UPDATE 3-USDA chief pessimistic about farm bill prospects

Wed Dec 19, 2012 5:00pm EST

* Vilsack urges congressional action on bill

* Warns U.S. could face Brazil retaliation over cotton

* Says agriculture must be part of any US-EU free trade pact

By Doug Palmer

WASHINGTON, Dec 19 (Reuters) - Agriculture Secretary Tom Vilsack Wednesday said there was a serious risk the deeply divided U.S. Congress will not complete work on a new five-year farm bill by year-end.

"There is a very serious risk that we might not get a farm bill done this year," Vilsack said in a speech to the U.S. Chamber of Commerce.

House Republicans and Senate Democrats remain deadlocked about how to best achieve major savings in farm programs, with debate centered on the level of crop subsidies and cuts to the food stamp program for the poor.

"We're going to encourage Congress to get this done," Vilsack told reporters after his speech.

He said the reservations of the presiding officer of the U.S. House of Representatives, House Speaker John Boehner, had become a stumbling block. Boehner has expressed concerns about lumping a "1,000-page" farm bill into any package crafted to avoid the "fiscal cliff" -- the tax increases and spending cuts that could kick in on Jan. 1.

"We need to tell the speaker it's not a thousand-page bill. It's a bill that can be easily linked to, and provide savings for, any fiscal cliff resolution," Vilsack said.

"We would encourage the speaker to rethink the notion it can't be done. It can be done," he added.

Debbie Stabenow, chairwoman of the Senate Agriculture Committee, said on the Senate floor on Wednesday that she was "appalled" at the lack of action on the Farm Bill in the House of Representatives. The Senate passed its version of the bill months ago.

"We're not giving up. We're coming back next week and we're going to be here and we are ready to work ... to be able to do what we need to do," Stabenow said.

TRADE RETALIATION

In his speech, Vilsack also told the U.S. business group that Congress needs to reform the subsidy program for cotton as part of the farm bill or face trade retaliation from Brazil against some $800 million of U.S. exports.

"(I'm) deeply concerned that further delay in addressing this issue could result in retaliation, not just in agriculture, but in other areas," Vilsack said, noting that Brazil has threatened to target U.S. intellectual property rights in the spat.

Brazil successfully challenged the U.S. cotton program at the World Trade Organization several years ago and has withheld retaliation after negotiating a temporary agreement with Washington.

Vilsack said time was running out for the United States to come up with a permanent fix.

"Frankly, the time to act is now," he said.

On another trade issue, Vilsack said the European Union's non-tariff barriers to U.S. agricultural exports must be addressed in any free trade agreement negotiated between the transatlantic trading partners.

The United States has long been frustrated by what it regards as the EU's "non-scientific" approach to food safety, which has led to restrictions on imports of U.S. beef, pork, poultry and other products.

The two sides are discussing a potential free trade agreement, and farm groups are adamant that their concerns be addressed in the talks, a position that Vilsack echoed in his speech.

"When you talk about the EU and agriculture, you have to talk about those non-tariff trade barriers, and they have to be addressed in any discussion of any potential free trade agreements," he said.

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