February 2007 Monthly Trade Commentary

Well another month of negotiations at the WTO and still no major breakthroughs.  The same sticking points remain with the three big players: the U.S. with their domestic agriculture support, the European Union with agricultural tariff issues and India with both industrial and agriculture tariff issues.  Although we’ve heard rumours that discussions between the U.S. and EU have resulted in convergence on some issues it’s still not enough to bring everyone back to the table.  Pascal Lamy, Director General of the WTO, indicated this past month that he would not bring high-level ministers together for another WTO Ministerial unless he’s confident that the meeting will result in success.  I guess we’ll have to settle for “wait and see” for another month!

As WTO negotiations continue, albeit slowly, the USDA wasted no time in revealing their new Farm Bill proposal.  The proposal includes significant changes from previous legislation.  Changing programs like the market based loan rate to use five-year olympic averages (with a maximum loan rate) and making the counter-cyclical program based on average national revenue gives the illusion of payments being “greener”, when in fact they will likely protect American farmers less and still be amber.  The biggest level of savings in the Farm Bill proposal seems to centre on who would receive the subsidies.  The new proposal indicates that if a producer has a total adjusted gross income of $200,000 or more, regardless of the source of income, the producer would not be eligible for commodity program payments, which is substantial considering the previous cap was $2.5 million.  American farm groups have already indicated that they wish to see funding increases, not decreases, in the next five years of agriculture spending.  I’m predicting some heated debate between the U.S. Congress and the USDA!

Enjoy your March,

Clinton Monchuk