October 31, 2007

Dear Colleague:

The U.S. Department of Agriculture’s Chief Economist projects that exports of agricultural products for this year are likely to reach $79 billion – nearly 30% of all farm cash receipts in 2007.  Clearly, trade and our trading partners are important to all farmers now and in the future.  However, I fear the Farm Bill passed by the Senate Committee on Agriculture, Nutrition, and Forestry ignores the importance of trade and international agreements. 

As you may know, Brazil will soon have the authority to retaliate in kind against U.S. products, whether they be agricultural products or intellectual property.  It is unclear if Brazil will follow through with these threats, but what is clear is that the World Trade Organization (WTO) has repeatedly found, after a number of appeals, the U.S. Cotton Program to be in violation of our commitments, and as a result, a whole host of challenges to other agricultural commodities have ensued.  

Upon the initial findings by the WTO, Congress did repeal some cotton related programs found to violate these agreements, namely the Step-2 program.  However, the Farm Bill we are currently considering does not even make an attempt to bring the rest of the cotton program into compliance.  In fact, it significantly increases the likelihood that other programs will be challenged by expanding programs the WTO found to be egregious.  Specifically, the WTO found that countercyclical payments and marketing loans are trade distorting and that direct payments, argued to be trade neutral, are in trade violation as long as planting restrictions are retained.  Astonishingly, the Farm Bill we will be considering increases payments made under these trade distorting programs almost across the board, further complicating our trade commitments. 

The Administration, earlier this year, put forth a number of policy changes that they argue would have fixed our trade problems with the WTO, including a revenue based counter-cyclical program, marketing loans that respond to market prices, and the elimination of planting restrictions for fruits and vegetables.  None of these proposals were incorporated into either the House of Representatives Farm Bill or the Farm Bill we will be considering in the Senate. 

U.S. action to comply with the WTO ruling against cotton subsidies, as well as U.S. policy regarding subsidies in general, will be closely monitored by the world’s exporters.  Failure to move toward compliance will undoubtedly invite retaliatory tariffs that legally can be directed at any U.S. industry.  And in the future, should the WTO determine that other U.S. farm subsidy programs do not comply with WTO rules, the potential for retaliation by other countries is immeasurable. 

As we move forward in the debate on this Farm Bill, Congress has an opportunity to make real strides toward achieving WTO compliance and protecting U.S. commodities from future litigation.  Senator Frank Lautenberg and I, along with a number of bi-partisan co-sponsors, will be offering the FRESH Amendment during the debate of the Farm Bill on the Senate floor.  This legislation will not only provide true safety-net for the first time to all U.S. farmers, but it will do so in a way that is fiscally responsible and trade compliant.