WTO Doha Round: Implications for U.S. Agriculture

Randy Schnepf
Specialist in Agricultural Policy

Charles E. Hanrahan
Senior Specialist in Agricultural Policy

The Doha Round of multilateral trade negotiations, launched in November 2001, is now in its 10th year. The goal of the agriculture negotiations is to make progress simultaneously across the three pillars of the World Trade Organization’s (WTO’s) 1994 Agricultural Agreement—domestic support, market access, and export competition—by building on the specific terms and conditions established during the previous Uruguay Round of negotiations. Negotiators are aiming to restrict the use of domestic and export subsidies, while expanding market access for farm products among all WTO member countries. However, as a concession to poorer WTO member countries, the degree of new conditions is to be less stringent for developing than for developed nations.

By early 2008, substantial progress had been made in the Doha Round negotiations in narrowing or resolving differences in negotiating positions. As a result, a WTO Ministerial Conference was held in Geneva during July 21-29, 2008, in hopes of resolving the remaining differences. However, the Ministerial failed to narrow the gap on the most contentious issues.

To revive the negotiations before momentum was lost, the chair of the WTO’s Committee on Agriculture released a draft text in December 2008, referred to as a “modalities framework” (i.e., specific formulas and timetables for reducing trade-distorting farm support, tariffs, and export subsidies, and for opening import markets). The draft modalities framework summarized the current mutually agreed changes to existing disciplines, as well as highlighting the areas of disagreement. As such, the 2008 modalities draft was an attempt to lock in the status of current negotiated concessions, while adding detail to outstanding issues and providing a basis for further, more specific talks.

Doha Round negotiations proved inconclusive in 2009. In 2010, however, the chair of the agriculture negotiating group reported that progress had been made in narrowing outstanding differences to a short list of highly contentious issues including designating additional products as sensitive coupled with establishing new tariff quotas, designating developing country products as special and thus exempt from tariff reductions, and allowing developing countries to raise tariffs temporarily to deal with import surges or price declines. During 2009 and 2010, U.S. trade negotiators, members of Congress, and commodity groups have expressed concern that the draft modalities included too many exceptions for foreign importers to ensure that an adequate balance could be achieved between U.S. domestic policy concessions and potential U.S. export gains.

To address the outstanding issues, the U.S. Trade Representative, Ambassador Kirk, has insisted that the multilateral negotiations in the Doha Round be supplemented with sustained direct bilateral engagement on agriculture and other negotiating areas, especially with such economically advanced “developing countries” as Brazil, India, China, and South Africa. As negotiations get underway in 2011, the WTO Director-General has called for accelerating the pace of bilateral talks so that a multilateral agreement could be reached in 2011, and legal texts could be submitted to WTO member country governments for approval in 2012.

This report reviews the current status of agricultural negotiations for domestic support, market access, and export subsidies, and the potential implications of a Doha Round agreement for U.S. agriculture.


Date of Report: February 2, 2011
Number of Pages: 13
Order Number: RS22927
Price: $29.95

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Previewing the Next Farm Bill: Unfunded and Early-Expiring Provisions

Jim Monke
Specialist in Agricultural Policy

The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) authorizes most federal farm and food policies. It also provides the mandatory funding for many farm bill programs, including the farm commodity programs and some nutrition, conservation, research, bioenergy, and rural development programs. Funding to write the next farm bill will be based on the baseline projection of the cost of these farm bill programs by the Congressional Budget Office (CBO), and on varying budgetary assumptions about whether programs will continue.

Some farm bill programs have baseline beyond the end of the 2008 farm bill, while others do not. Thirty-seven programs that received mandatory funds during the 2008 farm bill are not assumed to continue from a budgetary perspective because they do not have a budgetary baseline beyond FY2012. If policymakers want to continue these programs in the next farm bill, they will need to pay for the programs with other offsets. Depending on the approach used to estimate a cost to extend the 37 programs for five years, $9 billion or $10 billion of offsets from other sources may be needed. This is about 4% of the $283 billion five-year total cost of the 2008 farm bill when it was enacted, or 11% of the approximately $100 billion five-year cost if the nutrition title is excluded. Finding this level of offsets may be a difficult task in a tight budget environment, especially when many observers believe that the next farm bill might be written within the confines of the existing baseline.

The 37 provisions without baseline beyond FY2012 are spread among 12 of the 2008 farm bill’s 15 titles. The title with the most such provisions is the energy title (8), followed by conservation (5), nutrition (5), and horticulture and organic agriculture (5). Just three provisions—the agricultural disaster assistance program, the Wetlands Reserve Program, and the Biomass Crop Assistance Program, each with uncertainty about its future cost—account for nearly 75% of the $9 billion or $10 billion total.

The 2008 farm bill’s authorizations generally expire at the end of FY2012, or with the 2012 crop year for the farm commodity programs. Separate from the funding issue, six farm bill provisions have an expiration date before the end of FY2012. These include the new supplemental agricultural disaster assistance program, and the suspension of term limits that allows some farmers to continue receiving guaranteed farm operating loans. Some tax provisions that are outside the jurisdiction of the agriculture committees were included in the farm bill and also expire early, including a conservation tax deduction and the tariff on imported ethanol.


