July 31, 2006
Doha Round Suspension Raises Questions On Farm Bill, WTO Disputes
The decision last week by WTO Director-General Pascal Lamy to suspend Doha Round global trade talks is being seen by many as a setback that could at least postpone a completion of the Round for years or even end the Round completely. Negotiators already have spent nearly five years on the process before arriving at this week’s impasse, a period that some observers note still is three years short of the duration of the Uruguay Round. The lack of Doha Round progress is being cited by some in Congress –– as well as by representatives of various commodity groups –– as a reason to back away from any significant reform of U.S. farm programs and policies when the 2007 farm bill is written. A number have gone on record as calling for an extension of current farm legislation for one or two years, or until a WTO agricultural trade agreement is concluded.
On the other side, those who want serious reform of current U.S. farm policy –– especially members of Congress who do not sit on Agriculture committees and Bush administration officials –– may use the lack of a new global trade agreement as compelling reason for reform. For example, the Bush administration may feel it now can play a bigger role in the farm bill debate, working to assure that U.S. farm policy is less trade disrupting in order to give U.S. trade officials more leverage in multilateral trade negotiations when they resume.
Agriculture Secretary Mike Johanns said the administration wants to go forward with the writing of a new farm bill next year. “Keep in mind, 60 percent of U.S. farmers receive virtually nothing from the farm bill,” he said, adding that 93 percent of the subsidies currently go to just five crops: soybeans, corn, wheat, rice, and cotton. “I believe it’s important for all farmers to examine farm policy, to draft farm policy that is equitable, that is predictable and that is beyond challenge,” said Johanns.
Johanns also said he expected new challenges to U.S. farm subsidy programs to be raised under the WTO’s dispute settlement system. Responding to a reporter’s question on the likelihood of new trade disputes being brought before the WTO’s Dispute Settlement Body, Johanns said, “I have anticipated all along that other countries will be looking at our programs if the Doha Round doesn’t move forward.”
In related news, the American Farm Bureau Federation urged Congress to extend the 2002 Farm Bill provisions for at least one year, in the wake of the collapse of the Doha Round talks. Bob Stallman, president of the American Farm Bureau Federation, said, “By extending the current farm program, with minor changes to take into account recent trade rulings, we will move forward with the kind of policy that helps ensure U.S. farmers have the support they need to survive in today’s contentious global trading environment.”
Stallman argued that there was little point in making changes to U.S. farm programs and reducing or eliminating farm subsidies unilaterally, while U.S. trading partners continue to subsidize their farmers. Doing so would likely weaken the United States in future negotiations, he said. “You don’t get credit in negotiations for what you do on your own,” Stallman said.
Meanwhile, the United States continues to face a real possibility that Congress will not renew the president’s trade promotion authority by the scheduled expiration date of June 30, 2007. Trade observers point out that the last time presidential TPA expired, it took several years of lobbying before Congress agreed to reinstate the conditions that allow an administration to conduct trade negotiations in good faith. These observers also note that Congress is more protectionist or trade policy weary now than it was during the Clinton administration when TPA last was reauthorized.
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Conference Committee Next Step For Key Transportation Project Bill
The Senate last week approved its version of HR 2864 – the Water Resources Development Act (WRDA) – that would authorize over $12 billion for more than 100 navigation and flood control projects for the Army Corps of Engineers. The House passed its version in July 2005. The two chambers will now work in conference to iron out the differences in the two versions of the bill. The WRDA is usually reauthorized every two years but was last reauthorized in 2000. The importance of the current reauthorization version is that both the House and Senate agree on the need to expand and update key lock and dam infrastructure important to the soybean industry.
Importantly, the modernization of seven lock and dam projects on the Upper Mississippi and Illinois Rivers received a favorable nod. The contention between the two chambers will be differences on peer review and specific projects. The next steps in the process will be meetings of staff from both chambers during August, followed by a formal House-Senate conference committee meeting perhaps in early September.
Philippines May Open Soybean Market To U.S. In Exchange For Apparel Concessions
The Philippines may open up its highly protected grains market to U.S. farm exporters as a possible trade-off for preferential treatment for its apparel to compete with a slew of free trade agreements between the United States and other Southeast Asian countries. Among the sectors that could be opened up to imports are soybeans, wheat, and rice, which the Philippines is hoping could be used as leverage to get more access to the American garments sector, said George Siy, an official of the Garment Exporters Confederation of the Philippines, which has been actively lobbying for more access to the U.S. market.Washington and Manila have begun “to pursue discussions [on the trade off], and we have to examine other sectors that we can open to them,” Siy said, adding that initially the Philippines could allow importation from the United States of soymeal and wheat because these are not locally produced.
China’s Record Soybean Imports Used To Support Cooking Oil Demand
China is importing ever more soybeans to try and cater for the country’s cooking oil demand. Chinese soybean imports last year reached 26.6 million tonnes, up around 31% year-on-year, and imports in the first five months of this year were up 11% to 10.4 million tonnes, according to figures from Global Trade Information Services (GTIS). Chinese cooking oil consumption now accounts for 16.4% of the world’s total, and has increased by 10% annually over the last five years, said Chinese vice minister of agriculture Fan Xiaojian.
Soy Complex Lower As Midwest Rain Allays Crop Concerns
The soy complex closed lower on July 27 as significant rain in the Midwest eased crop concerns. While the soybean crop in parts of the Western Corn Belt has lost some yield potential, the overall crop is in pretty good shape going into the critical yield-determining month of August. August bean futures closed down $2.85 finishing at $210.91; September was $3.31 lower, closing at $213.39; and November lost $2.85 ending at $218.62. August meal was down $4.08, closing at $182.10; September was $2.43 lower, finishing at $183.97; and October was down $3.75 to finish at $185.30. August oil closed $4.63 lower to finish at $570.33; September was down $4.41, closing at $575.18; and October decreased $3.75, ending at $580.25.
