House Panel Hears More Policy Analysis

July 27, 2000

The House Agriculture Committee’s hearing on farm policy, one in a long series of hearings on the subject, heard Jack Roney, director of economics and policy analysis for the American Sugar Alliance (ASA), say that the apparent trend toward agricultural free trade is showing alarming signs of reversing itself. The Uruguay Round agreement five years ago and the "more profound reforms" from the 1996 farm law seemed to "presage a sea change: Governments removing themselves from the agricultural marketplace."

However, Roney added, "Developments since that time overwhelmingly suggest the opposite is occurring. Governments already heavily involved in their agricultural markets remain entrenched; many governments that had begun to remove themselves have reversed direction."

In describing the sugar industry's hope for freer trade, Roney said because of its competitiveness, with costs of production well below the world average, the U.S. sugar industry "supports the goal of genuine, global free trade in sugar. American sugar farmers cannot compete with foreign governments, but we are perfectly willing to compete with foreign farmers in a truly free trade environment."

He expressed concern, however, that recent developments suggest that free trade goal is more elusive than ever. "U.S. and world commodity prices plunged to historic lows in real terms the past two years. Governments have rushed back into the marketplace to protect farm prices, or income, or both, buttress their rural economies, and ensure domestic food supply stability. Efforts to initiate another multilateral round of reforms through the World Trade Organization collapsed. Bilateral or regional trade agreements have tended to exclude key agricultural products."

Roney listed several reasons for the intractability of agricultural policies: "Internationally, governments appear to be recognizing the unique value and sensitivities of their agricultural economies, and the economic and political dangers of deregulation. Agriculture is uniquely sensitive to weather, disease, and other natural disasters. Agricultural trade is uniquely distorted by the breadth and depth of entrenched government policies. Agriculture tends to be the primary, if not sole, employer in rural areas. And, agriculture provides a product unique in the public's view of essential products -- its basic food supply."

Jim Pellett, vice chairman of the National Cattlemen’s Beef Association Agriculture Policy Committee, said his organization believes the 1996 farm law "is working to make farm programs more market-oriented by cutting the link between government payments and the command and control actions of USDA. Consequently, the role of government in commodity pricing is diminishing and producers have more choice in marketing decisions."

Programs that subsidize agriculture through direct payments, acreage controls, set asides or direct subsidization can "distort supply and demand signals to producers. These confusing signals can negatively impact the demand and price of all commodities," he said.

The NCBA supports "the critical role of government in ensuring a competitive market through strong oversight," Pellett added. This includes the role of taking the necessary enforcement actions when situations involve illegal activities "such as collusion, anti-trust, and price-fixing."

However, government intervention must not inhibit producers' ability to take advantage of new marketing opportunities and strategies geared toward capturing a larger share of consumers' spending for food, he added. Government's role should be to "ensure that private enterprise in marketing and risk management determines a producer’s sustainability and survival."