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Kernel of hope

Canadian complaints about U.S. corn subsidies could help iron out Washington's farm policies.

February 04, 2007

THINKING ABOUT HOW much money Congress is gearing up to waste in the next farm bill makes us yearn for some help from on high. Not from heaven, mind you, but Canada.

The Bush administration last week unveiled its proposal for the 2007 farm bill, a blueprint spelling out U.S. agricultural subsidies and food stamp payments for the next five years. For anybody interested in fairness, government waste, free trade or economic growth, it was a deeply disappointing document, even if it is a major improvement over the trade-distorting porkapalooza that was the 2002 farm bill.

The trouble is, even this modest fix is being heavily resisted by the farm lobby and its backers in Congress.

Canada to the rescue, to cite a rarely uttered line. The Canadian government could prove to be the U.S. taxpayers' best friend in the upcoming legislative battles. That's because Ottawa has taken the initial steps toward a complaint against Washington at the World Trade Organization, claiming that U.S. corn subsidies violate international trade laws.

The corn case comes on the heels of a 2004 WTO decision, in a case filed by Brazil, that some U.S. cotton subsidies were illegal and ordered dismantled. Though the U.S. has been flouting the ruling, the Bush administration does seem more committed than Congress to making sure that farm subsidies don't run afoul of international trade rules.

Farm subsidies are a New Deal legacy once aimed at helping poor farmers. The program has become a form of corporate welfare for big agribusiness. The problem isn't just that these subsidies are unfair to farmers in other countries that aren't insulated from market realities by their governments. It's that many farm subsidies, with their built-in price supports, pervert those markets by stimulating inefficient production that affects global prices.

Say the price target for corn is $3 a bushel, but the actual price suddenly drops to $1 (and say the cost of production is $1.50 a bushel) because there's a glut. Normally, that would send a signal to farmers that they should stop growing corn and plant something else. But if the government makes up the $2 difference, they're encouraged to keep growing corn at an artificial profit. All that excess has to be sold on the world market at low prices. U.S. farmers don't care because they've got their subsidies, but corn growers overseas are wiped out.

So why should Americans care? First, because other nations retaliate against U.S. exports. Second, because subsidies kill competition with foreign growers that would ultimately lower prices on some produce in this country. Third, because taxpayers are shelling out roughly $20 billion a year in subsidies to an agribusiness juggernaut that neither needs nor deserves the money at a time of ballooning deficits. And fourth, because the poor countries most harmed by our trade policies are the ones most likely to become failed states, embittered by our hypocritical preaching on the merits of "free trade."

Members of the WTO have been trying since 2001 to pass a multilateral deal under the Doha round of trade talks that would lower trade barriers around the world, but the prime sticking point is high agricultural subsidies in the U.S. and, more so, in Europe.

Bush's farm bill doesn't go nearly as far as it should to spur a successful Doha round. It would cut farm subsidies by about $4.5 billion over the next 10 years, hardly enough to generate excitement among our trading partners. But it does do away with some of the more outrageous inequities of the current bill, such as paying corporate welfare to farmers making more than $200,000 a year, and it de-emphasizes price supports in favor of direct payments to farmers, which are far less trade-distorting and bring the country under compliance with WTO rules.

Most U.S. business interests would benefit from a relaxation of trade barriers worldwide, but the entrenched farm lobby is gearing up for a fight to protect its pork and to imperil Doha. So bring it on, Canada.

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