Massive US farm bill faces Bush veto, may impact WTO talks

WASHINGTON (AFP) - A massive US farm bill packed with consequences for global trade is moving through the Democratic-controlled Congress in the face of a veto threat by President George W. Bush.

The House of Representatives is poised to vote on the multibillion-dollar five-year plan that provides the safety net for farmers and ranchers, governing the amount of subsidies and aid available and a raft of other provisions, such as nutrition and conservation programs.

Bush's Republican administration has been threatening to veto the legislation, partly over what it says are high subsidies, a major stumbling block in the Doha Round of global trade negotiations.

Some observers suggest the threat may be difficult to deliver on, considering the already heated political maneuvering for the 2008 presidential race.

Still, the veto threat was renewed Wednesday after a House panel signaled it wanted to raise taxes on some foreign-owned companies with US subsidiaries in order to partly fund government nutrition programs.

The proposed tax hikes, anathema to Republicans, drew blistering fire.

"I find it unacceptable to raise taxes to pay for a farm bill that contains virtually no reform," Agriculture Secretary Mike Johanns said.

"Myself and the president's entire team of senior advisers will recommend that he veto this bill if it is adopted in its current form. We are unanimous on this point."

The estimated 286-billion-dollar measure was approved last week by the House Agriculture Committee after wrangling to get bipartisan support.

Agriculture Committee chairman Collin Peterson said the bill delivers "significant reform" and strikes "the balance necessary" to ensure that farmers' "safety net is still strong and secure."

The pressure is on to approve the 2007-2012 measure as the current bill expires on September 30, the end of the government's fiscal year.

The bill was taken up by the House late Thursday, but it was not clear when it would come to a vote. Congress adjourns on August 3 for its summer recess and reconvenes in September.

If approved by the House, the legislation must be reconciled with a Senate counterpart before the measure is presented to the president for signing.

Among the most difficult issues to resolve is farm subsidies, which prompted a revolt among 22 developing countries, stalling the Doha Round of World Trade Organization negotiations.

Under the current farm bill, government subsidies are paid to farmers with incomes of up to 2.5 million dollars per year.

The House bill would cut that cap to one million dollars annually and eliminate limits on some loans.

The Bush administration says the subsidy reduction falls far short. It had sought an income cap of 200,000 dollars, averaged over three years. Republicans argue that the House bill would deprive about 7,000 farmers of subsidies, compared with the 38,000 that would
be affected by their proposal.

"The House bill actually takes a step backward, creating farm policy that is less responsive to the free market, and it paints an even larger bull's eye on the backs of American farmers when it comes to international trade," said Johanns.

The Bush administration is under fierce pressure to help unblock the WTO Doha Round, launched in the Qatari capital nearly six years ago and aimed at lowering trade barriers and encouraging development.

Developing nation critics of farm subsidies say they allow developed countries to dump excess production on world markets at an unfairly low cost, depriving many developing and poor countries of strengthening their own farm-sector exports.

The United States and the European Union, also known for lavish farm subsidies, have given a lukewarm response to the latest WTO proposals to cut farm subsidies.

"We would underscore that, while we have indicated that we are prepared to offer more on OTDS (Overall Trade Distorting Support), our ability to make further cuts depends upon securing significant real increases in market access," the US ambassador to the WTO, Peter Allgeier, said.