CAGW Commentary: Senate Must Fix the Flawed Farm Bill

WASHINGTON--(BUSINESS WIRE)--Congress will be sending the wrong message to American taxpayers and the rest of the world if the Senate agrees to the House-passed Farm Bill, H.R. 2419. That bill offers “more of the same,” and worse.

Instead of making much-needed reforms in farm subsidies, the five-year $286 billion bill is inferior to the status quo. Instead of linking farmers to markets, it further insulates them by raising government support prices. Instead of eliminating subsidies to the 38,000 wealthiest farmers (as proposed by the Bush Administration), it eliminates subsidies for only 7,000 farmers. Under a congressional sleight of hand, some farmers can collect more under H.R. 2419 than they could under the old Farm Bill.

The House Democrat leadership endorsed H.R. 2419 in a bid to protect the seats of their newest members. But according to an analysis by Environmental Defense, these new members’ districts would have benefited under a reformed farm bill. Many Republicans opposed the legislation, but mostly due to an ill-advised tax increase, not because it maintained harmful farm subsidies.

U.S. farm subsidies are an example of a U.S. policy that increases the gap between rich and poor nations. According to a study by Oxfam, eliminating price depressing subsidies to U.S. cotton producers would benefit 10 million poor farmers and their families in West Africa. According to the CATO Institute, eliminating similar subsidies to U.S. rice producers would increase world rice prices by 4 to 5 percent.

The Farm Bill offends our friends overseas in other ways. First, just as international trade talks restarted after a year’s hiatus, the House-passed Farm Bill contains not even the hint of recognition that our trade-distorting farm programs are at the heart of the much-delayed trade negotiations. While our trade negotiators ask other countries to cut their farm subsidies and tariffs, the House blatantly passed a bill that undermines their position.

Second, there are provisions in H.R. 2419 that violate international trade agreements. Last year, Brazil won a case against U.S. cotton subsidies, a decision recently confirmed by the World Trade Organization (WTO) compliance panel. In fact, just three days after the House vote, the WTO ruled that the U.S. has not reformed its cotton programs enough to comply with the original ruling. Not only was there a failure to comply with the WTO ruling, the House bill reversed cotton subsidy reforms made last year. Cotton subsidies not only hurt Brazil, they also hurt African nations such as Benin, Burkina Faso, Chad and Mali – four of the world’s poorest countries. The upshot: Brazil won the right to retaliate against $4 billion in trade and the House actions have further undermined the trust of Africa’s poor in America’s goodwill and respect for law.

Third, the House paid for all the extra spending in the Farm Bill by imposing a $7.8 billion tax hike that violates U.S. treaties. Supporters of these taxes think this is acceptable because they affect only “foreign owned” companies. But if the U.S. breaks its promises to foreign companies that invest here, foreign countries can also break their promises to U.S. companies abroad. In a world where Coca-Cola earns more overseas than it does at home, this policy will boomerang to hit American companies and workers in the pocketbook. In an era where companies can and do move to any number of strong, stable democracies, the U.S. is not the safe haven it once was for the world’s investors. Money and jobs can flow out of the U.S. as easily as they can flow in.

The House bill sent a message that America does not care about the rest of the world; whether or not agricultural policies hurt the poorest of the poor; and whether or not international treaties are violated. If America wants to improve its image, our foreign policy and economic policy should reflect our best intentions, not our worst. The question is whether the Senate is going to say “me too” to the House, or clean up the mess the House has made of U.S. farm policy.