Date of Report: January 25, 2011
Number of Pages: 16
Order Number: R41433
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Deregulating Genetically Engineered Alfalfa and Sugar Beets: Legal and Administrative Responses

Tadlock Cowan
Analyst in Natural Resources and Rural Development

Kristina Alexander
Legislative Attorney

Monsanto Corporation, the developer of herbicide-tolerant varieties of genetically engineered (GE) alfalfa and sugar beet (marketed under the name of Roundup Ready alfalfa and Roundup Ready sugar beet), petitioned USDA’s Animal and Plant Health Inspection Service (APHIS) for deregulation of the items. Deregulation of GE plants is the final step in the commercialization process. Monsanto filed a petition for deregulation of its GE alfalfa in 2004, and for sugar beets in 2005.

As part of the deregulation process, APHIS conducts an environmental review under the National Environmental Policy Act (NEPA) to determine whether any significant environmental impacts will result from deregulating the item. APHIS conducted a limited review, known as an environmental assessment (EA), of the GE plants to assess the impacts of growing them on a commercial scale. For both GE alfalfa and sugar beets, APHIS issued a “finding of no significant impacts” (FONSI), in June 2005 and March 2005, respectively.

Lawsuits subsequently challenged the adequacy of the EAs as the basis of the FONSI. The courts agreed that APHIS should have prepared an environmental impact statement (EIS) for both deregulation decisions. APHIS was directed by the court to complete an EIS on the effects of deregulating both of the GE varieties.

The court in the GE alfalfa case halted planting of the genetically modified seed after May 3, 2007, and nullified the deregulation. The injunction was appealed to the U.S. Supreme Court, which held that the injunction was too broad and that the court should have considered partial deregulation. The Supreme Court did not discuss the appropriateness of the environmental review.

The court in the GE sugar beet case did not formally prohibit planting sugar beet, but it voided APHIS’s deregulation decision in August 2010. This decision undoes the five-year-old approval of GE sugar beet, from which nearly half of U.S. sugar is derived. APHIS announced on September 1, 2010, that the agency is evaluating a request to partially deregulate GE sugar beets, which would permit planting and harvesting sugar beets under certain restrictions. APHIS issued four permits authorizing seedling production that would not allow flowering or transplanting without additional authorization. In December, a judge ordered those seedlings pulled from the ground, holding that APHIS had violated NEPA in issuing the permits. This ruling was put on hold by the Ninth Circuit.

APHIS anticipates that the draft EIS for sugar beet will be publicly available May 2011, and the final EIS in May 2012. A draft EIS for alfalfa was released to the public on December 14, 2009. The final EIS was released on December 16, 2010. APHIS announced no final decision on approval of the GE alfalfa, although the agency stated that it supports either a complete deregulation or a partial/conditional deregulation that would permit the crop to be grown under geographic restrictions and isolation distances.

The cases of GE alfalfa and sugar beet highlight continuing policy questions about the adequacy of APHIS’s deregulation protocol, particularly regarding the environmental review process. In their suits against APHIS, plaintiff lawyers cited the EAs’ failure to assess the impact on non-GE alfalfa growers (particularly those who export to Japan, Korea, and Taiwan) and on producers of commercial table beet and chard seeds (species that can cross-pollinate with GE sugar beet).


Date of Report: January 18, 2011
Number of Pages: 17
Order Number: R41395
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Agriculture-Based Biofuels: Overview and Emerging Issues

Randy Schnepf
Specialist in Agricultural Policy

Since the late 1970s, U.S. policymakers at both the federal and state levels have enacted a variety of incentives, regulations, and programs to encourage the production and use of agriculture-based biofuels. Initially, federal biofuels policies were developed to help kick-start the biofuels industry during its early development, when neither production capacity nor a market for the finished product was widely available. Federal policy has played a key role in helping to close the price gap between biofuels and cheaper petroleum fuels. Now, as the industry has evolved, other policy goals (e.g., national energy security, climate change concerns, support for rural economies) are cited by proponents as justification for continuing policy support.

The U.S. biofuels sector has responded to these government incentives by expanding output every year since 1996, with important implications for the domestic and international food and fuel sectors. The production of ethanol (the primary biofuel produced in the United States) has risen from about 175 million gallons in 1980 to an estimated 13.2 billion gallons per year in 2010. U.S. biodiesel production, albeit much smaller, has also shown strong growth, rising from 0.5 million gallons in 1999 to 678 million in 2008 before declining to an estimated 327 million in 2010.

Despite this rapid growth, total agriculture-based biofuels production accounted for only about 5% of total U.S. transportation fuel consumption (on a gasoline-equivalent basis) in 2010. Federal biofuels policies have had costs, including unintended market and environmental consequences and large federal outlays (estimated at over $7 billion in 2010). Despite the direct and indirect costs of federal biofuels policy and the relatively small role of biofuels as an energy source, the U.S. biofuels sector continues to push for greater federal involvement. But critics of federal policy intervention in the biofuels sector have also emerged.

