Is President Bush finally facing down Congress on agriculture in his lame duck year? Here are the guts of tonight’s FT story by Alan Beattie:

President George W. Bush has threatened to veto the “farm bill” unless provisions he says amount to tax rises are taken out, and a cap on subsidies given to richer farmers is lowered…

Even if the White House is successful in getting Congress to trim spending, it is unlikely to make US farm programmes consistent with the offer to cut payments that Washington has already made in Doha…

Collin Peterson, the Minnesota Democrat who chairs the House of Representatives agriculture committee, has said failure to agree a bill by the expiry of the current bill on March 15 would mean reverting to a law dating from 1949 that would massively raise support prices for a range of commodities…

Reformers were dismayed by the draft House and Senate bills, which, they say, have done little to reduce the price supports that encourage overproduction and environmental degradation, and have added only minimal amounts of money for fruits and vegetable farming, which currently receives little support.

The WTO has once again ruled in favor of the Brazilian complaint against US cotton subsidies, finding that US reforms have not brought its subsidies into compliance with previous WTO dispute settlement panel decisions.

15.2 (pdf): “The Panel considers that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding are inconsistent with the obligations of the United States under the covered agreements, these recommendations and rulings remain operative.”

Addendum: FT story.

Mitt Romney in a GOP debate, via Hit & Run:

We’re competing with European and Brazilian and other farmers, and we’re competing in a marketplace where they are heavily subsidized, at great disadvantage for our farmers. And so, if we’re going to change our support structure, we want to make sure that they change their support structure.

And we do this together, as opposed to unilaterally saying: We’re going to put our farmers in a tough position and have the farmers in the rest of the world continue to be subsidized.

Unfortunately for Mitt, European farm subsidies have been largely decoupled from production since 2003, so they aren’t triggering a surge in output or a flood of imports. Moreover, the European Union is due to reform its Common Agricultural Policy in 2008-09:

The European Commission unveiled plans Tuesday to shake up Europe’s farm subsidies in a bid to make costly hand-outs more relevant to the modern world as the sector enjoys the strongest boom in generations.

While past reforms have geared the European Union’s Common Agriculture Policy (CAP) towards reining in production, farmers are now struggling to keep up with surging demand fuelled by explosive growth in China and India.

Kicking off a six-month review of the CAP, the EU’s executive arm floated the idea of capping hand-outs to the biggest farms, phasing out milk quotas, scrapping rules on keeping land fallow and guaranteed minimum cereals prices.

Based on the findings of the review, the Commission is to come forward with reform proposals in May that would both modernise and simplify Europe’s support of its farms. [AFP]

So while Europeans seem to progress, US policy is getting worse. Moreover, I’ve never heard of Brazilian farmers receiving subsidies. Shame on Mr Romney for blaming others when the United States is the laggard.

The 2002 farm bill reversed a gradual, albeit slow, trend of liberalizing American agriculture. Many analysts, including myself, hoped that that legislation was an aberration born of particular electoral considerations, and that the 2007 farm bill might return to reform. Unfortunately, Kim Elliott says things are only getting worse:

Senators Richard Lugar (R-IN) and Frank Lautenberg (D-NJ) introduced a reform-oriented farm bill that no one thinks has a chance. Perhaps the best that can be hoped for in this case is that continued disagreements over who gets what in the farm bill and who pays for it will continue to stall passage, resulting in a short-term extension of the slightly less bad 2002 farm bill.

The proposed farm bill is approximately 1.8 percent of projected spending over the next five years.

Thomas Hertel, Roman Keeney &  L. Alan Winters explain why agricultural liberalization is so tough to achieve:

The “average” farm household in the United States is little affected by the trade reforms currently being contemplated in Geneva, but these reforms imply significant losses primarily for the very richest households involved in production of highly protected commodities. Meanwhile, in the developing world, many of the benefits of rich country agricultural liberalisation are translated into reduced poverty….

[I]n the United States, farm income accounts for less than 10% of total income of farm households… [O]ur estimates of the impact of Doha on the average farm household’s income suggest that it is statistically indistinguishable from zero! If this is the case, then what is the source of such strong opposition to reform?… In the United States, most farm households earn relatively little from farming, but those large farms producing sensitive products tend to be specialised, with the richest deriving up to 90% of their income from agriculture…

In contrast to the negligible impacts on the average US farm household, full agricultural trade liberalisation would cut the total income of the wealthiest rice farmers by about 19% and that of cotton farmers by 10%… It is these wealthy, highly specialised households in a few heavily protected sectors that stand in the way of serious agricultural reform in the US. Indeed, around one half of producer revenue in the US rice and sugar sectors over the period 2001-2005 were attributable to farm programs., while more than a third of cotton revenues are directly attributable to government programs. This sharp concentration of potential losses among a relatively small number of influential households has made reform in the US difficult indeed.

Read the full column for other important insights into agriculture at the Doha Round.

How many times have I reported this headline before? Reuters: “WTO rules against US cotton subsidies”

Behold the power of Google Maps:

“The red dots indicate people who live in Manhattan (and so clearly are neither hurting for money nor tilling the soil on the family farm) but receive agricultural subsidies from the federal government. The larger red blobs mark people receiving more than a quarter of a million dollars in farm subsidies annually.” – Yuval Levin

[HT: Norberg]

Ever the contrarian, Dani Rodrik mounts a defense of anti-dumping rules (pdf):

There are also some provisions of the GATT/WTO regime that are highly open to protectionist abuse, but these have had only limited impact on trade. The anti-dumping (AD) provisions of trade law are particularly notable in this respect, as they provide easy access to protection in circumstances where the economic case for protection is weak or non-existent. While countries do make use of AD, it is hard to argue that the world economy has greatly suffered as a result. In retrospect, what is striking is not that AD is used, but that it is used so infrequently in light of the flexibility of the rules, and that it has caused so little damage. Indeed, we could argue that AD has made the trade regime more resilient by providing a safety valve for protectionist pressures. These pressures might have had more damaging consequences otherwise, if they had to make their way outside international rules rather than within them.

The people of the First District of Minnesota, I think, can probably lay claim to one of the richest agricultural pieces of land in the entire world . . . I had 14 hearings throughout my district with universal acceptance of making sure the safety net is maintained . . . When I need advice on the farm bill, I go to a couple of good farmers in my district, Kevin Papp, president of the Minnesota Farm Bureau, and Doug Peterson, president of Minnesota’s Farmers Union. I don’t need to go to the ideologues at the Cato Institute or Club for Growth to know what’s good for rural America. [Tim Walz (D-MN)]

The result?

The House Farm Bill allocates $286 billion over five years to agricultural programs—that’s an even bigger price tag than the one attached to the bloated 2002 Farm Bill, which increased agriculture spending by 80 percent over 1996’s Freedom to Farm Act, itself a huge bill.

It continues the tradition of giving huge subsidies to wealthier farmers, though on a more limited basis than the 2002 Bill. Where the 2002 Bill dished out subsidies to farmers earning up to $2.5 million annually, this bill establishes an annual income threshold of $1 million, or $2 million if a husband and wife each claims subsidies. A slight improvement, at best.

I think the House successfully avoided the Cato Institute’s contaminating influence.