White House promises Lincoln no new subsidy caps before CAFTA vote

In advance of her vote in favor of a U.S. free trade agreement with Central American countries, President Bush and his chief political advisor promised Sen. Blanche Lincoln (D-AR) they would oppose setting new limits on the agricultural subsidy payments individual recipients may receive, despite the Bush Administration's budget proposal to lower existing limits, according to informed sources. Lowering payment caps would disproportionately hurt rice and cotton producers in the southern United States, and is likely to be an issue in the upcoming budget reconciliation bill due to be passed this fall, they said.

In budget reconciliation, the Senate Agriculture Committee will have to reduce the programs under its jurisdiction by $3 billion over fiscal years 2006-2010, starting with $173 million for FY 2006. Imposing new payment caps would raise close to $2 billion of the $3 billion required for budget reconciliation, and failure to include them in the bill will make it harder to meet that target, sources said.

The Senate Agriculture Committee, along with other committees of jurisdiction, has to submit its recommendations for its cuts to the Budget Committee by Sept. 16, according to congressional sources. The Senate Agriculture Committee has jurisdiction over commodity, conservation and nutrition programs.

In Lincoln's view, such payment caps would have been devastating to rice and cotton producers in her state, sources said. She believes that the appropriate time to adjust U.S. agriculture policy is not while the current farm bill is in effect, but after there has been a successful conclusion of the Doha round in the World Trade Organization, they said.

Lincoln successfully pressed for assurances that the White House would not support new payment caps in the budget reconciliation bill in addition to several other issues in meetings with President Bush and Presidential Advisor Karl Rove prior to the June 30 vote.

In promising to oppose individual payment caps, the White House went against its own budget proposal released earlier this year and thwarted a priority of Senate Finance Committee Chairman Charles Grassley (R-IA), these sources said. Grassley has advocated individual payment limits of $250,000 as a way of ensuring that farm subsidies go to family instead of corporate farmers.

In its budget proposal earlier this year, the administration proposed that the individual payment caps be lowered from the current $360,000 to $250,000 (Inside U.S. Trade, Feb. 11, p. 3).

Senate Agriculture Committee Chairman Saxby Chambliss (R-GA) has been an outspoken critic of new limitations, but Lincoln did not work directly with him to receive the White House assurances that she sought, sources said. Some sources said that they assumed that Chambliss would be able to ward off attempts to lower payment limits in the budget reconciliation bill, but speculated that the promise to Lincoln could serve as a backstop to his efforts. Lincoln felt she needed the White House assurances because critics of the current U.S. farm programs might be emboldened by the fact that the Bush Administration's budget proposal included the new payment limits.

Chambliss and Lincoln voted for the DR-CAFTA when it passed the Senate by a vote of 54 to 45, the narrowest Senate margin on a recent trade agreement vote. In contrast, the North American Free Trade Agreement received 61 votes of support. The 45 opponents consisted of 34 Democrats and 11 Republicans, many of them with sugar producers as their constituents.

Agriculture lobbyists conceded that they were disappointed that the Johanns letter did not attract more Senate votes, most notably Sen. Craig Thomas (R-WY). Thomas voted against the deal despite heavy pressure from the administration, which he said in the June 30 floor debate included calls from the Secretaries of Defense and State, President Bush and Vice President Dick Cheney.

Some anti-CAFTA lobbyists were surprised by the yes votes cast by Sen. Richard Burr (R-NC), who they said had signaled that he was leaning against the agreement and by Sen. Tom Coburn (R-OK). A Senate aide said that Burr had been subject to heavy administration lobbying.

Burr, who had a mixed record on trade agreements as a House member, highlighted in his floor statement that the DR-CAFTA would help the textile industry in North Carolina, and said the administration had reassured him that it would negotiate an aggressive customs deal with Mexico before that country would be allowed to ship certain fabrics for production to DR-CAFTA countries. The National Council of Textile Organizations had pressed for such a deal in the hope that this would delay the implementation of cumulation provisions for at least 18 months that allow Mexican inputs to be included in garments made in Central America that would enter the U.S. duty free.

Lobbyists for passage of the DR-CAFTA are hoping that the yes votes by the two North Carolina senators, Rep. Elizabeth Dole (R-NC) and Burr, and the two Florida senators will have a positive impact on House delegations from those states. The fact that the Democratic and Republican senator from Florida voted for the deal will "definitely give some kind of cover" to House members from Florida, one lobbyist said. He said DR-CAFTA supporters are hoping to hold on to the yes vote that Rep. Mark Foley (R-FL) has cast for DR-CAFTA in the Ways and Means Committee, and to attract the votes of Rep. Adam Putnam (R-FL) and Ginny Brown Waite (R-FL). Foley said he would vote against DR-CAFTA on the floor unless more was done for sugar (Inside U.S. Trade, July 1, p. 1).

They are hoping the same for the North Carolina delegation, but opponents of the DR-CAFTA said House members there will be more likely to pay attention to the sentiment of their constituents in their own districts than the two senators, who will not face re-election for several years.

Sen. Bill Nelson (D-FL) who voted for the DR-CAFTA said during the June 30 Senate floor debate on the DR-CAFTA that U.S. Trade Representative Robert Portman made it clear that "there is no prospect of any substantial sugar concessions being included in any other trade agreements through the life of the farm bill." He conceded that Portman would not take that position "officially" but that this is the "bottom line" of the conversation he had with him.

However, Assistant U.S. Trade Representative for Intergovernmental Affairs Chris Padilla said Portman did nothing more than discuss the substance of the Johanns letter with Nelson and other members of the Senate. "That was the substance of the conversation," Padilla said. "I'm not going to comment on how Sen. Nelson characterized it."

But he said that the Johanns letter would cover imports from other bilaterals that the U.S. has negotiated and implemented by September 2007, when the current farm bill ends. The U.S. is currently negotiating FTAs with Andean nations and Thailand.

The administration lost the vote of Sen. Chris Dodd (D-CT) over its refusal to back inspections by the International Labor Organization (ILO) of individual factories instead of merely contacting labor ministries, according to Dodd's floor statement on both June 29 and 30.

Dodd announced he had negotiated with Portman on this issue until the day of the vote. But in the end, he said, a letter Portman offered him "included no real concrete commitment" that the U.S. government would back the implementation of the DR-CAFTA deal he was seeking. He said he wanted the ILO to have unfettered access to work places, and be permitted to set up mechanisms for receiving and investigating matters related to ILO labor standards. According to Dodd, he also wanted the ILO to make private recommendations to worker and employer organizations as well as appropriate officials and to have the ILO issue public reports on its findings.

Dodd pointed out that the direct ILO visits have a precedent in the bilateral textile agreement the United States struck with Cambodia, and that DR-CAFTA labor ministries would not likely be critical of their own governments. "This administration seems to hold the view that support for expanded trade and economic growth is incompatible with advocating core labor standards in developing countries," he said. Dodd expressed regret about not being able to vote for the DR-CAFTA; he had previously advocated its passage as a way of helping DR-CAFTA countries.

A U.S. trade official said yesterday (July 7) that the Bush Administration's position was driven by the fact that it wants to build the capacity of DR-CAFTA labor ministries, not replace them with the ILO. He said that when the U.S. struck the deal with Cambodia, there was no labor ministry in place which could have carried out the task, and that seven years later, the ministry still does not have the necessary capacity. He also pointed out that the Bush Administration has shown its commitment to labor rights by committing an unprecedented $180 million to labor capacity building and rural development assistance over a number of years in the DR-CAFTA in a pledge to Sen. Jeff Bingaman (D-NM).