Cotton and soybean farmers can add another worry to the long list of things that give them pause about the Doha Development Round negotiations that many expect to kick off again this fall.
This “new” wrinkle — product-specific spending caps — actually dates back to the Doha Round Framework Agreement that WTO ministers approved in July 2004. But not much has been said about it publicly, according to Mark Lange, president and CEO of the National Cotton Council.
“The G-20 developing countries and the European Union proposed using a 1995-2000 average for the support measures for the major commodities during that period,” he said. “The United States has been proposing 1999-2001. Unfortunately, not many people support the U.S. time period, but there are a lot of folks lining up behind the other.
“And it’s very clear that the 1995-2000 time period results in lower caps for all U.S. commodities, but significantly lower caps for cotton and soybeans.”
Speaking at the joint summer meeting of the ACP and The Cotton Foundation in San Antonio earlier this month, Lange said the U.S.-supported average for cotton would provide a $2.07 billion spending cap vs. $806 million for the 1995-2000 average and $3.36 billion vs. $1.3 billion for soybeans.
Another element of concern is the amount of support calculated for the dairy and sugar programs in the so-called aggregate measures of support or amber box category of farm programs.
Last October, the Bush administration proposed a 60-percent reduction in AMS or amber box support and a 53-percent reduction in Trade Distorting Domestic Support to try to help get the Doha Round over another hurdle that threatened to deadlock the negotiations.
The proposal would reduce the current amber box ceiling on those aggregate measures of support — marketing loan gains, dairy, sugar, loan forfeitures and interest subsidies — from $19.1 billion to $7.64 billion. Total TDDS would drop from $47.74 billion to $21.96 billion.
“Dairy and sugar annually don’t cost a lot of money, but they do run programs that, under the WTO rules, have to be estimated as to the producer subsidy equivalents that are generated by the nature of the programs,” said Lange. “For dairy, that will commonly run in excess of $4.5 billion and for sugar in excess of $1 billion.
“They are measures of support although they do not involve direct spending by the government, and they have to be part of the $19.1 billion amber box ceiling.
Lange noted the proposed amber box ceiling of $7.64 billion is a very real constraint. “We estimate that with the exception of 2003, every year since 1997 the United States would have exceeded the new proposed ceiling. All commodity programs will be impacted by the lower cap.”
He said members of the audience of leaders of the state cotton producer organizations and the allied industry members who belong to The Cotton Foundation have probably heard the calls for the U.S. government to offer to make further cuts in its farm programs to appease other members of the WTO.
Agriculture groups, including the National Cotton Council and other members of the “Gang of 11” farm groups, have repeatedly told the U.S. Trade Representative, Susan Schwab, that they will not support any more reductions in U.S. domestic subsidies.
The U.S. Trade Representative has held firm to the U.S. position during the agricultural negotiations. The significant market access gains sought in the U.S. agricultural proposal are necessary in order to offset the type of reductions in domestic support outlined by Lange. This points to the market access debate as the focal point in any renewed negotiations.
“All of this hinges on the WTO negotiators reaching an agreement this fall or in 2007,” says Lange. “If there is no Doha agreement, then these don’t matter.