The second message is to developing country trade negotiators, who
six months before passage of the 2002 Farm Bill were told by U.S.
trade officials that the Doha Round of multilateral trade
negotiations would focus on developing country issues, including
agriculture. The reasons for this were not driven by any sense of
U.S. and European noblesse oblige, but the realization that the
developing countries now hold the keys to a successful round.
Therefore, the excuses proffered for protectionist backsliding in the
form of U.S. steel tariffs and the Farm Bill, which revolved around
the need to round up votes for fast-track authority, have been
overtaken by a sense that domestic U.S. concerns will always trump
cooperative multilateral trade liberalization. Over the next two
decades, this is likely to be a far more serious blow to U.S.
agriculture and to the overall U.S. economy than many people realize,
because growth in developing countries is a key to American export
growth itself.

U.S. Agricultural Competitiveness: Ready, Fire, Aim

A variety of recent studies have reconfirmed that whenever domestic
farm subsidies are raised, they are quickly capitalized into farmland
prices. In a 2002 study for the USDA, agricultural economists Terry
Roe and his colleagues concluded:

"Since direct payments are targeted to land formerly planted to
program crops, the cash rental rate that a tenant is willing to pay
for an acre of land is affected by the payment, and consequently, so
is the price of land."

The result of this insidious capitalization process is that a 20-25
percent expansion in domestic subsidy spending will only insulate
U.S. producers from global competition in the short run. Within a few
years, by bidding up land rents, it will raise production costs and
actually injure U.S. farm competitiveness. As the cost structure of
farming rises, profit margins will fall, spurring farmers to demand
yet higher subsidies. In other words, we will witness a vicious cycle
of cost-escalation and public spending that will push U.S. farmers
further and further away from the competitive edge.

The age distribution of these same farmers is rapidly changing. U.S.
farmers on average are old and getting older. The last solid data
available (comparing 1992 and 1997) shows that for all farms, the
number of farmers 65 and older rose from 478,000 to 497,000 and the
number who were 25-35 years old fell from 179,000 to 128,000. This
demographic shift will be aggravated by the cost barriers to entry
created by the capitalization process. Younger and poorer farmers
will be bid out of purchasing land and equipment at the entry level.
More ominously, farming will become ever more divided between those
who own the land and receive the subsidies and those who must rent,
often without any prospect of ownership. The landowning class will
increasingly be absentee owners who live off the farm (including many
widows or urban heirs), while those who do the actual work will be
tenants. The process of capitalization thus reinforces a farm
ownership structure in which land entitlements to subsidies flow to a
favored few, who then employ tenants to till their soil.

A third instance of self-injury resulting from trade restrictions
under 2002 agricultural policies arises from their many other
unintended side-effects. Consider one obscure but important
provision, introduced by members of Congress who thought they were
slowing up competitive imports of meat and other products from
Canada. On page 875 of the Senate version of the 2002 Bill,
requirements were imposed on imports of agrifood products sold at
retail--including beef, pork, lamb and fish, which stipulate "country
of origin" labels. The provision (Title X, section 10816) says that
by 2004, only meat from animals and fish born, raised and slaughtered
or harvested in the United States can be labeled "Product of USA."
The idea was to discourage feeder cattle or weanling pigs raised in
Canada or other countries from competing with the U.S. variety.
Hundreds of thousands of these animals are now born and reared for
the first months of their lives north of the border, and then raised,
fattened and processed in the United States. Under the new
provisions, any such products would become a "Product of Canada."

Ironically, whether or not a Canadian label is considered inferior by
U.S. consumers (the opposite may be true), these requirements have
bitten back hard. They have turned into a nightmare for U.S.
producers, especially packers and wholesalers, who realized too late
that they had imposed even greater burdens on themselves than on
Canadians. U.S. retailers must now validate and attest to the origin
of all of their products, proving that they originate in the United
States. These requirements shift costs up the supply chain from
retailers to wholesalers, processors to packers, and handlers to
producers, all of whom must verify U.S. origins. The American Meat
Institute's president, J. Patrick Boyle, called the provisions "the
most costly, cumbersome and complex labeling proposal in history."
There is also another phrase that comes to mind to describe Title X,
section 10816: thinking from the wrong end of a horse.

