International agency Oxfam welcomed the Bush Administration’s proposal to reform the 2002 Farm Bill as a first step toward unlocking the paralysis in multilateral trade negotiations. However, the organisation cautioned that it is still unclear if the proposal will significantly reduce export dumping or signify a meaningful shift in the American position at the WTO. Importantly, there is no guarantee that the US Congress will adopt the proposal.
‘With the future of the world trading system at a critical juncture, an improved American Farm Bill would help facilitate a WTO agreement to reduce trade-distorting agricultural subsidies and end dumping,’ said Andrew Hewett, Executive Director of Oxfam Australia. ‘The ball is now in the court of the US Congress to build upon the Bush Administration’s proposal to deliver a pro-development Farm Bill.’
The proposal, presented this week in Washington by US Agriculture Secretary Mike Johanns, would reduce so-called “trade-distorting” payments, and direct more money towards other forms of support, such as direct payments. These are meant to be less trade distorting because they are not directly dependent on production levels. However, Oxfam warned that there was more to be done to ensure a pro-development outcome.
‘Although this proposal signals a shift away from trade-distorting subsidies towards more WTO-friendly farmer supports, much more needs to be done to align the Farm Bill with existing international trade rules,’ said Mr Hewett. ‘The devil is in the details, and at this point it is unclear how far these reforms would reduce the trade-distorting effects of the current subsidy system and allow the poorest farmers of the world to benefit from trade. A litmus test would be whether these reforms would benefit West African cotton farmers by substantially reducing US export dumping.’
The projected fall in US trade-distorting subsidies is partly due to high commodity prices – especially in maize and other cereals. Since many existing and proposed US farm subsidies are triggered by low prices, subsidies could grow in the future if prices fall.
Furthermore, reducing trade-distorting subsidies by de-linking them from production (so called “partial decoupling”) may not necessarily lead to a decrease in export dumping. Reforms implemented in Europe among similar lines have not yet significantly affected production levels.
The proposal shifts 25 percent of the food aid budget to cash in order to facilitate purchase from regional sources, a move welcomed by Oxfam as food aid shipped in from the US is not only inefficient, but can also destabilise local food production.
For more information or to arrange an interview call Ian Woolverton on 0409 181 454