FarmPolicy

October 18, 2017

Canada Requests New WTO Panel on U.S. Agricultural Subsidies

Categories: Doha / Trade /EU /Farm Bill

A press release issued yesterday by Foreign Affairs and International Trade Canada stated that, “The Honourable David Emerson, Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics, and the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board, announced today that Canada is requesting the establishment of a World Trade Organization (WTO) dispute settlement panel on the issue of U.S. trade-distorting domestic agricultural subsidies.

“‘Canada believes that the United States has breached its international obligations by providing agricultural subsidies that exceed the levels allowed by the WTO,’ said Minister Emerson. ‘This panel request complements our efforts in the Doha negotiations to further discipline and reduce trade-distorting agricultural subsidies.’”

The news release added that, “It is Canada’s view that when trade-distorting domestic support is properly accounted for under the WTO Agreement on Agriculture, the United States exceeded its WTO commitment in 1999, 2000, 2001, 2002, 2004 and 2005.

“Canada’s concerns are shared by Brazil. Brazil is also announcing today that it is requesting a WTO dispute settlement panel on U.S. agricultural subsidies. Canada and Brazil have been working together to coordinate their challenges. Given the similarities, it is expected that their cases will be heard by a single panel.”

A “Backgrounder,” which was included as part of the news release stated that, “This request is distinct from and supersedes the one filed by Canada on June 20, 2007. Among other things, Canada’s new request does not include a challenge to the export credit guarantee measures, in light of a recent decision on these measures by a WTO panel in the Brazil-U.S. cotton dispute.”

“Canada will be making its request for the establishment of a panel at the meeting of the WTO DSB [Dispute Settlement Body] on November 19, 2007,” the release stated.

In related news coverage of this development, the Associated Press reminded readers yesterday that the U.S. only just recently notified the WTO of recent farm subsidy payment levels: “After three years of silence, the United States notified the WTO last month of a farm aid level within the rules, but high enough to demonstrate the ‘real cuts’ it insists it is now offering in the current global commerce round.

“Joe Glauber, Washington’s chief farm trade negotiator, said last month in a press conference in Geneva that payments in the category of most trade-distorting subsidies amounted to US$9.6 billion in 2002; US$6.9 billion in 2003; US$11.6 billion in 2004; and US$12.9 billion in 2005.

“Under WTO rules, Washington has a US$19.1 billion limit on agricultural payments linked to distribution, export credits, marketing assistance loans and price guarantees — the so-called ‘amber box.’ [Note: For more background on this issue, see this FarmPolicy.com update from October 8th].

“Canada, along with Brazil, filed WTO complaints claiming the U.S. has exceeded its cap in six of the last eight years. Brazil also announced Thursday that it is requesting a WTO dispute settlement panel.”

Bloomberg writer Greg Quinn noted reaction from the U.S. on this development in an article from yesterday: “‘The United States has provided domestic support for agriculture within our WTO commitments,’ Gretchen Hamel, a spokeswoman for the U.S. Trade Representative, said today. ‘Given the opportunity before us in the Doha negotiations to make real progress in reducing trade distortion in agriculture, we think that a formal WTO panel procedure would be an unfortunate diversion of resources at a critical moment.’”

The Bloomberg article added that, “The WTO will probably use one panel to decide on the Canadian and Brazilian complaints at the same time, Emerson said in the statement.

“The dispute covers farm products such as corn, wheat, soybeans, sugar, and lentils and peas known as pulses, the Canadian government said.”

In broader coverage of the WTO Doha Round of trade negotiations, Reuters writer Doug Palmer reported yesterday that, “A ‘substantial’ new world trade deal is within reach by early 2008, but both the United States and the European Union will have to settle for less than they wanted, the EU’s top trade official said on Thursday.

“‘After six years, there is more or less a deal on the table. It is substantial and valuable,’ EU Trade Commissioner Peter Mandelson said in a speech to the Carnegie Endowment for International Peace.” (For complete coverage of Commissioner Mandelson’s remarks, including audio and video, just click here).

Mr. Palmer added that, “Responding to questions after his speech, Mandelson said he expected a final deal to include deeper U.S. farm subsidy cuts and deeper EU farm tariffs than either has offered so far.”

With respect to what might be “deeper U.S. farm subsidy cuts” than has been “offered so far,” recall that on September 20, an AFP article reported that, “Diplomats at the World Trade Organisation said the US agricultural negotiator, Joseph Glauber, had announced during talks late Wednesday that the United States accepted WTO proposals on subsidy cuts made two months ago as a basis for negotiations.

