03/21/05 Subsidy debate and world trade, Pt. 2

03/21/05 Subsidy debate and world trade, Pt. 2

The Bush Administration announced significant farm payment program subsidy reductions in its proposed fiscal year 2006 budget, perhaps as a way to show World Trade Organization member nations that the U.S is serious about moving ag trade reform negotiations forward by cutting such subsidies. But perhaps a more clear sign that the W.T.O. as a body is serious about subsidy reduction or elimination, came when it recently upheld a previous ruling against the U.S. cotton payment program. In fact many developing nations within the W.T.O. are urging America and other developing countries to reduce if not eliminate farm subsidies. Now that won't be easy in the states, based on the ag community's outcry against such cuts. In part, that is because rural banks fear less farm program payments will mean less money for borrowers to pay back loans. And Tim Ohlde, the President of a Kansas bank, says he and other lenders fear it could lead to a run of farm bankruptcies and financial difficulties similar to those that plagued agriculture in the 1980's. OHLDE: Lenders will be looking at risks in their portfolio. I don't want to return to an eighties scenario. I'm not a profit of doom. We've got higher energy costs. If we start pulling back on government payments, are we going to create some real clouds of uncertainty for the next two, three, four years and set up an eighties scenario? But some proponents of reducing or eliminating farm support program payments believe there doesn't have to be the financial risk growers and bankers fear. David Orden of the International Food Policy Research Institute, who supports elimination of subsidies, has a solution. ORDEN: End farm subsidies by buying out the farm support programs. Buyout means you're going to get something in the beginning and less in the end, or if you will, nothing in the end, so it would provide enhanced transition support to farmers, it would provide long term savings to taxpayers, and it would potentially pave the way for more substantial global agricultural trade liberalization by breaking this gridlock of high subsidies and high tariffs going hand and hand. And that is all well and good. But there are others, including U.S. government officials, who say the subsidy reform issue works both ways & meaning maybe developing nations who say they won't cut farm subsidy payments until the developed nations do, maybe need to rethink their own position. More on that in our next program.
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