Tuesday, October 16, 2007

WTO rules against U.S. policies that discourage fruit and vegetable production on land that gets crop subsidies

From a nutrition perspective, the most blatantly counter-productive U.S. farm subsidy policy may be the prohibition against growing fruits and vegetables on land that is eligible for direct subsidy payments.

This is a bit complicated, so bear with me.

Farm subsidies used to be criticized for encouraging overproduction of major row crops, such as corn, wheat, soybeans, and cotton, because farmers could earn more subsidies by growing more of the crop. The overproduction harmed the environment and immiserated poor farmers in developing countries by suppressing world prices for these crops. To partly -- and only partly -- remedy these problems, beginning in the 1996 and 2002 farm bills, a portion of the subsidies were converted to "direct payments," which were based on a farmer's historical production rather than current production. These direct payments were supposed to solve the problem of encouraging overproduction, because farmers could earn billions of dollars of these welfare-style payments even without growing the crop.

However, fruit and vegetable lobbyists were concerned that corn, soybean, wheat, and cotton farmers would begin growing fruits and vegetables while collecting direct payments. This would increase the supply of fruits and vegetables and suppress their prices.

From a nutrition perspective, that would be great! But, the fruit and vegetable industries are more powerful than the nutrition lobby, so they convinced Congress to prohibit farmers from growing fruits and vegetables on land that qualified for direct subsidy payments.

This prohibition is just one of the issues at stake in the important Brazil cotton case. See farmpolicy.com today and an excellent Congressional Research Service (.pdf) report last month for the full story. Brazil argued that the fruit and vegetable prohibitions meant the direct payments continued to distort U.S. farmers' planting decisions and harm the interests of farmers in Brazil. The WTO agreed. The United States took half-steps toward fixing problems with the cotton subsidy programs, but these half-steps did not include repealing the fruit and vegetable prohibition. Even the new House-passed Farm Bill fails to repeal the prohibition.

This week, news reports say a compliance panel of the WTO has ruled that the half-steps taken by the United States do not suffice. The fruit and vegetable prohibitions continue to violate our country's world trade commitments. The consequence may be that the WTO will allow Brazil legally to impose trade barriers against U.S. export industries.

So here's my question. How many Americans in these export industries will lose their jobs so that Congress can protect this grand principle: preventing farmers from growing fruits and vegetables?


Bix said...

Do you think, then, that Congress will eventually uphold the fruit and veg prohibitions?

(Thank you for taking the time to write all this up. It was very informative. I did not know, although it makes sense, that the fruit and veg industry would act to suppress growth to keep prices high.)

usfoodpolicy said...

Aliza points out that a proposal in the Senate might give farmers an option to choose a program variant without the fruit and vegetable restrictions. But, as I understand it, this would be purely optional. Farmers could instead choose the usual direct payments along with restrictions on fruit and vegetables.

Anonymous said...

Parke, thanks for this post. I agree that from a nutrition perspective, the provision makes no sense-- but from a farm livelihood one, it does. I wonder if there's a way to achieve both goals. I'd love to hear your thoughts on what a win-win policy might look like.

My hometown neighbors, who grow produce in New Hampshire on 10 acres of land, are certainly not the powerful F&V lobby-- but they're completely against the removal of planting restrictions. They argue that allowing farmers who receive subsidies to grow produce would drive down its price, making it harder for them and other small specialty farms to stay afloat. And I think they're right to be concerned: if planting restrictions were removed and prices dropped, the little guys would likely suffer the most since they can't utilize economies of scale like the big CA growers.

I think the policy impact question here is a very interesting one. The F&V planting restriction is one of the last vestiges of supply control policy-- it keeps production levels stable and prices relatively good. When supply control policies were removed on commodity crops in the 1970s, 80s and 90s, production surged, prices plummeted, subsidies kicked way up, and farmers here and abroad saw their incomes decline (and Tyson and ADM got a lot of cheap corn to process into meat or corn syrup). Family farm interests here are worried that the same thing would happen with fruit and veggies-- farmers here and abroad would suffer. And the human effects would, I'm guessing, be worse, since produce production and harvesting can't be mechanized in the same was as corn or soy. I worry that plummeting prices will drive a race to the bottom for farmworker wages and working conditions in the produce industry, hurting the very people-- poor consumers-- that the low prices are supposed to help.

I wonder, then, if there is some way to encourage consumers to eat more produce without eroding farm and farmworker livelihoods. I don't know enough about food policy to know how this might work, and I'd love to hear your thoughts. How can poor consumers buy more produce and family farms make a living? Is there a way to make produce cheaper on the retail end for certain consumers instead of driving down prices on the production end?

usfoodpolicy said...

Hi Elanor. I read your recent work on food safety at Ethicurean with great interest.

I don't have any nostalgia for supply controls -- certainly not for fruits and vegetables at a time when Americans suffer from not having enough of them.

One wishes that government planting restrictions to prop up the market price would help a small farmer in New Hampshire instead of a millionaire in California. But, if that's not the case, then dwelling on the wish serves only to postpone hard criticism of bad policies.

The good news for small fruit and vegetable farmers comes from new local markets for fresh produce, from new interest in local produce from retailers, hospitals, and schools, and from new efforts to have the government and major nutrition organizations speak even more plainly and clearly about the nutrition advantages of plant foods. Much of this is driven by consumer choice, but there is some good news even in the House Farm Bill and proposals in the Senate.

But, the next time you see them, it might be time to challenge your neighbors in New Hampshire about the merit of planting restrictions for fruits and vegetables. Sometimes, a memorable and meaningful conversation begins by sharing a view that somebody doesn't want at first to hear.