“It marked a shift in the US position on the compromise proposal suggesting a limit of 12.8 to 16.2 billion dollars (9.2-11.6 billion euros) a year on its agricultural subsidies.

“Until now, Washington has refused to accept a ceiling below 23 billion dollars.”

For additional context on U.S. agricultural payment levels, click here; see also this graphical depiction of government payments from 1997 through a 2007.

In other WTO related developments, an item posted yesterday at the WTO webpage indicated that, “Brazil and Peru proposed, at the Committee on Trade and Environment Special Session on 1-2 November 2007, that biofuels and organic food products, respectively, be considered as environmental goods subject to tariff cuts or elimination in the Doha Round.”

The update added that, “Brazil said that the group has to start looking at environmental products where developing countries could be competitive, such as biofuels. It maintained that the Committee’s negotiating mandate was not limited to industrial products.”

“Some other delegations, including Australia, the European Union, Japan and the United States, maintained their reservations about including agricultural products in the trade-and-environment negotiations,” the update said.

And in a broader look at agricultural trade issues and U.S. farm subsidies, an item posted today at the Council on Foreign Relations webpage (“Troubling Harvest for Trade”) stated that, “The U.S. Farm Bill has been blamed for global trade-round failures, environmental abuses, even obesity. So as the measure came due for renewal this year, it looked to be particularly ripe for reform, especially with prices for the most heavily subsidized commodities surging (CNBC). But thus far, agricultural forces aligned in Congress appear on course to pass a new five-year bill totaling nearly $290 billion, keeping intact many of the subsidies that have raised such an outcry.”

The CFR item added that, “Particularly damaging is the bill’s effect on the World Trade Organization’s Doha round of talks, hung up in part on U.S. and EU rigidity on agriculture supports. CFR Senior Fellow Jagdish N. Baghwati noted that the House version of the 2007 Farm Bill passed last summer as talks involving the United States, European Union, India, and Brazil were in progress. The effect was to undermine the negotiating position of U.S. Trade Representative Susan Schwab, who pressed India ‘to offer market access in agriculture even as the U.S. offered little of her own,’ he wrote.”

In more specific developments regarding issues associated with U.S. farm policy and their international impacts, Ag Committee Ranking Member Saxby Chambliss (R-Georgia) issued a release yesterday which stated that, “U.S. Senator Saxby Chambliss (R-Ga.), Ranking Republican Member of the Senate Agriculture Committee, today took to the Senate floor blasting a recent editorial published in the Washington Post regarding domestic cotton production and the global market. Sen. Chambliss noted that the author made numerous false claims and inaccurate statements in attempting to characterize the U.S. cotton program. The Senate is currently debating the bipartisan Food and Energy Security Act of 2007, which Sen. Chambliss coauthored.

“‘I want to set the record straight relative to one particular issue in the editorial that has been talked about over the last several years that is simply wrong,’ said Sen. Chambliss. ‘This editorial takes on the cotton program in the 2002 farm bill and says that this program has a very negative effect on cotton farmers in the West African countries of Benin, Burkina Faso, Chad, and Mali.’

“Senator Chambliss questioned the editorial’s claim that U.S. cotton acreage has increased in response to U.S. subsidies at the expense of West Africa: data clearly demonstrates that U.S. cotton acreage has decreased 39 percent from 2002 to 2007, while cotton acreage in both China and Brazil has increased at least 50 percent over the same time period. During this same time period, China, India and Brazil have each experienced tremendous increases in cotton production. While the editorial cited economic studies by organizations with an anti-cotton agenda, Senator Chambliss pointed out that several independent analyses show minimal price impacts attributable to the U.S. cotton program on world prices.”

Farm Bill

Dow Jones writer Bill Tomson reported yesterday that, “U.S. Senator Tom Harkin, D-Iowa, said Thursday he expects Democrats and Republicans to soon reach an agreement on which amendments will be allowed for consideration to the 2007 farm bill, ending a dispute that has held up debate and votes on the Senate floor this week.

“A resolution could be reached as early as this evening with the first vote on an amendment possibly sometime Friday, Harkin told reporters.

“Sen. Pat Roberts, R-Kans., was less optimistic Thursday. He called the dispute over amendments a ‘parliamentary quagmire.’”

