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Abstract
The US Farm Bill of 2002 is the latest in a 7-decade history of farm subsidy
laws that transfer funds to farmers and regulate and subsidize production of
selected commodities. Fruit, tree nut, ornamental and vegetable crops, hay and
meats remain outside scope of main subsidy programs. The new law continues
many innovations of the 1996 Act, such as removal of authority for annual land
idling and crop price floors accompanied by government stockholding. Government
payments remain the primary focus of commodity programs. The total
amount of these payments are likely to remain similar to the amount paid in the
period 1999–2001, but with some changes in the form of the programs. For example,
allowing owners to update acreage and yield payment bases creates additional
incentives for farmers to link current planting decisions to anticipated farm subsidies.
Similarly, the new program that ties “counter-cyclical” payments to the price
of a specific crop also has production stimulus. A new program, estimated to add
about 5–10 per cent to marginal milk revenue for smaller farms, makes ‘deficiency’
payments to dairy farms when milk prices are low. Despite the new programs with
added links to stimulating production, new USA programs stimulate production
only marginally more than the subsidies of the 1999–2001 period, which were
replaced. Furthermore, the USA has flexibility to avoid explicitly violating its
WTO commitments. Nonetheless, this US Farm Bill of 2002 has curtailed the
previous trends toward lower farm subsidies and smaller production stimuli, and
the negative publicity surrounding it has made negotiating reductions of farm trade
distortions more difficult.