Even the most optimistic Chesapeake Bay restoration advocate is beginning to understand that the federal government is not going to come up with the $15 billion or $20 billion in Bay restoration funds that were recommended by the Chesapeake Bay Blue Ribbon Finance Panel. New strategies are clearly needed.
Recently, the Bay restoration community, led by the Chesapeake Bay Foundation, announced a new strategy that involves a major about-face in the way they plan to deal with the most significant and most complicated source of Bay problems, agriculture.
Instead of using political and legal pressure to coerce agriculture to be less harmful to the Bay, the new strategy involves collaborating with agriculture in political efforts to increase the region’s share of the $15 billion in federal subsidies that are paid out to U.S. farmers every year. An environmental payoff will result because farmers, presumably, will spend at least some of their increase in payments on projects to reduce their impacts on the Bay.
At first glance, it seems like an opportune time to initiate such a strategy. In 2006, the World Trade Organization will begin enforcing trade rules that require member nations to eliminate farm subsidies that are “trade distorting.” Most conventional U.S. farm subsidies are tied to agricultural production or commodity prices and are viewed by the WTO as being trade distorting.
“Green payments” made to farmers to reimburse them for implementing practices that improve the environment are not. This is viewed as good news by environmentalists because it means that unless Congress wants to eliminate farm subsidies altogether or face stiff WTO penalties and countervailing duties, it will need to use the 2007 Farm Bill to shift from conventional farm subsidies to green payments. Bruce Babbitt, a member of the Bay Blue Ribbon Finance Committee and a national environmental leader, has been speaking around the country referring to the anticipated 2006 changes in WTO provisions and anticipated 2007 changes in the U.S. Farm Bill as a “once in a lifetime opportunity for the environmental community.”
It makes sense for Bay restoration advocates to team up with local agricultural interests to seize this opportunity.
What is less clear is whether the Bay environmental community is prepared to play the complicated and potentially unsavory role it may need to play for this strategy to be successful.
For example, the new WTO provisions will state unequivocally that to not be considered trade distorting, “the amount of the payment to farmers shall be limited to the extra cost or loss of income involved in complying with the government environmental program.” This is great from the perspective of Bay environmentalists because it means the WTO and most foreign governments will want 100 percent of “green payments” made to U.S. farmers to be spent on environmental projects.
On the domestic front, though, this poses some problems. The main reason that the U.S. Congress funds farm subsidy programs is to supplement farm incomes and allow U.S. farmers to compete more effectively in international markets. Subsidizing farm income, by some accounts, also serves broader national interests by stimulating production and generating agricultural surpluses that our government can use to promote U.S. international interests.
Historically at least, U.S. agricultural surpluses have also allowed the U.S. to dominate world food markets, which has other foreign policy advantages. From an economic and foreign policy perspective, therefore, it is clear that each dollar in federal payments to U.S. farmers that is spent on environmental projects rather than boosting farm income, promoting U.S. agricultural production and allowing U.S. farmers to sell food at lower prices in the U.S. and in export markets, is a dollar wasted.
Making the U.S. farm subsidy program “WTO-friendly” by shifting to green payments is one thing; requiring that farmers spend these payments on environmental programs is something else.
In fact, there is no reason to expect that Congress would continue to support giving $15 billion in tax revenues to farmers if it became known that these payments would be used primarily to achieve environmental goals rather than support farm income and our national economic and foreign policy objectives.
This suggests that if the Chesapeake Bay restoration community really wants to increase the allocation of federal farm subsidies to Bay area farmers, it should, outside of WTO earshot, give Washington policy-makers some kind of signal that local environmental interests do not expect a very high percentage of green payments to be spent on environmental programs and will not encourage any kind of formal green payment project auditing that could result in WTO taking retaliatory action against the United States.
One might even expect that the amount of Congressionally appropriated green payments received by Bay area farmers will be inversely proportional to the percent of those payments that Congress expects will be used on environmental projects.
These payments may also be adversely affected if it is perceived that the Bay environmental community will want to keep track of how green payments are used and might spill the beans to the WTO.
For the 50 or so years since institutions like the WTO were formed to “even the playing field” in international markets and promote world trade, governments everywhere have been finding creative ways to hide their farm subsidies to give their farmers an advantage and avoid international penalties or the imposition of import duties.
Nothing will change in 2006. By the time the new WTO rules take effect, most nations that export agricultural products will already have converted conventional farm subsidy payments to green payments and will be doing whatever they can to maximize the amount of income that farmers derive from green payments and to convince the WTO that no farm income is derived from green payments.
Bay restoration advocates, whether they decide to side with agriculture or not, will need to make some difficult choices about what role they should play in all of this. One option is to be patriotic and help area farmers compete fairly in world markets by allowing them to play the same green payment masquerade as other nations will be playing.
The other option is to demand green payment accountability which may result in an increasing share of green payments being spent on environmental restoration until Congressional support for green payments eventually dries up.
So, perhaps the best strategy for Bay environmental groups is what might be called the “doubly deceitful 50 percent” or DD50 solution. Collaborate with agricultural interests to convince the WTO that green payments are not providing income support to U.S. farmers and to convince Congress that they are, and cut a side deal with them to do at least 50 percent of what they should be doing to protect and restore the Bay.