So it now appears that Canadian meat imports to the United States
will be treated under pre-existing country-of-origin laws, and that
the main hit will be taken by U.S. farmers and food firms. A
calf-rearing association, r-calf United Stockgrowers of America,
noted that the provision will impose a greater burden on domestic
producers than it does on importers. U.S. producers must maintain
records from birth to retail while imported products are not subject
to the same verification requirements. It is nonsensical for the USDA
to saddle U.S. producers with a more burdensome and complicated
verification system than is required of beef imports.

Indeed, because the provisions tilt the playing field against U.S.
meat production, multinational firms operating on both sides of the
border, such as Cargill's Excel Beef, may actually find it easier not
only to raise Canadian feeder cattle, but to fatten and process them
there, too, drawing investment and value-added meat processing jobs
out of the United States and into Canada. This provision was inserted
into the 2002 bill by a group of senators who promoted themselves as
defenders of the American family farmer. Nice work, fellas.

Conservation and Sustainability Issues

One of the leading questions during the 2002 Farm Bill debate was
over increased funding for conservation programs. Such programs were
championed by both Democrats, such as Senator Tom Harkin of Iowa, and
Republicans, such as Richard Lugar of Indiana. In the final bill,
baseline funding for conservation was expanded, especially to include
conservation payments for land already in production and livestock
facilities. The bill also expanded lands eligible for Conservation
Reserves and Wetlands Reserves. Total increases in authorized
spending for these and other conservation programs rose from $10.4
billion in 1996-2001 to $18.8 billion in 2002-07, an increase of over
80 percent.

Despite this apparent victory, many questions remain over whether
these programs will be effectively implemented. In a letter to the
administration in late 2001, Senators Harkin and Lugar pointedly
criticized the Office of Management and Budget for failing to
implement spending already authorized for technical assistance under
the Farmland Protection Program and the Wetlands Reserve Program.
"[W]e are concerned", they wrote, "that further delays in releasing
funding for conservation programs will hurt the ability of America's
farmers and ranchers to obtain the assistance they need to carry out
practices to conserve natural resources for future generations."

More broadly, there are serious questions as to whether these
conservation measures will be overwhelmed by the incentives created
by high subsidy payments to plant fencerow-to-fencerow. Since the
richest subsidies are paid to row crops such as corn, soybeans and
cotton, which are known to be highly erosive and consumptive of
higher levels of pesticides, the net result may be to aggravate soil
loss and water pollution problems. In the face of massive crop
subsidies, conservation will take second place. Subsidies to large
row crop producers don't follow a "polluter pays principle", but a
principle of paying the polluter.

America's farm trade policy has become a four-dimensional disaster.
It attempts to hide huge subsidy increases behind semantic claims of
"non-product specificity" in order to keep them GATT-legal,
effectively insulating U.S. producers from global markets. It sends
exactly the wrong signal to those in Europe and developing countries
who have struggled for trade liberalization, undercutting progress
made in the Uruguay Round to reduce protectionism and expand
agricultural markets for all farmers--notably U.S. farmers. Because
these huge subsidies will quickly be capitalized into farmland values,

U.S. producers will face higher costs, and younger and less landed farmers
will be denied entry, aggravating disturbing trends toward
an aging farm population and fueling division between a landed elite
and their tenants. And despite increases in authorized funding for
conservation, the massive infusions of subsidies to row crop
production are likely seriously to aggravate soil and water
degradation as the United States continues to pay the agricultural
polluter.

Best perhaps, in such depressing circumstances, to recall the
hallowed words of that 20th-century American philosopher who many
times said: "Well, it's a fine mess you've gotten us into this time."
Oliver Hardy please come home; you're needed on the farm.

Essay Types: Essay