Joseph Francois is optimistic about agricultural liberalization, despite the failing WTO negotiations:

In recent years, the new dispute settlement body… has led to successful cases against the U.S. and EU (led by Brazil) on cotton and sugar. At the same time, under different dispute mechanisms in the WTO, developing Latin American countries recently won a high-profile case against the EU on bananas. The most difficult issues are being handled through the legal machinery in Geneva, and developing countries are even winning. As it turned out, none of this really hinged on the agriculture negotiations themselves…

The current set of agricultural policies in the U.S. and EU is not sustainable. In the case of the EU, the combination of (i) aging populations and (ii) an Eastern Enlargement that has taken in poor, agricultural economies means that the CAP as we know it is doomed. The European Commission knows this, and EU Members have already launched on a policy reform process that recognizes that future agricultural policy will have to be very different (and much cheaper) if it is to survive the budget constraints brought on by aging populations, and the demands for structural funds from new members. The EU has made a commitment to reform (necessary regardless of how events unfold in Geneva), and we can expect the process to continue. So, why not just wait? We can probably get the same results we would from active negotiation. In the case of the U.S., the budget hole is now so deep, and the looming costs for Medicaid and Medicare with retiring baby boomers is so large, that large farm outlays are likely to be a victim of the storm of budget rationalization that will arrive with the next White House team. So again, why not just wait? We will get rationalization anyway, regardless of whether or not we push this through Geneva.

The EU scenario seems reasonable, but I don’t buy the US story, at least at first glance. Agricultural subsidies run around $20 billion, while federal spending is in the neighborhood of $2.5 trillion and the deficit is more than $300 billion, so although the subsidy payments are foolish, slashing them won’t significantly improve the budget situation. Meanwhile, farm lobbyists are a well-organized and influential constituency.

Analysts more familiar with the entitlement programs and the federal budget process are better equipped to discuss this topic than I am, but I’m skeptical that farm subsidies are likely to be first on the chopping block.