Wednesday, December 15, 2010

Disconnections in US Agricultural and Trade Policy

Why do US negotiators for agricultural trade liberalization in the World Trade Organization sometimes spend scarce negotiating capital in “tit for tat” concessions from our trading partners that are later made irrelevant, or nearly so, by the US Congress? And why do our trade negotiators appear at odds with the inclinations of the US Congress about making the changes needed to our domestic farm policy to support our international trade negotiations? I investigated this question with co-author, Kathleen C. Hansen, former student at MSU, now Rhodes scholar enroute to Oxford, and our paper on this question will be published early next year in the Estey Centre Journal of International Law and Trade Policy.

The GATT, now known as the World Trade Organization, made progress in the liberalization of agricultural trade for the first time with the Uruguay Round Agreement. Implementation of the URA began in 1995, and in the year 2000, WTO members began negotiating again to further liberalize agricultural trade. Progress in this round of negotiations has been excruciatingly slow and a final agreement is still elusive. Progress is problematic as one key component of the negotiations is restrictions on the nature and level of domestic subsidies for agriculture that distort agricultural trade. Some, but not all, subsidies are considered to result in an increase in exports and thus a move away from the “level playing field.”

The problem in a nutshell is that the US Congress has the authority to enact domestic farm bills that contain a wide variety of subsidies for US farmers, some trade distorting, others not. Congress wants to keep this power as the Farm Bill has been an important mechanism in securing the support of constituents. However, since the 1930s Congress has been delegating authority for negotiating trade agreements to the agency now known as the Office of United States Trade Representative. In sum, Congress found it politically expedient to keep authority over the Farm Bill but to delegate authority to negotiate trade agreements.

This was not a problem for fifty years, until the mid 1980s, when agriculture was substantively included for the first time for comprehensive negotiations in the GATT/WTO. In order to achieve trade liberalization for agriculture, WTO members have to agree to restrict the nature and extent of domestic subsidization. And sometimes there is a divergence between Congress and US trade negotiators about how to negotiate for agricultural trade liberalization that may require us to reform our domestic policies. This is painfully known by the rest of the world, and at times, diminishes US credibility and power in the negotiations. For details, check back to our blog for a link to the paper when its published, or contact Linda Young for a draft copy.

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