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Monday, 29 April, 2002, 19:54 GMT 20:54 UK
US farm bill raises trade tensions
A storm moves through a western Kansas wheat field near the town of Montezuma.
The new US farm bill is causing a storm of controversy
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David Schepp
BBC News Online's North America Business Reporter
line

The US Congress is set to pass a wide-ranging farm bill that will cost American taxpayers $100bn (68.6bn) and has ignited a firestorm of criticism from one of its staunchest allies.


The US has clearly abrogated its leadership on the issue of world trade in agriculture

Warren Truss, Australian agricultural minister
The measure, which President George W Bush is expected to sign into law, will help boost cotton and grain farmers' income at a time of record-low prices for commodities.

Australia is fuming over the proposed subsidies, which it fears will further depress commodity prices around the world.

Among Pacific Rim nations, Australia has much to lose, with 30bn Australian dollars ($16.16bn, 11.08bn) worth of farm exports at stake.

It plans to challenge the US plan through the World Trade Organisation (WTO) and is currently reviewing its strategy for doing so.

Big bill

"We're extremely disappointed," said Warren Truss, Australia's agricultural minister, of the bill. "The US has clearly abrogated its leadership on the issue of world trade in agriculture."

Australia and the US both enjoy lucrative export markets in Asian nations for wheat and cotton. But the bill is also seen as hurting Australian sugar exports, too.

IMF Managing Director Horst Koehler
Koehler says developed nations must end subsidies
The proposal would result in $4.8bn annually in subsidies to US farmers over the next six years.

The new farm bill replaces one passed by Congress in 1996 called the Freedom to Farm Act, which sought to effectively end taxpayer-backed subsidies to the nation's farmers.

When it was signed into law by then-President Bill Clinton, the Act changed the relationship between the federal government and farmers, ending decades of subsidies that paid farmers to idle their land, among other forms of support.

Shortly after the implementation of the Freedom to Farm Act, however, worldwide commodity prices began a freefall. The federal government stepped in with huge bailouts to help ailing farmers with the effect of running up the federal deficit.

Protectionism

This latest row over international trade threatens for a third time to portray the Bush administration as protectionist, following recent decisions by the US president to impose stiff tariffs on steel imports and softwood lumber from Canada.

Some have accused Washington of talking out of the both sides of its mouth at once - promoting trade as a way to stem global poverty while instituting duties on some imports.

"Every day we go without expanding trade is another day of missed opportunities to strengthen our economy," Mr Bush said in his weekly radio address on Saturday.

US barn and silo
Farm subsidies would rise by $4.8bn a year
The president is keen on getting trade promotion authority, or fast track, to facilitate his ability to make trade deals.

Double standards

The US and other western nations have come under harsh criticism in recent months for agricultural and industry subsidies by International Monetary Fund (IMF) Managing Director Horst Koehler.

At the recent springs meetings of the IMF and its sister organisation, the World Bank, Mr Koehler reiterated his opposition to government support in developed countries, calling it "unconscionable".

During his travels to developing countries, Mr Koehler told reporters gathered at the National Press Club it pains him to hear complaints about double standards in trade policy.

He advocates for fewer subsidies in agriculture, textiles, cotton and citrus fruits, among other areas.

"I am appealing to the rich countries - open your markets," he said. "At the end, it will pay off for the American people."

See also:

19 Apr 02 | Business
World Bank calls for more trade
26 Mar 02 | UK Politics
Prime Minister hosts 'food summit'
29 Jan 02 | UK Politics
Farming faces major shake-up
14 Jan 02 | Business
IMF chief calls for open markets
19 Dec 01 | Business
US farm subsidy sparks fresh row
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