Ag Policy Wrap-up - Dr. Larry Sanders, Oklahoma State University

1. Trade and the economy are issues in the news that may affect agriculture & agricultural policy. Let’s talk trade first.

–We noted here last week that the Bush Administration was reviewing trade agrements for impacts.
–Now the Administration has told several countries that the US will impose trade sanctions if they don’t lift/relax trade barriers.
–Primary countries include Japan, South Korea and Brazil
–Super 301 is a provision that permits us to sanction countries that don’t remove targeted trade barriers.
–While agriculture is likely to benefit from a more level playing field, these attacks sometimes backfire when offending countries consider the claims unjustified, and trade wars could result.

2. These warnings follow the President’s trip to Quebec and Senate hearings on trade last week. Any connections?

–The President did just return from Quebec where he committed us to seeking a new hemispheric trade agreement–Free Trade Area of the Americas.
–The sanction report is an annual process, but its timing may signal an attempt to let the other countries in South America know we intend to negotiate tough.
–The Senate Ag Committee also review trade and trade policy last week, probably unrelated to the Bush warnings on sanctions.
–The Committee heard from farm groups, experts and trade groups.
–Most panelists at the hearing pushed for more free trade and market access.
–National Farmers Union spoke in favor of market access, but cautioned that it is not a cureall, and want food security and policy flexibility to be protected and maintained.

3. Let’s move to news on the general economy. Some surprising good news to report?

–That’s right. Figures released this past week show the economy grew faster than thought for the first quarter of 2001.
–Most analysts thought the economy was going into a recession with negative growth or, at best, about 1% growth.
–Federal data, however, shows the growth was about 2%, primarily because of consumer spending.
–While that’s nothing like the 4+% we’ve seen the past several years, it will cause the Fed to reconsider interest rate cuts in the near term, and likely limit the next cut to a half percent.
–So, the recent settling of rates may stick for awhile.
–Also, Commerce Dept figures show that income rose in March about 0.2% adjusted for inflation.
–On the international level, the IMF endorsed a program to improve procedures to step in and avoid any repeat of the 97-98 Asian currency crisis.
–This reduces the likelihood that foreign economic crises will have major global economic impacts.

4. Congress also seems to be moving toward a compromise on the budget and tax cuts. Who seems to be winning and what’s the impact on agriculture?

–Congressional Republican leaders and Bush have agreed to a $1.25 trillion tax cut over the next 10 years, much less than the $1.6 trillion originally sought by Bush.
–An additional $100 million in immediate tax relief aid may also move forward.
–It is by no means a done deal, with fiscal conservative Republicans wanting $2 trillion, and many Democrats wanting a more modest $1 trillion.
–But it’s a compromise that could capture a majority in both the House and Senate.
–This sets the stage for estimating how much will be left for the agriculture budget.
–The President’s targets for agriculture will probably be modestly increased by Congress, and the Congressional targets for emergency aid may be more likely.

5. The House Ag Committee continued their hearings to take input on the next farm bill. What’s the latest?

–The sugar industry provided its wish list to the committee.
–The sugar producers called for:

(1)    maintain the nonrecourse sugar loan;
(2)    retain USDA authority to limit imports with tariff-rate quota system;
(3)    operate sugar program as close to no net cost as possible;
(4)    resume government-administered inventory management
(5)    eliminate the sugar marketing assessment fee for 2002 & 2003.

–The Committee is also hear from the fruit, vegetable and honey industries this week.

6. Secretary Veneman also spoke to Congress last week. Did she give them support for the budget?

–In speaking to the House Ag Appropriations Subcommittee, she indicated some cuts are planned and gave no information on emergency aid.
–She says the President remains committed to staying within the recommended budget.

7. Congress:

a. Recent/Current:

–House Ag Committee reviews farm programs with the sugar industry (26 Apr)
–House Appropriations Ag Subcommittee FY2002 hearing with USDA Secretary (26 Apr)

b. Upcoming:

–House Ag Committee reviews farm programs with fruit, vegetable & honey industries (2 May)
–House Ag subcommittee reviews energy impacts on ag sector (2 May)
–House Ag Committee reviews farm programs with National Farmers Organization (3 May)
–Senate Ag Appropriations subcommittee FY2002 budget hearings for ag/related agencies:
–production assistance & farm economy (3 May)
–FDA, DHHS (10 May)
–House Appropriations Ag Subcommittee FY2002 hearing schedule:
–FNS (2 May)
–House Ag Committee review FTAA potential w/Secretary Veneman & USTR Robert Zoellick (23 May)

c. Congressional Calendar:

--As of 7 May, about 58 weekdays remain in this Congressional session.

May 25 - June 4 Memorial Day District Work Period

May 28 Memorial Day

June 14 Flag Day

June 30 - July 8 Independence Day District Work Period