U.S. Is Playing Shell Game With Subsidies

Once again, farm subsidies have proved harder to kill off than a boll weevil in a cotton patch.

Less than a year ago, developing nations accused Washington of hypocrisy because it preached that other countries should open their markets to U.S. agricultural products but subsidized American farmers at home, giving them an unfair advantage.

“It’s rhetoric,” groused Pedro de Camargo Neto, a Brazilian trade negotiator. “The U.S. says one thing and does another.”

In Africa, the consequences were said to be most serious: Impoverished farmers, especially cotton growers, couldn’t hope to compete against American rivals who relied upon the munificence of Uncle Sam to stay in business.

Outraged at the situation, a group of developing nations walked out of the World Trade Organization negotiations in Cancun, Mexico, last September, causing the conclave to collapse and threatening the long-term round of talks that are aimed at expanding global trade.

But then in Geneva this month, the picture suddenly seemed to brighten. A framework agreement was reached on agriculture amid widespread praise for the U.S.’ willingness to reduce farm subsidy payments by 20%.

So, what exactly changed?

In fact, very little. Despite the hoopla out of Geneva, the U.S. is not poised to lower subsidies much, if at all. Increasingly, American farmers are taking advantage of subsidy programs that would fall outside the scope of the framework agreement and WTO oversight.

In some cases, the U.S. is subsidizing wheat, corn, cotton and rice growers by decoupling the payments from specific crops -- a maneuver that experts call putting the money in the “Blue Box.”

In other cases, Washington is paying farmers for soil conservation and crop research -- another area exempt from WTO rules. This is known as the “Green Box.” And in still other cases, subsidies will continue to be available to U.S. farmers under a de minimus arrangement that exempts 5% of a country’s total agricultural output.

In other words, it’s all a giant shell game, allowing U.S. farmers to reap as much as $50 billion in federal subsidies of one kind or another, according to several experts. That’s a lot of cushion, given that U.S. farmers currently milk the Treasury Department to the tune of about $19 billion.

Lest you think that the developing nations have been hoodwinked here, it’s important to know that they were in on the deal, driven by several different motives.

For starters, by letting the U.S. play games with farm subsidies, other nations “got what they wanted elsewhere,” says Robert Paarlberg, a professor at Wellesley College and coauthor of “Policy Reform in American Agriculture: Analysis and Prognosis.” Among the gains: “permission to continue protecting some of their own ‘special’ farm goods.”

Beyond that, those at the negotiating table were realists, keenly aware of two things: that any larger trade pact must be approved by the U.S. Senate, and that American lawmakers are not about to approve any accord if it risks incurring the wrath of the farm lobby.

As Iowa State University agricultural economist Bruce Babcock notes, with decided understatement, “agricultural interests are very influential” in the corridors of the Capitol. (This helps explain why, after Congress passed the Freedom to Farm Act in 1996, promising to curb subsidies, payments to farmers rose instead -- climbing to a record $23.5 billion in 2000.)

Now that the farm subsidy issue has been put to rest, global trade talks are ready to move forward. Some American farmers -- including California growers of fruits, nuts and vegetables -- stand to benefit from an opening of markets in Asia. Meanwhile, other U.S. industries also could prosper if a final trade deal comes together, including insurance, financial services and entertainment.

Trade is not a one-way street, of course. Many of the 147 countries participating in the trade discussions are eyeing greater access to U.S. markets in textiles and other products.

As for those pesky farm subsidies, you shouldn’t expect much to happen there -- at least beyond the lip service already provided.

A Brazilian lawsuit against U.S. cotton farmers is proceeding at the WTO (separate from the trade talks), and that could eventually push some U.S. producers out of business. But all in all, the handouts from Uncle Sam are sure to keep on rolling, like a tractor across an open field.

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James Flanigan can be reached at jim.flanigan@ latimes.com. For previous columns, go to latimes.com/ flanigan.