If the U.S. accepts what's on the table now, it would likely break the impasse in the Doha Round negotiations that have been frustratingly slow over the last 10 years.
It would also force major belt tightening by Canada's dairy and poultry farmers who would face the threat of losing their markets unless they scale back prices. Any reduction in prices would come right out of their profit margins. One result would be a decline in quota prices as the least profitable farms would be forced to fold and dump their quota into the market.
There would be gains for Canada's export commodities, such as grains and oilseeds, because a cut in U.S. subsidies would reduce their production and exports. There could, however, also be some increase in wheat, corn and soybean acreage as cotton and sugar beet producers would be looking for alternative crops to grow.
Tim Josling of Stanford University is the economist urging the U.S. to make a deal at the World Trade Organization negotiations in Geneva.
“The deal on the table is by no means bad,” he says in a report prepared to influence politicians crafting a new U.S. Farm Bill for 2013-2017. “And it is unlikely that a better deal will be on the table in a year or two,” he adds.
The U.S. has been holding up an agreement by insisting that Third World countries, especially the “emerging” economies such as China, India and Brazil, reduce their tariffs on American industrial-sector exports and market access for financial products and services.
The Doha Round is supposed to “correct” deficiencies in the previous Uruguay Round that failed to bring agriculture-industry benefits for developing nations.
There is concern by farmers about losing subsidies and facing increased competition from imports.
Josling says these concerns tend to be exaggerated in the U.S. and says many existing programs could survive because they are considered “green” – i.e. doing little to distort trade.
Even if limits or reductions are applied to some U.S. green programs, such as its Direct Payments program, Josling argues farmers may not experience much, if any, pain.
If the negotiations fail to reach a deal by 2013, which is when the new U.S. Farm Bill is to take effect, Josling recommends it contain a “circuit breaker” so it could be amended to bring the U.S. into compliance with the deal that is reached.
