The real protectionism

The US House of Representatives has passed the 2007 Farm Bill by 231 to 191 votes.

There is often a conflict between trade policies that are in the best interests of domestic groups and those that promote development in other countries. The farm bill is a rare example of a law that is detrimental to both. It rewards big agribusiness at the expense of family farmers at home and abroad. The new bill contains some good news thanks to the Democrats (improvements in the food stamps program, funding for conservation efforts and fairer taxation of US subsidiaries of foreign firms) but doesn't fundamentally reform damaging subsidies.

As Kim Elliott at the Center for Global Development points out 70 per cent of subsidies go to 10 per cent of farm operations:

Of the $10 billion in payments for specific commodities in 2004, 60 percent went to just two crops--corn ($4.5 billion) and cotton ($1.6 billion). But rather than reform this discriminatory and inequitable system, legislators preferred to buy off selected critics by adding a few dollars to nutrition and conservation programs, while piling on more trade-distorting subsidies for wheat and other grains, soybeans, and sugar.

This is the real face of protectionism in the US, not family farmers or domestic manufacturers trying to compete in a system that benefits multinationals, not trade unionists and environmental activists campaigning for basic regulatory standards to be included in free trade agreements, and not protesters who question the nature of globalization. Why was there such an enormous fuss about inserting ILO standards into the text of trade agreements, yet very little protest over this incredibly unfair bill?

And why are 'free traders' in Congress willing to let this continue? Passing this bill without cutting farm subsidies shows developing countries in the WTO that the US is hardly serious about the 'development' aspects of the Doha round. The Washington Post reports that the White House has threatened a veto, on the grounds that subsidies remain high. Countries such as Brazil are critical of US and EU agricultural subsidies, the main stumbling block at a recent meeting of the G4 (Brazil, the EU, India and the US). It's enough to make even the most steadfast supporters of the Doha Development Agenda throw up their hands in disgust.

What should we do to improve this situation? First of all, let's remove food stamps from the bill. There must be a better legislative vehicle for this important program. Presidential candidates, how about putting this in your health reform plans?

Second, let's stop subsidizing big agribusiness. Oxfam America provides some good policy suggestions on this. The money could be better spent elsewhere - providing assistance to farmers that really need it, and sponsoring rural conservation and infrastructure development.

And while we're reforming fast track, let's reform the way that Congress votes on farm subsidies as well. A trade policymaking process in which Congress and trade negotiators aren't even reading from the same book, let alone on the same page, is not one that works.

Read more of Holly's posts at her blog TradingLives.