Domestic Production Support in the New US Farm Bill

- This article reviews current US agricultural programs as revised under the Fsri Act of 2002. Attention focuses on the commodity programs and their compatibility with international commitments. Subsequent to the fall in the international prices of major agricultural commodities, the US Congress decided to bring an end to relying solely on decoupled payments, and to restore a safety net for farm incomes based on countercyclical payments. In short, under the 2002 farm bill growers of program crops can be eligible for (1) direct contract payments not tied to current production or prices; (2) market loss assistance payments not tied to current production but justified by low commodity prices; and (3) marketing loan benefits tied directly to current production of a specific commodity and calculated to offset low prices for that commodity. Thus, with the new farm bill a significant portion of payments varies with market price levels, and by consequence it is impossible to determine ahead of time what the total level of payments will be in future years. Under the Uruguay round Agreement on Agriculture, the United States agreed to limit spending on domestic support programs considered trade-distorting (amber box spending) to $19,1 billion per year. Early estimates suggested that the US was likely to exceed this limit in the 2002 marketing year by about 30%. Should this prove to be the case and, above all, if a stricter limit on domestic support is negotiated in Cancun, the Secretary for agriculture will have to exercise his authority to limit payments.