July 23 (Bloomberg) -- President George W. Bush's new-found opposition to the kind of farm spending he once embraced may not be enough to stop it -- or to prevent new global trade conflicts as a result.

The Bush administration is signaling it's prepared to veto the $300 billion farm bill that will probably come before the U.S. House of Representatives this week. Bush already signed similar legislation in 2002, when his Republicans controlled the House, and will face pressure to do so again with next year's elections approaching.

Federal crop subsidies, which date back to the Great Depression, are among the most popular programs among rural lawmakers, and the legislation is backed by a coalition of Midwestern and Southern Republicans, Democrats and farm interests that has beaten back past efforts to limit such aid, including one by Bush just last month.

Despite the president's threats, a veto ``is very, very unlikely to happen,'' says Dan Glickman, a former Democratic congressman who was agriculture secretary under President Bill Clinton. ``There are a lot of potentially vulnerable Republican members in the House right now. The numbers don't look great for their party anyway, and this is part of their base.''

While most farm-bill spending goes toward food-aid programs for the needy, the crop subsidies are by far the most contentious part. The administration says the legislation will leave the U.S. vulnerable to challenges at the World Trade Organization by Canada, Brazil and other countries that say the subsidies give American farmers an unfair advantage.

`A Step Backward'

The House bill ``takes a step backward,'' Agriculture Secretary Mike Johanns said in a July 13 letter to Agriculture Committee Chairman Collin Peterson, the Minnesota Democrat who sponsored the measure. A White House official, speaking on condition of anonymity, says the president wouldn't hesitate to veto the measure.

The package, covering five years, includes subsidies that could give more than $1 million to some farmers, along with production incentives that would benefit the world's biggest food companies such as Tyson Foods Inc. and Archer Daniels Midland Co.

``You could not design anything more economically irrational,'' says Brian Riedl, chief budget analyst at the Heritage Foundation, a Washington-based research organization that backs limited government. ``They resemble Soviet five-year plans.''

Peterson, 63, says such critics miss the point. ``It's about being able to keep independent family farmers in business,'' he says. ``When a guy comes in to get a loan for his crop, he has to be able to show the banker that if everything goes to hell, he can pay his loan back.''

Out of Production

The bill approved by the House Agriculture Committee last week contains some $35 billion in crop subsidies for farmers. It raises the amount of money farmers would be paid if overproduction drives prices lower. And it pays them to grow fewer crops, if they take acreage out of production under land- conservation programs.

If the legislation passes the House, it would need to be reconciled with a Senate bill, which also is being drafted. It would then go to Bush. The current farm bill expires Sept. 30.

The 2002 bill Bush signed, on which the new legislation is based, sent 66 percent of crop payments to just 10 percent of farmers who get subsidies, according to the Environmental Working Group, a Washington-based watchdog. And because 93 percent of all payments go to growers of corn, soybeans, wheat, cotton and rice, 60 percent of all farmers get no aid at all.

WTO Headaches

Still, the interventionist approach is enough to cause the U.S. headaches before the World Trade Organization. The Geneva- based trade arbiter ruled against U.S. cotton policy two years ago, forcing the government to rewrite the crop program. Canada filed a case against U.S. corn in January.

Brazil, the leader in the cotton case, lodged a general complaint against U.S. subsidies on July 12, saying that since 2001 they may have topped the combined $19 billion annual spending allowed under U.S. pledges to the WTO.

If Peterson's plan goes through ``it would confirm the worst fears of our trading partners,'' says Grant Aldonas, a fellow at the Center for Strategic and International Studies in Washington and a former top Bush administration trade official. ``It not only is negative, but they will use it to justify their own recalcitrance.''

White House officials also cite other objections to the measure: It raises minimum price guarantees when crop prices are at record highs, and blows through the $200,000 income limit for farm-subsidy recipients that the president supports.

Republican Unrest

There's another reason as well. The president, who has presided over a 32 percent surge in federal spending, faces unrest among fellow Republicans over his failure to rein in government growth. Farm programs have been among the biggest targets of those calling for spending curbs.

Farm-lobby officials say that, despite the administration rhetoric, they don't think Bush will try to block the bill.

``When you're at the end of your presidency, it's easier to threaten a veto, but I think in the end there will be more political consensus than disagreement,'' says Mary Kay Thatcher, top lobbyist for the American Farm Bureau Federation, the largest U.S. farmer group. ``Farmers like this bill, and farmers are important voters.''

The administration proposed its own farm bill in January. It was no radical departure from the past, maintaining most programs while lowering payments for trade-distorting subsidies and shifting funds toward fruits and vegetables, rural development and ethanol programs.

Unanimous Rejection

Even so, the House Agriculture commodities subcommittee unanimously rejected it in June. While more than half of farm subsidies go to just 19 of the 435 congressional districts, nine of the top 10 receiving payments are represented on the agricultural committee, according to the Environmental Working Group.

Peterson, whose rural Minnesota district got $874 million in payments from 2003-2005, notes that subsidies have declined as crop prices have increased. Subsidies dropped to $16 billion in 2006 from $25 billion in 2005, according to Department of Agriculture data, and are projected to average $7 billion during the next five years if no rules are changed. That's because the farm programs helped farmers prosper, Peterson says.

The last attempt to dismantle subsidies, the Freedom to Farm Act of 1996, resulted in more than $30 billion of ``emergency'' farm bailouts in the ensuing years. U.S. overproduction caused prices to plunge and other countries kept subsidizing their own farmers, which kept trade advantages from materializing, he says.

``There is no free market in agriculture,'' Peterson says. ``Every country has its own way of distorting things.'' Unilaterally cutting U.S. supports, he says, would be ``a stupid idea.''

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

Last Updated: July 22, 2007 19:11 EDT