Nut Negotiations.

first_imgA federal program that anchorsa major part of Georgia’s farm economy is currently under fireas the United States prepares its future farm policy to complywith freer trade in the world.Since the 1930s, the U.S. government has run a peanut programthat controls domestic supply and demand through a quota and pricesupport system.In the past, this program had little effect on world trade, andworld trade had little effect on it, said Nathan Smith, an economistwith the University of Georgia Extension Service.Going to Change The World Trade Organization believes government subsidies distortfree world trade, Smith said.WTO considers a domestic program a “trade distorter”if it supports the number of acres of a commodity planted or theamount or price of the crop.Even though the current peanut program is considered a no-net-costprogram, the WTO says it’s a barrier against open world trade.The peanut program costs the United States in trade negotiations.”The WTO says the current program distorts world trade by$347 million,” Smith said.Under WTO rules, the United States has agreed to limit its spendingon agricultural trade-distorting programs to $19.1 billion. Thisis referred to as “amber box” spending, which includesthe current peanut program, Smith said.In WTO terminology, different types of spending go into different color boxes. Spending that distorts trade goes into the amber box. Spending that does not distort trade goes into a green box.Peanut Proposals The U.S. peanut industry is considering two major proposals.One proposes to stimulate the purchase of U.S. peanuts in theworld market. Peanuts would receive a price support similar tothe current program, Smith said. Processors would buy U.S. peanutsat the world price, and the government would make up the differencebetween the domestic price and the world price.”This program would modify the current program but not moveit out of the amber box,” Smith said.A second program would be a marketing loan option. Other majorU.S. crops such as corn and cotton are under this type of program.The government would still make payments to compensate for worldprices. But the program would not be tied to production controland would fit under WTO trade rules, Smith said.Whatever the outcome, he said, Georgia peanut farmers can expectchanges in the federal program that has governed their industryfor a long time. “But the peanut program doesn’t fit with the current (U.S.)trade policies,” Smith said. “The program is going tochange. But by how much? That’s the question right now.”Any changes to the current peanut program will affect Georgia’seconomy, Smith said. Peanuts contribute about $400 million a yearto Georgia’s farm economy and about $800 million in economic activityfor the state. Georgia grows about 40 percent of U.S. peanuts.It will be another year and half before the next farm bill isimplemented. But the House Agricultural Committee is now preparingthe part that will affect the peanut program, Smith said. Theyhope to have the basis ironed out by June.How will a domestic peanut program fit into a farm bill that encouragesmore open world trade?Competing with The World Unchecked free trade would hurt the domestic peanut industry,Smith said. High tariffs keep the U.S. peanut market from beingflooded by foreign peanuts. But these tariffs will be loweredin the future and allow more peanuts to be imported.The Free Trade Areas of America recently met in Canada to discussfurther expansion of free trade for all of the Western Hemisphere.This agreement includes open trade with peanut-producing countriessuch as Argentina and Nicaragua.Farmers in these countries have much lower input costs than U.S.growers have. They can sell their peanuts cheap. “And thosecountries would have access to our market,” Smith said. Peanutfarming in Georgia would be cut drastically.Trade Distorterlast_img

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