A federal program that
anchors
a major part of Georgia's farm economy is currently under fire
as the United States prepares its future farm policy to comply
with freer trade in the world.
Since the 1930s, the U.S. government has run a peanut program
that controls domestic supply and demand through a quota and
price
support system.
In the past, this program had little effect on world trade, and
world trade had little effect on it, said Nathan Smith, an
economist
with the University of Georgia Extension Service.
Going to Change
"But the peanut program doesn't fit with the current (U.S.)
trade policies," Smith said. "The program is going to
change. But by how much? That's the question right now."
Any changes to the current peanut program will affect Georgia's
economy, Smith said. Peanuts contribute about $400 million a year
to Georgia's farm economy and about $800 million in economic
activity
for the state. Georgia grows about 40 percent of U.S.
peanuts.
It will be another year and half before the next farm bill is
implemented. But the House Agricultural Committee is now
preparing
the part that will affect the peanut program, Smith said. They
hope to have the basis ironed out by June.
How will a domestic peanut program fit into a farm bill that
encourages
more 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 being
flooded by foreign peanuts. But these tariffs will be lowered
in the future and allow more peanuts to be imported.
The Free Trade Areas of America recently met in Canada to discuss
further expansion of free trade for all of the Western
Hemisphere.
This agreement includes open trade with peanut-producing
countries
such 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 those
countries would have access to our market," Smith said.
Peanut
farming in Georgia would be cut drastically.
Trade Distorter
The World Trade Organization believes government subsidies
distort
free world trade, Smith said.
WTO considers a domestic program a "trade distorter"
if it supports the number of acres of a commodity planted or the
amount or price of the crop.
Even though the current peanut program is considered a
no-net-cost
program, 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
spending
on agricultural trade-distorting programs to $19.1 billion. This
is referred to as "amber box" spending, which includes
the 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 the
world market. Peanuts would receive a price support similar to
the current program, Smith said. Processors would buy U.S.
peanuts
at the world price, and the government would make up the
difference
between the domestic price and the world price.
"This program would modify the current program but not move
it out of the amber box," Smith said.
A second program would be a marketing loan option. Other major
U.S. crops such as corn and cotton are under this type of
program.
The government would still make payments to compensate for world
prices. But the program would not be tied to production control
and would fit under WTO trade rules, Smith said.
Whatever the outcome, he said, Georgia peanut farmers can expect
changes in the federal program that has governed their industry
for a long time.
Published on 05/04/01
Georgia Farmers Eye Peanut Program Change
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