The U.S. administration has signaled that the U.S. Farm Bill may concede lower agriculture payments this year to farmers. Enormously swelling budget deficit, the costly war with Iraq and slower growth rate has certainly mounting immense pressure on the U.S. economy at present. If the U.S. lowers its agricultural subsidies, it would be able to offset some its pressure though not significantly. On the other hand, the economy is witnessing a record-high crop prices and the experts feel that if the subsidies are reduced the farmers will not be affected much.
Recently, the European Union has pressurized the bush administration to cut its agricultural subsides in order to resolve differences to reach a trade deal at WTO. The U.S. has maintained that it is holding discussions on the key issues to save Doha round talks. Therefore, if the Farm Bill reduces the agricultural payments this would also help the U.S. to break the deadlock on the world trade talks.
The Bush administration certainly had given it a high priority in their agenda and the speculations were strong that the administration will increase its agricultural handouts. The decision now seems to be turning in a realistic way in the wake of slower economy growth and booming farm sector. However, few incoming democrats were in consistent with the White House on this issue and were urging for more dollars to farmers.
The administration is yet to make a decision on the Farm Bill, but experts are expecting the forthcoming Bill will reduce the subsidies by $7 billion to around $13.5 billion amidst soaring crop prices, growing demand for corn based ethanol and to some extent global draughts. The current bill was passed in the year 2007 when congress decided to increase the subsidies to $7.4 billion a year, 75 percent up from what it was in 1996.
However, in the year 2002 circumstances were evidently different and a whopping increase in subsidies could have been easily made. The year witnessed falling U.S. agricultural exports for straight five years. And the Congress had considerable budget surplus to increase the subsidies without affecting economic growth of the country.
