From a nutrition perspective, the most blatantly counter-productive U.S. farm subsidy policy may be the prohibition against growing fruits and vegetables on land that is eligible for direct subsidy payments.
This is a bit complicated, so bear with me.
Farm subsidies used to be criticized for encouraging overproduction of major row crops, such as corn, wheat, soybeans, and cotton, because farmers could earn more subsidies by growing more of the crop. The overproduction harmed the environment and immiserated poor farmers in developing countries by suppressing world prices for these crops. To partly -- and only partly -- remedy these problems, beginning in the 1996 and 2002 farm bills, a portion of the subsidies were converted to "direct payments," which were based on a farmer's historical production rather than current production. These direct payments were supposed to solve the problem of encouraging overproduction, because farmers could earn billions of dollars of these welfare-style payments even without growing the crop.
However, fruit and vegetable lobbyists were concerned that corn, soybean, wheat, and cotton farmers would begin growing fruits and vegetables while collecting direct payments. This would increase the supply of fruits and vegetables and suppress their prices.
From a nutrition perspective, that would be great! But, the fruit and vegetable industries are more powerful than the nutrition lobby, so they convinced Congress to prohibit farmers from growing fruits and vegetables on land that qualified for direct subsidy payments.
This prohibition is just one of the issues at stake in the important Brazil cotton case. See farmpolicy.com today and an excellent Congressional Research Service (.pdf) report last month for the full story. Brazil argued that the fruit and vegetable prohibitions meant the direct payments continued to distort U.S. farmers' planting decisions and harm the interests of farmers in Brazil. The WTO agreed. The United States took half-steps toward fixing problems with the cotton subsidy programs, but these half-steps did not include repealing the fruit and vegetable prohibition. Even the new House-passed Farm Bill fails to repeal the prohibition.
This week, news reports say a compliance panel of the WTO has ruled that the half-steps taken by the United States do not suffice. The fruit and vegetable prohibitions continue to violate our country's world trade commitments. The consequence may be that the WTO will allow Brazil legally to impose trade barriers against U.S. export industries.
So here's my question. How many Americans in these export industries will lose their jobs so that Congress can protect this grand principle: preventing farmers from growing fruits and vegetables?