Massive US Farm Supports Will Affect World Food Trade Talks
Issued 1st May 2002
The decision by the US to massively increase direct income support to farmers is likely to have a major impact on the World Trade Organisation (WTO) discussions, according to a leading US economist.
Professor Bob Young of the Food and Agricultural Policy Research Institute at the University of Missouri told the Teagasc 'Outlook 2002' conference in Dublin (Tuesday, 30 April, 2002) that the new US farm bill, which will be enacted over the coming weeks, involves a dramatic increase in the level of government support for farmers.
''The bill involves total spending of around US$140 billion (€155 billion) over the next 10 years. This represents an additional US$45 billion (€50 billion) in direct supports for farm production. The vast bulk of this additional funding will go directly to tillage farmers'', he said.
Professor Young said the new bill also involves an additional US$17 billion (€19 billion) funding to farmers for environmental and conservation programmes. In overall terms, the bill represents a doubling of the contribution by US taxpayers to their farming counterparts. The increased funding is likely to result in the US exceeding the limit of direct supports allowed under the existing WTO agreement.
He conceded that the increased funding will create significant problems for the US approach to the crucial new world food trade talks, which reconvened last autumn.
The US has been a consistent critic of the EU farm support system, maintaining that it distorts world food trade. Since 1992, the EU direct payments system has become a crucial component of Irish farm income. Teagasc surveys show that direct payments now account for over 60% of average farm income.
Professor Young admitted that the enhanced support for US farmers represents a ''descent by the US from the high ground which it had occupied'' and will make it difficult for its negotiations to maintain the attack on the EU policy at the WTO negotiations.
Professor Young, who spent over a year with Teagasc in the late 1990s establishing the organisation's economic policy analysis unit, also told the Teagasc conference that international markets for dairy products are likely to recover from the current slump later this year. The weak markets have led to a significant drop in milk prices for dairy farmers. However, he said it is unlikely in the short-term that dairy markets and milk prices will recover to the buoyant levels of 2001.
For the full proceedings of the Teagasc Outlook 2002 Conference, click here.