Current issues and policy developments related to the U.S. biofuels sector that are of interest to Congress include the following: 

• Many federal biofuels policies (e.g., tax credits and import tariffs) require routine congressional monitoring and occasional reconsideration in the form of reauthorization or new appropriations funding
• The 10% ethanol-to-gasoline blend ratio—known as the “blend wall”—poses a barrier to expansion of ethanol use. The Environmental Protection Agency (EPA), issued waivers to allow ethanol blending of up to 15% (per gallon of gasoline) for use in model year 2001 and newer light-duty motor vehicles. However, the limitation to newer vehicles, coupled with infrastructure issues, is likely to limit rapid expansion of blending rates
• The slow development of cellulosic biofuels has raised concerns about the industry’s ability to meet large federal usage mandates, which, in turn, has raised the potential for future EPA waivers of mandated biofuel volumes and has contributed to a cycle of slow investment in and development of the sector
• Several trade issues (including Chinese anti-dumping charges against an ethanol by-product and threats of a WTO dispute case against the U.S. ethanol import tariff from Brazil’s main sugar cooperative) have emerged in early 2011 that, if realized, could slow further development of the U.S. biofuels sector.

Date of Report: January 24, 2011
Number of Pages: 37
Order Number: R41282
Price: $29.95

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Agricultural Credit: Institutions and Issues

Jim Monke
Specialist in Agricultural Policy

The federal government has long provided credit assistance to farmers, in response to insufficient lending in rural areas or a desire for targeted lending to disadvantaged groups. One federal lender is the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA). It issues direct loans to farmers who cannot qualify for regular credit, and guarantees repayment of loans made by other lenders. Thus, FSA is called a lender of last resort. Of about $240 billion in total farm debt, FSA provides about 2% through direct loans, and guarantees about another 4%-5% of loans. Another federally related lender is the Farm Credit System (FCS), a cooperatively owned, federally chartered lender with a statutory mandate to serve agriculture-related borrowers. FCS makes loans to creditworthy farmers, and is not a lender of last resort. FCS accounts for about 40% of farm debt. Commercial banks are the largest farm lender and hold 44% of total farm debt.

While the global financial crisis that escalated in 2008 was slower to affect agricultural balance sheets than the housing market, it has begun to take its toll. Net farm income fell by 30% in 2009, reducing some farmers’ ability to repay loans—particularly among dairy, hog, and poultry farms. But farm income rebounded by one-third in 2010, to near record levels. Delinquency rates (loans that are more than 30 days past due) on residential mortgages began to rise in 2005, but delinquency rates for agricultural loans did not begin to rise until mid-2008 and have not risen as quickly. The delinquency rate on residential mortgages may have peaked at 11.3% in June 2010; it reached 3.4% for agricultural loans in September 2010.

Because of the financial turmoil, the USDA farm loan program has seen significantly higher demand. In FY2010, FSA had $6 billion of authority for loans and guarantees, up from $3.4 billion a few years ago. An FY2010 supplemental appropriation added over $950 million in loan authority to a $5.1 billion regular loan authority. The FY2011 appropriation proposed by the Senate in the 111th Congress would have provided $5.4 billion of loans and guarantees to help to forestall as much need for a supplemental if loan demand remains high.

Term limits have been part of the USDA farm loan program since 1992. They encourage farmers to graduate to commercial loans by placing a maximum number of years that farmers are eligible. However, Congress had suspended application of the guaranteed operating loan term limit to prevent some farmers from being denied credit. At the end of 2010, Congress let that suspension expire, and now the term limit statute is being applied. USDA says that 4,200 borrowers in 2010 had reached the limit and would not qualify for more loans. The 2008 farm bill had renewed a prior suspension of this term limit, but only through 2010. Two bills in the 111th Congress (S. 3221 and H.R. 6418) would have extended the suspension of term limits for two more years.

Also, because of the financial crisis and debt repayment problems, farmers’ use of mediation services has increased. USDA has a grant program that provides matching funds through the states to mediators. This $4 million program was reauthorized through FY2015 (P.L. 111-233).

Finally, FCS is seeking to expand its authority through a broader list of permissible investments. The 2008 farm bill did not expand FCS’s lending authority, but a proposed rule would allow FCS to “invest” through bonds or other assets to finance certain rural infrastructure, housing facilities, and rural business investment companies. Under statute, FCS cannot be a lender to these nonfarm entities. Disposition of the proposed rule awaits action by the Farm Credit Administration (FCA), the federal regulator. FCA’s fall 2010 regulatory agenda listed the rule as “undetermined” and did not anticipate a decision. Congress does not have a role in this regulatory decision.


Date of Report: January 27, 2011
Number of Pages: 21
Order Number: RS21977
Price: $29.95

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