WTO Negotiations Could Undermine Farm Bill Efforts

MEMPHIS – National Cotton Council Chairman Larry McClendon said the NCC will continue to work closely with Congress to ensure final passage and implementation of the farm bill and a successful conclusion to the World Trade Organization (WTO) Doha negotiations.

In an address here today at the Southern Cotton Ginners Association’s Ag Update, McClendon recapped the NCC’s two-year efforts to develop sound farm policy that would: 1) provide a solid safety net for producers, ensure competitive prices in the international market, 2) align provisions of the upland cotton marketing loan with market signals and 3) streamline the flow of cotton to the marketplace. He said the Council also sought to avoid any tightening of payment limits or increased standards for eligibility for program benefits; to get a safety net of unlimited access to a marketing loan with redemption at the adjusted world price; and have the counter-cyclical payment decoupled from production with the direct payment left as the cornerstone of cotton policy.

“The farm bills in the House and Senate largely reflect the provisions sought by the Council,” he stated. “The Council has urged Conferees to include reforms that are part of the House or Senate bills in the new farm bill.”

The Arkansas ginner said the Council also has strongly urged Conferees to continue to reject proposals by the Administration and others for more extreme changes to Adjusted Gross Income (AGI) means tests that carry unknown consequences.

“We also believe that any new rules should be gradually phased-in to allow growers, land owners and lenders to adjust to the new rules and regulations,” he said.

McClendon said the remaining contentious issues between the House and Senate bills and between Congress and the Administration are: 1) the farm bill funding level above the base line determination and the revenue source for that funding and 2) the Administration’s pressing for additional payment eligibility reform, especially AGI means test provisions.

However, McClendon warned that WTO negotiations may overshadow the U.S. cotton industry’s two-year effort on delivering sound policy in new farm legislation.

He said the U.S. agricultural community has been largely supportive of its trade negotiators’ aggressiveness in the WTO Doha Round – even the proposed significant cuts in domestic agricultural support programs.

“But we stated from the very outset that such large cuts in support would only be acceptable if there were real, significant gains in market access,” he said. “We warned our negotiators in 2006 that other countries were pocketing U.S. proposals and demanding more cuts in agricultural support while retreating on market access.”

McClendon, who met last fall with WTO Agricultural Negotiations Chairman Crawford Falconer, said Falconer’s two draft negotiating texts – one released just a few weeks ago – include significant specific ranges of cuts for various types of domestic support but “little in the way of specifics on increased market access.” The texts, he noted, include a section that demands that the United States reduce its cotton program expenditures by more than 90 percent from recent spending levels. The most recent draft, though, contains market access provisions that “are riddled with exceptions that could easily allow a developing country to exempt most of its trade from real increases in market access.”

The NCC chairman called on USDA to provide U.S. agriculture with a clear analysis of exactly what gains U.S. agriculture can expect in market access under these draft negotiating texts.

“It is incumbent on the negotiators to demonstrate that whatever gains that have been won in market access are at least as large as the sacrifices in the safety net for U.S. producers,” McClendon said.

He also reminded attendees of July letters from 41 U.S. agricultural organizations, including the NCC, that were sent to President Bush and the Office of the U.S. Trade Representative. Those letters stated that an acceptable Doha text “must have equal ambition in domestic disciplines and increased market access.”

McClendon told attendees that the NCC also has been clear in all communications with U.S. negotiators -- that cotton’s market access improvement will be measured by changes in China.

“To this point in the negotiations it appears that China will have very little to do in meeting their market access commitments with regard to cotton,” he said.