Penn Defends New Farm Law

May 24, 2002

USDA Under Secretary J.B. Penn believes the new farm law is compatible with U.S. obligations under the World Trade Organization, and criticisms or worries from other countries are unsubstantiated. The U.S. domestic support ceiling under WTO, he said, "is relatively low. Our ceiling is $19.1 billion compared to $31 billion for Japan and $62 billion for the European Union. So the European Union has a ceiling that is three times that of the United States. The Japanese ceiling is fully 50% higher than our ceiling."

Funding levels in the new law will not violate the $19.1 billion ceiling, he added. "Now the estimated cost of the new farm bill is $170 billion over the next 10 years. That's an average of $17 billion a year. A less conservative estimate would put the cost of the new bill at $190 billion over the next 10years. That's an average of $19 billion a year."

Much of this $19 billion is "unarguably green box" spending, he said. "There's $5.2 billion each year that is in so-called decoupled direct payments. Those are green box. So it seems to me that just by simple arithmetic, you can see that there is virtually no way that we're going to exceed the $19.1 billion allowable ceiling."

If the new law upsets China and Mexico, he said, there is no basis for those reactions. "We do support our agricultural producers, but we do it in a way that is clearly legal, clearly within the bounds of the WTO. And as I tried to say, we can support our farmers fully and still stay within the obligations that we have under the WTO."

Australia's concerns, he added, center on how the new law in some way might affect the ability of the United States to be a major player in the WTO international trade negotiations. "We have tried to reassure the officials personally -- I'm trying to do that here today -- that again, there is no reduction, no lessening of our resolve to be major players and to have a successful outcome" to the talks.