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Monday, 13 May, 2002, 20:41 GMT 21:41 UK
Outrage as US farm handout agreed
Montana cornfield
US farmers' gain could be trade talks' loss
President George W Bush has signed into law a bill awarding US farmers as much as $190bn in subsidies over the next decade.

The bill, which boosts spending on US farm subsidies by up to 80%, was described by Mr Bush as promoting a sector "essential to the success of the American economy".

"This bill is generous and provides a safety net for farmers," he said in an early-morning ceremony designed to make it onto newscasts in farming communities.

"It will do so without encouraging overproduction and depressing prices."

'Budget buster'

But the legislation has provoked outrage from international trade partners angry that the US again seemed to be undermining in its actions the free trade credentials it has, in its words, promoted.

And even some members of Mr Bush's own Republican party had urged the president to veto the bill, which will increase a budget deficit already swollen by defence commitments following the 11 September terror attacks.

The legislation is estimated to add $6.4bn a year to US crop and dairy spending.

"It is a budget buster," said Republican senator Don Nickles, who contested the claim that the bill would not encourage overproduction, and predicted it would eventually force farm prices down.

"I don't think that helps farmers in the long run," he said on Sunday.

'Bringing certainty'

The law, the latest in a regularly updated series of farm bills, raises crop subsidies, increases conservation spending by 80%, and restores food-stamp eligibility to legal immigrants in the US for five years.

The legislation guarantees annual payments to growers, and allows them to keep the difference between their selling price and the federally set minimum crop prices.

The bill was "huge in terms of bringing certainty to uncertain times", said Ron Warfield, Illinois Farm Bureau president.

Bad precedent

But countries including Australia, Brazil and Canada, and the European Union, have complained that the legislation undermines US free trade credentials already tarnished by the implementation of tariffs on steel imports.

Australia's prime minister, John Howard, said he would be seeking concessions.

And Donald Johnston, secretary general of the Organisation for Economic Co-operation and Development, said the subsidies would dissuade other countries from cutting their own subsidies and tariffs.

The European Union has come under considerable pressure to reform its own farm subsidy regime.

"There has been much pressure put on some of our member countries... to liberalise markets and reduce subsidies," Mr Johnston said.

"So the fact of increasing subsidies in the US I don't think is going to encourage other countries to liberalise as we have been recommending consistently."

Political considerations

He also noted that the extra spending was coming in an election year, in which the Republican party is desperate to regain control of the Senate.

The US farm states are seen as key election battlegrounds.

"Politicians have to get elected and are constantly weighing what might be right against what might be practical in terms of the current political scene," he said.

"That's what's happening obviously in the US. It's very clear that there are political decisions being made here."

His comments were echoed by Indiana senator Richard Lugar, a Republican, who warned that the bill put election year-imperatives "to try to help individual senator and house members" before sensible policy making.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Steve Kingstone
"The market in world farming feels a little less free"
See also:

10 May 02 | Business
Anger greets US farm aid
03 May 02 | Business
US farm aid threatens new trade row
02 May 02 | Business
EU-US trade tensions rise
29 Apr 02 | Business
US farm bill raises trade tensions
14 Jan 02 | Business
Q&A: US-EU trade war
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