Thursday, July 15, 2004

The Senate approved a $12 billion program yesterday to pay tobacco farmers for ending a system of price supports begun during the Great Depression, and to give the government broad new powers to regulate tobacco advertising and sales.

The program, passed by a 78-15 vote, was inserted into a broader corporate-tax bill. It roughly mirrors a $9.6 billion provision approved by the House last month.

Lawmakers must still reconcile the separate versions, and some legislators said they would try to have the tobacco provisions eliminated.

“What a waste of money,” said Sen. Don Nickles, Oklahoma Republican and chairman of the Budget Committee.

But the tobacco plan brought together key legislators from both parties who favored either the buyout or the new tobacco restrictions, including Sen. Mitch McConnell, Kentucky Republican, Sen. Mike DeWine, Ohio Republican, and Sen. Edward M. Kennedy, Massachusetts Democrat.

And the tobacco provisions opened the door to a compromise on the larger, $170 billion corporate-tax bill. For weeks, senators had been unable to agree on procedural moves that allow legislators from both chambers to meet in conference and negotiate through the differences in their respective bills.

Quick action is imperative for thousands of U.S. companies. The wider corporate bill rolls back tax breaks that the World Trade Organization said are illegal export subsidies. The ruling allowed the 25-nation European Union to slap U.S. exporters with sanctions, punishment than began in March and has increased each month.

“The tax bill is a must-pass piece of legislation,” said Sen. Charles E. Grassley, Iowa Republican and a sponsor of the bill.

The Senate legislation would tax tobacco makers and importers to raise $12 billion for the 10-year buyout plan. The government would in turn pay farmers and landowners for quota allotments initially granted to limit production and support prices.

The legislation would still limit the amount of land that can be used to produce tobacco, and only allows production in traditional tobacco counties. Roughly two-thirds of U.S.-grown tobacco is produced in North Carolina and Kentucky.

Tobacco farmers would also give up a government loan program that supports prices and income.

The Senate bill also gives the Food and Drug Administration authority to prevent tobacco advertising that targets children, to crack down on sales to minors and to regulate tobacco manufacturing.

The House did not include the new FDA regulations and funded the buyout from existing cigarette taxes. House lawmakers this week voted against such a funding plan for the buyout, further complicating the bill.

Critics say the buyout would make a handful of the largest quota holders into millionaires while doing relatively little for smaller farmers. But tobacco growers have generally supported the buyout.

“It’s something we’ve needed for a long time,” said Danny McKinney, a Kentucky grower and leader of the Burley Tobacco Growers Cooperative, which represents growers in Kentucky, Indiana, Ohio, Missouri and West Virginia.

“By and large, the average farmer is going to get $4,000 or $5,000 or so, and there are several thousands of those. That’s what it’s about, not whether a few become millionaires,” said Mr. McKinney.

The Senate also approved the U.S.-Australia Free Trade Agreement yesterday by a 80-16 vote. The pact that would eliminate trade barriers on 99 percent of trade between the allies.

“The free-trade agreement with Australia is the kind of agreement we should be negotiating. It offers both broad commercial benefits and high standards,” said Sen. Max Baucus, Montana Democrat.

The Senate action followed House approval by a day.

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