U.S. Agriculture Secretary, Mike Johanns, told a Washington forum Thursday that the generous subsidy programs that boost the incomes of American farmers must be cut. Mr. Johanns believes the subsidies will face increasing legal challenges from other members of the World Trade Organization.
Johanns is worried that some of the American subsidy programs could be in violation of World Trade Organization (WTO) free trade rules. He mentioned specifically Brazil's successful WTO challenge to U.S. cotton subsidies two years ago, a decision that is forcing a change in the way Washington pays U.S. cotton growers. Johanns wants American agriculture to propose less costly reforms.
"I really believe we have a couple of options," he said. "The first would be let the future be driven by WTO litigation, that dismantles [subsidy] programs piece by piece. The second would be to craft farm programs in such a way that it leads us to the future with vision and foresight."
Subsidies paid to US farmers totaled $25 billion last year. Johanns wants to cut the subsidies, something that is very difficult to achieve, particularly in an election year. Subsidies are popular with farmers, a majority of whom support President Bush's republican party. Johanns says the subsidy to sugar growers will have to change by 2008 when under the North American Free Trade Agreement (NAFTA), Mexican sugar can enter the United States duty free.
"We have a 100 percent tariff on sugar. It is very, very much a protected industry," he noted.
In an effort to advance the stalled Doha Round of trade liberalization negotiations, the Bush administration has offered to cut U.S. subsidies by half, a proposal dismissed as inadequate by some developing nations.
At the same forum, Cal Dooley of the Food Products Association called for the abolition of all U.S. farm subsidies. He said American farmers can compete even without subsidies, which he said, go mostly to the richest corn, wheat and soybean producers. Dooley said because American agriculture is increasingly dependent on exports, Washington needs to take the lead in ending the trade distorting subsidies.
"We're basically [through our subsidies] giving license to the EU to continue to provide their $60 billion in subsidies, far in excess of what we do," he explained. "And we're continuing to sanction, in effect, Japan continue having their 500 percent tariff on rice."
Dooley said without U.S. leadership there won't be subsidy cuts in other industrial nations.