ABARE advocates price support changes in U.S. Farm Bill
On March 27, GMF's Economic Policy program hosted the Executive Director of Australian Bureau of Agriculture and Resource Economics (ABARE), Mr. Phillip Glyde, at a luncheon event entitled The Benefits of Farm Policy Reform: Lessons from Australia for the United States and Europe.
At the event, Mr. Glyde argued that the proposed price support changes in the 2007 Farm Bill proposal recently issued by the U.S. Department of Agriculture are not ambitious enough to elicit a strong enough market access response from the EU to move the agricultural negotiations forward in the Doha Round of trade talks at the World Trade Organization (WTO). More dramatic cuts are needed now, in the context of the multilateral negotiations, if the U.S. wants to pave the way for an easier negotiating process. Achieving greater market access would more than compensate for the loss of price supports.
Mr. Glyde based his conclusion on three potential reform scenarios modelled by ABARE last year (assuming no changes to trade policies in the rest of the world):
- Unilateral reform through eliminating U.S. domestic support and tariffs;
- The Administration's current 2007 Farm Bill proposal;
- The 2007 Farm Bill proposal, with a multilateral trade agreement based on an additional 5 per cent cut to agricultural tariffs in WTO countries and a further $5 billion reduction in U.S. overall trade distorting support (dubbed the "5 by 5" approach by Australia).
He and his colleagues at ABARE used the reference case of 'business as usual'-meaning extension of the current Farm Bill - to model against the proposed scenarios.
The '5 by 5' approach, they found, would yield the best results for the United States-the highest increase in both GNP and agricultural exports. New Zealand's agricultural sector has increased by 2.5% since removing subsidies in 1984; similarly, Australia's reformed agricultural sector still has an annual growth rate of 2.3%.
The presentation was followed by a Q&A session, where the issue was raised that the biofuels boom in the U.S. had not been captured by the ABARE model. Several audience members voiced general concern that the Bush administration is not showing enough conviction in any area of WTO negotiations, and is too preoccupied with domestic constituencies leaving agricultural reforms to be potentially held over until after 2008 Presidential election.
It was indicated; however, that while important for the WTO negotiations, the Farm Bill will not necessarily determine U.S. farm policy for four years as legislated. If a successful Doha agreement can be reached there will be an opportunity to make the farm programs WTO-compliant during the implementation period. Though it should be noted that this course of action runs the risk of foregoing greater reciprocal concessions in global agricultural market access.
For a copy of the ABARE report, click here.