(For more perspective on the Farm Bill, coving both process and substance, see yesterday’s Ag Policy Soup podcast (MP3-audio), which includes a sampling of audio statements made Thursday on the floor of the U.S. Senate. The audio lasts about seven minutes and includes clips from Sen. Thune (R-SD), Sen. Roberts (R-KS), Sen. Chambliss (R-GA), and Sen. Conrad (D-ND). Ag Policy Soup is the podcast of FarmPolicy.com).

The article added that, “Harkin, chairman of the Senate Agriculture Committee and steward of the five-year blueprint of U.S. agriculture policy, said he expects an attempt to cap farm subsidies at $250,000 by Sens. Charles Grassley, R-Iowa, and Byron Dorgan, D-N.D., to be one of the first amendments offered for a floor vote.”

Mr. Tomson also noted that, “Senators should be able to offer amendments, Harkin said, but the farm bill – estimated to cost $286 billion from 2008 through 2012 – should not be opened up for just anything to be attached.”

In a related item Congressional Quarterly’s Greg Vadala and Jennifer Scholtes reported yesterday that, “Senate leaders hit an impasse on the bill after Majority Leader Harry Reid, D-Nev., executed a procedural maneuver to prevent amendments on matters such as the estate tax, labor issues and the Iraq War. Minority Leader Mitch McConnell, R-Ky., has made clear that he intends to keep pushing for an open amendment process on the $283 billion legislation.

“More than 60 amendments have been offered, including a proposal by Charles E. Grassley, R-Iowa, and Byron L. Dorgan, D-N.D., that would reduce the total federal money that any farming operation can receive in a year.”

DTN Political Correspondent Jerry Hagstrom indicated yesterday (link requires subscription) that, “Senate Agriculture Chairman Tom Harkin, D-Iowa, said Thursday he expects Senate Majority Leader Harry Reid, R-Nev., and Minority Leader Mitch McConnell, D-Ky., to reach an agreement soon on a plan for amendments to the farm bill.

“However, it’s also possible their conflict will only be resolved by a cloture petition that would ripen early next week.

“‘It may come to that,’ Harkin said at a news conference touting the energy provisions of the bill. Though there was no deal on amendments, the Senate resumed debate on the bill Thursday.”

Sen. Judd Gregg (R-New Hampshire), the Ranking Member of the Budget Committee, made a floor speech yesterday highlighting various aspects of the budget, including issues related to the Farm Bill.

In part, Sen. Gregg stated that, “The Farm Bill reaches a new standard of creativeness, because they now are taking entitlement spending and freeing up entitlement spending by giving tax credits. In other words, they create a new tax credit to pay for items which historically have been paid for by entitlement spending under the Farm Bill, mandatory spending. Since they no longer had to pay for that with mandatory spending, they created an extra $3 billion that they could spend on new farm programs. So the Farm Bill itself is a continuation of this exercise in making the concept of Pay-Go superfluous and certainly the claim that Pay-Go applies around here fraudulent. It’s really about time, hopefully, that people start paying attention to this. When you’re up to $500 billion of new spending in ten months, much of which has been done outside of the budget window so that the budget rules haven’t been allowed to apply to it, that gets to serious money and it gets to a serious lack of fiscal discipline. And I would hope that we would change this course, but we don’t appear to be changing this course. We actually appear to be aggravating this problem by bringing forward bills such as the Farm Bill which continues this failure of fiscal discipline.”

For more detail on the budget and the Farm Bill from Sen. Gregg, see this bullet point summary, entitled, “Budget Gimmicks And Pay-Go Avoidance, All Used to ‘Pay for’ Farm Bill’s Excessive Spending: A Budget Perspective,” which was issued yesterday.

Reuters writer Charles Abbott reported yesterday that, “Some $2.3 billion in federal support would flow to biofuels under the Senate farm bill, half of it to develop cellulose as a companion to corn as a feedstock for fuel ethanol, Democratic senators said on Thursday.

“Agriculture Committee chairman Tom Harkin said the bill proposed a ‘very robust’ program in biofuels. The bill ‘puts us on a path’ to produce 60 billion gallons of biofuels by 2030, roughly 10 times current output, said the Iowa Democrat.

“The package includes $1.1 billion to encourage farmers to grow biomass crops, in financial aid to construct ethanol plants using cellulose, found in grasses and wood, as a feedstock, and to help refiners buy biofuel feedstocks.”

A complete transcript of Sen. Harkin’s comments on this issue can be viewed here.

Keith Good

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