W.T.O. to consider challenge to U.S. farm programs

by Jay Sjerven
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WASHINGTON — The World Trade Organization’s dispute settlement body on Dec. 17 established a panel to investigate complaints lodged by Canada and Brazil against the U.S. for providing farm subsidies and other domestic agricultural support exceeding established limits. The W.T.O. panel will begin to consider the broad challenge to key U.S. farm and trade policies even as the Senate and House farm bills, which expand the very programs in dispute, are referred to a conference committee.

Initially, Canada and Brazil lodged their complaints separately. The government of Canada on Jan. 8, 2007, requested consultations with the U.S. about U.S. subsidies and other domestic producer and agricultural industry support relating to corn and other agricultural products. Canada asserted the U.S. provided domestic support in excess of limits it agreed to under the current world trade agreement. Canada also said the U.S. government through its export credit guarantee programs provides U.S. exporters premium rates and other terms more favorable than the market would provide. Discussions between the U.S. and Canada failed to resolve Canada’s concerns.

Brazil on July 11, 2007, requested consultations with the U.S. to determine whether the U.S. exceeded the $19.1 billion per year limit on its domestic support in six of the past eight years ending in 2005. Brazil asserted calculation of levels of support should include direct payments made to producers, crop disaster payments and energy subsidies, including those encouraging ethanol production. Like Canada, Brazil targeted U.S. export credit guarantee programs as providing an unfair advantage to U.S. exporters.

At the Dec. 17 dispute settlement body session, Canada and Brazil

requested a single panel to consider both cases jointly, and the U.S. did not object. During the meeting, Canadian representatives said the U.S. was providing trade-distorting subsidies inconsistent with its W.T.O. obligations. Canada estimated the U.S. exceeded the level of its authorized subsidies by billions of U.S. dollars each year.

The U.S. representatives said they were disappointed with the request for a panel, indicating the dispute was unnecessary and a diversion of resources and time from the Doha round negotiation. The U.S. representatives said U.S. farm programs were designed to be compliant with W.T.O. obligations and believed the panel would agree.

Nations reserving third-party rights to participate in dispute panel’s proceedings were the European Union, India, Japan, Australia, Argentina, China, Thailand, Mexico, New Zealand, South Africa, Chile, Taiwan and Nicaragua.

The investigatory panel was expected to issue its first ruling sometime in 2008. The dispute-settlement process often takes years before a final decision is reached.

Acting Secretary of Agriculture Charles Conner on Dec. 18 in addressing the Agribusiness Club of Washington said the Senate and the House, by raising marketing loan rates and target prices on several crops, invite such challenges to U.S. farm policies.

Mr. Conner said farmers and ranchers want to know the support they receive through the farm bill will not be taken away as a result of a trade case.

"I think it defies common sense to increase at this time our trade-distorting supports, particularly at a time when U.S. agricultural exports hit a record $82 billion this year," he said. "Exports are projected to go to $91 billion in the year 2008. This is not a market that you jeopardize in any way. This is a market that’s absolutely essential to our prosperity."

Mr. Conner expressed hope Senate and House farm bill conferees will work with the administration to correct deficiencies in the farm legislation, including provisions that would increase trade-distorting producer subsidies that invite further challenges.

In the same address, Mr. Conner expressed disappointment with a Dec. 18 opinion of a W.T.O. compliance panel suggesting changes the U.S. has made to its cotton program are insufficient to bring the U.S. into conformity with W.T.O. standards. Brazil brought the original case against the U.S. cotton program in 2002, which resulted in the U.S. ending Step 2 payments to domestic users of U.S. upland cotton and Step 2 payments to exporters of U.S. upland cotton.

"Of course, when any of our programs are challenged, we’re going to defend our programs and U.S. farm law," Mr. Conner said. "We have worked to bring our programs into full compliance with our W.T.O. obligations following the original cotton case, and we believe our support to our export credit guarantee programs are consistent and in line with our agreements with the W.T.O."

This article can also be found in the digital edition of Food Business News, January 8, 2007, starting on Page 1. Click here to search that archive.

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