than in mid -1990s Promises to remain important – perhaps in
different ways New developments:
– US farm bill– New farm laws elsewhere– The trade agenda
New US WTO proposal
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Farm Security and Rural Investment Act of 2002
Generated unusual barrage of criticism – at home and around the world
Much of the criticism is unfounded – used by others to support their agenda or deflect criticism
USG mounted aggressive defense
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Farm Security and Rural Investment Act of 2002
Major Criticisms:– Will depress prices to the detriment of global
farmers 4-year funding unchanged – so, no supply response
surprises – output changes marginal, at most
– Is protectionistic – not so: changes no tariffs, quotas, market access whatsoever
– Violates URAA WTO Agreement – not so! Stays within allowable limit – US relatively low: $19.1B vs $62B EU, $32B Japan – “circuit breaker”
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Farm Security and Rural Investment Act of 2002
The real concern– Would the US still be able to provide strong
leadership for Doha Round? Would we be compromised – have lost our zeal for reform?
– U.S. remains a strong leader. New US WTO proposal is evidence enough!
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Domestic Farm Policies Elsewhere
Japanese (recent)– Multifunctionality– Food self sufficiency
Canadians– Decided shift– Multifunctionality – Fed to provincial
EU (Mid-term Review)– Decided shift– Budget/EU Expansion– Multifunctionality
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The Policy Environment – the Overall Trade Agenda
Ambitious in scope and schedule 3 major thrusts
– Multilateral: Doha Development Agenda– Regional: FTAA and CAFTA– Bilateral: FTAs – Singapore – Chile in
negotiation; growing waiting list (Morocco, S. Africa, Australia, etc.)
“A competition for liberalization” - If progress stalls on one, shift attention and efforts to others
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U.S. WTO Agriculture Proposal
Comprehensive reform “package” – addresses all 3 pillars: export competition, market access, and domestic support.
Results in: reductions in trade barriers greater equity across world agriculture; and expanding sales opportunities for low cost
producers
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U.S. WTO Agriculture Proposal
Export Competition – Elimination of export subsidies in 5 years
Market Access – Reduce all tariffs using Swiss 25 formula approach
over 5 years – global avg. 62% to 15% - maximum 25%
– Increase TRQ’s 20% over 5 years– U.S. market already open – avg. tariff 12%; Japan
50%; Cairns 32%; EU 30%.
September 12, 2002 19
U.S. WTO Agriculture Proposal
Domestic Support– Reduce trade distorting support to 5% of value of ag
production over 5 years
Negotiate Date Certain – termination of all tariffs and domestic supports.
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Proposed Tariff Reductions
0
20
40
60
80
100
120
Final Bound Swiss25
US EU Japan Korea India
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Proposed Domestic Support Reductions
0
10
20
30
40
50
60
70
Current Ceiling U.S. Proposal
EU
Japan
US
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Negotiations Timeframe
Ambitious overall– Doha 1 Jan 2005– FTAA 1 Jan 2005– FTAs As completed
Doha Round– March 31, 2003: Establish Modalities– September, 2003: 5th Ministerial – Cancun, Mexico– January 1, 2005: Negotiations conclude
Trade environment could be significantly changed in relatively short time:
September 12, 2002 23
III. Summary Observations
Implementation of new farm bill
Trade Agenda has considerable momentum – significant potential change possible in near future.
Farm Bill Implementation and the International Trade Agenda
National Cotton Council
Board of Directors
September 12, 2002
Memphis, TennesseeJ. B. Penn
Under Secretary Farm and Foreign Agricultural Services