The Bush administration has finally drafted a legislation that aimed at reducing subsidies to farmers by $10 billion over the next five years. The recent proposal also include cutting off payments to wealthy farmers. However, the proposal is subject to approval by Congress. The new legislation would succeed a five-year agricultural authorization, which is due to be expired by the end of this year. Moreover, the amount proposed to be reduced is not in conformity with the level of reduction desired at World Trade Organization.
If congress endorses this proposal it will ward off some trade-distorting payments over which the global trade talks reached a deadlock. It is also likely to mount some pressure on European countries to reduce their farm subsidies. In the meanwhile Brussels immediately started studying the proposal in order to ascertain how this plan could affect trade talks.
Under the fresh proposal the direct payments to farmers would be increased by $5.5 billion, while it would reduce loan payments that have been criticized by other countries alleging it is distorting global trade. The proposal pushes to cut off farm subsidies given to wealthy farmers. According to the fresh proposal, the farm subsidies have been restricted to those farmers whose earning is less than $200,000 a year against the present level cap of $2.5 million. Nevertheless, this would likely to meet stiff challenges in the congress.
The recent restriction is likely to affect around 71,800 farmers out of two million who declared farm income in 2003. However, this proposal has been praised by the leading antipoverty organization Oxfam America as it seeks to cut subsidies to wealthy farmers.
On the other hand, it would escalate pressure on the EU as well to devise a legislation to restrict payments to wealthy farmers. EU has failed in its efforts to cap farm subsidies on the basis of income. The European Commission had earlier proposed such restrictions in 2002 but it failed to come into force as Germany and Britain indicated that they would not support it.
