Tuesday, July 12, 2005

AAEA's Choices Magazine explains trade policy

The latest issue of Choices Magazine, the lay publication of the American Agricultural Economics Association, has a wonderful explanation of how recent trade negotiations and court rulings will affect U.S. agriculture.

First, Timothy Josling summarizes the Doha round of World Trade Organization negotiations. These global negotiations have increased the pressure on the United States and European Union to reduce their trade-distorting domestic agricultural subsidies. Second, Mechel Paggi, Lynn Kennedy, Fumiko Yamazaki, and Tim Josling review regional trade agreements, such as the Central American Free Trade Agreement (CAFTA). A particularly interesting article, by Darren Hudson, C. Parr Rosson III, John Robinson, and Jaime Malaga discusses the implications of the recent WTO ruling against U.S. cotton subsidies, which may in fact call into question a broader range of domestic farm programs.

The authors begin:
Once in a while, an event comes along that portends to reshape agricultural policy. Brazil's complaint in the World Trade Organization (WTO) against the United States on domestic support for cotton, export credit guarantees, and export subsidies could be one such event....
And conclude:
US farm policy is formed in a dynamic setting. Agriculture is becoming an ever-shrinking share of the US federal budget; demographic trends make the population further removed from the farm and rural life. As international problems and goals consume more time and money, agriculture will increasingly become the residual claimant for federal resources. Agriculture may increasingly become the carrot for the United States to use in trade negotiations, because agriculture is a larger relative share of the economy of developing and less developed countries.

Although US agricultural tariffs are already among the world's lowest, its trade-distorting domestic farm support ranks near the top, along with the European Union and Japan. The farm programs of all three countries may be targets of challenge in the future. A successful conclusion to the Doha Round would likely mitigate this outcome, whereas failure in Doha will almost certainly ensure a future fraught with litigation.
I've recently added KickAAS ("Kick all agricultural subsidies"), a strongly anti-farm-program weblog, to my regular reading schedule. It reports that most national leaders at the recent G8 summit in Scotland gave tepid statements rehashing earlier positions in favor of agricultural trade negotiations, but without firm deadlines, while President Bush more boldly offered a specific deadline of 2010 for changing U.S. farm programs if other aspects of international negotiations meet U.S. agreement. For balance, the progressive Institute on Agricultural and Trade Policy (IATP) covers recent developments on the same topics from a well-articulated position much less favorable to the trade agreements.

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