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Doha collapse threatens US farm reform

Another casualty of the suspension of the Doha round of global trade talks could be the long-awaited reform of American farm subsidies. Reformers are worried that the absence of Doha as an incentive to change will tip the balance back towards the expensive and inefficient status quo.

The current five-year US subsidy regime or "farm bill", generous even by US standards, was signed in 2002 and will expire next year. The Bush administration tried without much success to use the upcoming farm bill renewal to exact concessions from its negotiating partners in the Doha round, saying it could be their last chance for five years to influence the reform of US subsidies.

It is now appealing to Congress and the farm lobby to heed advice about trade rules and particularly the threat of litigation in the World Trade Organisation while writing the new farm bill. It is not an utterly hopeless task, but only an inveterate optimist would be confident of success.

Given how removed they now are from their original intent, American farm subsidies are remarkably resistant to reform. When created as a relief programme for embattled farmers during the Great Depression, the regime spread support by stabilising prices of a small number of "programme commodity" crops, including wheat, rice, corn, cotton and soy, of which most small farmers then grew at least one.

Those crops are now grown on a much smaller number of mainly large mechanised farms. Today 93 per cent of subsidies (an estimated $21bn this year) go to the programme crops, while 60 per cent of American farmers get no such support at all. Farmers of higher-value crops such as fruit and vegetables, who want help with research and development rather than straight payouts, remain largely unsupported – even though US horticulture now grows nearly $50bn worth of produce a year, more than all the programme commodity crops put together.

A report published this week by the Chicago Council on Global Affairs put the case for switching farm spending towards conservation programmes and helping to protect all farmers from fluctuating income, not picking out a few favoured commodities.

Cal Dooley, president of the pro-reform Food Products Association and former California congressman, said that a coalition including environmentalists, anti-subsidy development charities such as Oxfam and neglected farmers in areas such as horticulture, wine and livestock would need to come together to effect change. But groups of commodity farmers with a strong voice in lobbies such as the nationwide American Farm Bureau Federation have so far successfully resisted large-scale reform, and the suspension of Doha has strengthened their hand.

A successful conclusion to Doha would reduce trade-distorting subsidies such as the programme commodity payments, which are often linked to production, in return for opening agricultural export markets abroad. The US has already offered in the Doha talks to reduce the ceiling for trade-distorting subsidies by 60 per cent. But testifying to Congress last week, Bob Stallman, president of the AFBF (which claims it represents all farmers) called for the current farm bill to be extended in its current form. "Altering our farm programmes now to reduce supports by 60 per cent, just in case that is what is including in the final [Doha] agreement, makes no sense," he said.

Charles Grassley, senator for corn-growing Iowa and chairman of the Senate finance committee, which oversees trade policy, told the FT that without a swift advance in Doha, "we will have a farm bill looking the same way it has looked for the past six years".

For campaigners this is a grim prospect. Ken Cook, head of the Environmental Working Group, which campaigns for farm subsidies to be redirected to conservation, says the Bush administration could well repeat the fiasco of the 2002 farm bill when it was forced meekly to abandon its own reform-minded draft bill in favour of a more traditional and generous version.

Mike Johanns, the agriculture secretary, insists that change is possible. "There isn't any one group any more that controls the dialogue," he told the FT this week. "This farm bill has worked well for some commodities and for others it has not worked at all." The Farm Bureau and others supported a renewal of the current bill, he said, but noted that "there are farm lobbies that disagree with that". Mr Johanns has also repeatedly warned that Brazil's recent successful legal challenge to US cotton subsidies at the WTO could be repeated across a range of programme commodities, with rice subsidies a prime candidate.

But Mr Stallman last week argued: "To alter farm programmes now because a country might file a case against our farm programmes is not a good reason to alter current farm policy."

Robert Thompson, professor of agricultural policy at the University of Illinois and co-chair of the Chicago Council report, wrote recently that the combination of overall federal budgetary pressures, the threat of litigation and public disquiet over the inefficiency of farm subsidies were all arguments for change. But overall he expected inertia to win out. "If I were a betting person," Prof Thompson said, "I would wager that the 2007 farm bill will look a lot like the 2002 farm bill."