Watertown
Daily Times
Copyright © 2001, Watertown Daily Times
Story published Sunday, March 25, 2001
Page B1 Edition: Both Section: Local
DAIRY COMPACT OPPOSITION MAY COME FROM OVERSEAS
Dateline: WASHINGTON
Supporters of the Northeast Interstate Dairy Compact
who consider the Upper Midwest their biggest enemy may want to keep an
eye out to the east - across the Atlantic Ocean.
European countries, and to some extent Australia and
Canada, may try to kill dairy compacts and other U.S. farm programs in
the next round of world trade talks, farm organizations say.
Other countries consider dairy compacts and milk price
supports to be trade-distorting policies that could easily be challenged
at the World Trade Organization. If the United States lost such a
case, it would have to do away with the policies or face even tougher
trade barriers to other countries' markets.
That the United States' domestic farm policies could
be subject to challenges from overseas may seem surprising, but that is
the nature of agricultural trade talks recently. Even the
existence of farmer cooperatives is a risk, some trade experts say,
because Australia and other countries have talked about challenging the
law that made them possible.
Whether the threat is real or perceived, farm groups
say the U.S. government is not taking it seriously enough and could end
up compromising its own farmers' livelihood.
"I pick up no signs from Capitol Hill or the
(Bush) Administration," said A. Mario Castillo, executive director
of the Dairy Trade Coalition, a group of companies and farm
organizations critical of U.S. trade policy on dairy products.
"I pick up nothing that these sorts of challenges are on their
radar screen."
Trade talks on agriculture have been going on for
several months and might not wrap up until 2004. Dairy products are
on of the stickiest issues because milk-producing nations are especially
protective of their farmers, most of whom have small or medium -sized
operations.
United States negotiators want more access to markets
in Europe. But the European Union subsidizes its industry, making
its products cheaper on the world market than U.S. dairy products.
The same is true of New Zealand, one of the world's major dairy
exporters.
At the same time, dairy products from the United
States are generally more expensive than world market prices, except
when the federal government pays exporters the difference through
programs such as the Dairy Export Incentive Program.
But world trade agreements have pared back the DEIP
program.
The willingness of the United States to criticize
other countries' subsidies has fueled attacks on U.S. programs.
Other countries may argue that dairy compacts interfere with the market
by guaranteeing farmers in certain states higher prices, which makes
them produce more milk. More production usually means lower
prices.
Another potential victim, Mr. Castillo said, is the
Capper-Volstead Act, which exempts farmer-owned cooperatives from
anti-trust regulations. The majority of milk in the United States
is sold through cooperatives, which sometimes also act as processors,
selling powdered milk or cheese on international markets.
But because Capper-Volstead Act does not set up price
supports, the U.S. Department of Agriculture considers it safe.
"We don't see a problem," said James D.
Grueff, assistant deputy administrator for international trade at the
Foreign Agricultural Service.
Mr. Grueff acknowledged that the next round of trade
talks could yield new definitions of what is considered trade-distorting
and other countries could try to fit that definition to laws like Caper-Volstead.
The Australian Embassy has no information on potential
challenges to the Capper-Volstead Act, but an official there said
Australia does consider dairy compacts trade-distorting.
In addition to Australians, Dutch and Canadian
negotiators have targeted U.S. farm programs, as have European nations
generally, Mr. Castillo said.
On compacts and cooperatives, foreign countries might
find allies in U.S. food companies. Milk bottlers have long
opposed dairy compacts, which raise their costs of buying milk.
And many dairy processors believe the Capper-Volstead Act gives an
unfair advantage to farmer-owned cooperatives that also make and sell
cheese or butter, say people close to the industry.
A spokeswoman for the International Dairy Foods
Association, which represents dairy processors, did not return calls
seeking comment. But the industry has generally supported
loosening trade barriers.
The uncertainty in Geneva, where the talks are
conducted, could also complicate Congress's drafting of a new farm bill
next year. Lawmakers are grappling with how to uphold a farm
safety net while not abandoning the spirit of the 1996 "Freedom to
Farm" package that did away with most price supports.
James P. Eichstadt, a dairy cooperative executive in
Wisconsin who advises Mr. Castillo's group on dairy policy, said
disaster assistance payments to farmers could be at risk as well.
Mr. Eichstadt said the USDA's Economic Research
Service reported recently that emergency aid, crop insurance and loan
deficiency payments all affect farm production, since farmers account
for those programs in deciding how much to plant. But that
acknowledgement plays into the hands of countries that would challenge
U.S. farm policies, he said.
"Our own team is sticking a knife in our
back." Mr. Eichstadt said.
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