February 25, 2020

Canada Takes U.S. Farm Subsidy Complaint to WTO

Categories: Canadian Corn Case

Ken Cook, writing yesterday at the Mulch blog, pointed to an article published yesterday at Canada East Online, which stated that, “Canada has gone to the World Trade Organization to fight what it calls harmful American farm subsidies.

“International Trade Minister David Emerson has asked for a WTO panel to rule on whether U.S. agriculture subsidies breach that country’s own international trade rules.

“Emerson says requesting a panel is the latest step in Canada’s fight against U.S. subsidies that are hurting Canadian farmers.”

Interestingly, recall that, “On May 2, 2007, the Canadian International Trade Minister announced that the Canadian government would hold off on taking any further action in its World Trade Organization (WTO) dispute settlement proceeding (DS357) against U.S. corn subsidies until at least the end of the year pending the outcome of current Doha Round trade negotiations. Earlier this year, Canada had taken the first step in instituting a WTO dispute settlement case when it requested consultations with the United States to discuss Canadian concerns regarding certain aspects of U.S. commodity programs in general, and the U.S. corn program in particular.” (See, “U.S.-Canada WTO Corn Trade Dispute,” a Congressional Research Service publication by Randy Schnepf, which was updated on May 4.)

The corn case issue goes back to at least 2005, “when Canadian corn producers sought legal action for alleged unfair subsidization and dumping of U.S. corn in Canadian markets. Canada’s International Trade Tribunal (CITT) ultimately ruled on the 2005 AD/CV duty case in favor of the United States. However, Canadian corn producers continued to press their concerns upon the Canadian government about perceived unfair subsidization of U.S. corn” (Schnepf page one).

Philip Brasher, writing yesterday at The Des Moines Register Online provided this succinct summary of the latest Canadian action, “Canada is accusing the United States of spending more on farm subsidies than international trade rules allow.”

Mr. Brasher explained that, “Under WTO rules, the United States can provide up to $19.1 billion annually in subsidies that are considered trade distorting. Canada says the United States broke the rules every year from 1999 to 2005 except for 2003.”

The Register article also brought up the corn case, noting that, “Brook Grantham, a spokesman for the Canadian trade ministry, said his country is still challenging U.S. corn subsidies but under the broader umbrella of overall farm spending. An internal trade panel in Canada ruled last year that Canadian growers had not been harmed by U.S. corn subsidies.”

Douglas Belkin, writing in today’s Wall Street Journal, added that, “The [Canadian WTO] request comes as U.S. lawmakers are drafting a new farm-subsidies bill and the Group of Eight members called on WTO members to demonstrate the flexibility needed to conclude the stalled, six-year-old Doha talks.

“‘We remain concerned that the U.S. is providing agricultural subsidies in breach of its WTO commitments,’ David Emerson, Canada’s Minister of International Trade, said in a statement. ‘Requesting a dispute settlement panel reinforces our efforts in the Doha negotiations toward reducing trade-distorting U.S. subsidies.’”

A Reuters news article from today noted that, “It is the first broad challenge of United States farm programs, a Toronto trade lawyer, Lawrence Herman, said, noting that Brazil successfully challenged a U.S. cotton subsidy at the W.T.O.”

And this morning, the Mulch blog pointed to a news release issued yesterday by Foreign Affairs and International Trade Canada, which stated that, “Canada’s request for a WTO panel has two main objectives. The first objective is to address the total level of U.S. trade-distorting agricultural subsidies (often called “Amber Box” subsidies). Under its Total Aggregate Measurement of Support (Total AMS) commitment, the U.S. is allowed to provide support of up to $US19.1 billion annually in agricultural trade-distorting subsidies. Canada’s position is that the U.S. has exceeded its Total AMS commitment in each of 1999, 2000, 2001, 2002, 2004 and 2005.

“The U.S. Total AMS consists of subsidies to a wide range of agricultural products, including, but not limited to, corn, wheat, soybeans, pulses, and sugar. These trade-distorting subsidies are provided through dozens of U.S. programs, such as direct payments, loan deficiency payments and counter-cyclical payments, which harm the economic interests of Canadian farmers and disadvantage them in their domestic and international markets.

“The second objective of Canada’s panel request is meant to address export credit guarantees to certain agricultural products (such as corn and soybeans) provided through the General Sales Manager (GSM) 102 program. Canada’s position is that the U.S. GSM 102 program provides export subsidies that are inconsistent with its WTO obligations.

“The majority of U.S. agricultural subsidies derive from Farm Bill programming. It is Canada’s view that these programs are trade distorting and require reform. Canada believes that it is an opportune time to press the U.S. to comply with its WTO obligations given that it is in the process of rewriting its Farm Bill.”

The release also explained that, “WTO consultations held with the United States in February 2007 did not resolve these issues. As a result, Canada is proceeding with a request for a panel, which is the next formal step in the WTO dispute settlement process. In its consultations, Canada raised concerns that U.S. corn subsidies were causing, or threatening to cause, serious prejudice to Canadian corn growers by significantly suppressing Canadian prices. Canada has chosen not to include this element in the current request for a WTO Panel. However, our case on Total AMS includes the same programs, and the subsidies paid out to U.S. corn farmers under these programs, that were at issue in the WTO consultations on serious prejudice. Canada retains the right to seek a WTO panel on serious prejudice on corn at a later date.”

For more on the “total AMS” issue, see, “Agriculture in the WTO: Limits on Domestic Support,” by Randy Schnepf, Congressional Research Service, May 10, 2005.

Keith Good

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