1. U.S. Agricultural Policy Joseph W. Glauber U.S. Department of Agriculture Silverado Symposium on Agricultural Policy Reform / Napa, California /January 20, 2004

2. Farm and Food Trade Policy: Historical overview 1982 – 1998: Budget deficits => farm program reforms => trade liberalization 1998 – 2002: Budget surpluses => farm program retrenchment => disenchantment with trade policy Post 2002: Return of budget deficits => renewed pressures on farm programs (?) => renewed interest in trade (?)

3. Trends in U.S. Commodity Programs, 1985-2001 Deregulation of supply Decoupling payments from price and production Market oriented support levels

4. Criticisms of 2002 Farm Bill Increased level of support and broadening of scope of support Re-coupling of payments to price through counter-cyclical payments Re-coupling of payments to production through base and yield updating

5. Costs of the Farm Bill

6. Change in Acreage Since 1990

7. Base Updating under 2002 Farm Bill

8. 2002 Planted Acres as Percent of 2002 DCP Contract Acres

9. WTO Implications Level of support Classification of support: –Amber vs blue vs green –Product specific vs non-product specific

10. Classification Issues Amber—product specific –Price support (dairy, sugar) ($5-6 billion) –Loan deficiency payments ($8-9 billion) Amber—non-product specific –Credit, water –Crop insurance –Market loss assistance/counter-cyclical payments => Below de minimis levels (5% of value of all ag prod) Green –PFC/Direct payments

11. Amber box levels and WTO commitments

12. Doha Development Round US proposal –Harmonizing cut in domestic support –Elimination of blue box –Elimination of export subsidies –Swiss formula for tariff reductions Harbinson EU/US paper

13. Cancun Text—Domestic Support Significant reduction in AMS Product specific AMS capped Reduction in de minimis Modify and cap blue box –Fixed area and yield –Capped at 5% of total value of ag production w/ further annual reductions Cap on AMS + Blue +de minimis w/ further annual reductions

14. Implications for U.S. Domestic Support Commitments ($ bil) CurrentProposedChange AMS19.19.6-9.6 De minimis9.64.8- 4.8 Blue 1/---9.6 Total28.724.04.7 1/ 5% of value of total agricultural production.

15. Domestic Support with 50% AMS Reduction Cap at 2000 levels

16. Domestic Policy Options to Meet New Support Commitments Reduce loan rates –Dairy and sugar: $5-6 billion –Decrease loan rates => lower LDPs Increase Direct Payment rates => Green Maintain current DP rates => increase CCP => “New” Blue box

17. Other Policy Considerations Payment limitations: LDP vs DP/CCP Opposition to further decoupling (e.g., Texas rice producers) Budget implications-- DP vs LDPs

18. Conclusions Cancun text could lead to substantial reduction in trade distorting support Would require US to make significant modifications in support (e.g., loan rates) But would allow for continuation of decoupled income support