Bridges Weekly Trade News Digest • Volume 13 • Number 10 • 18th March 2009
US, EU, Quizzed on Farm Subsidies, Other Trade Measures
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The latest US farm bill and the reintroduction of EU export subsidies were among the controversial issues discussed at a 12 March meeting of the WTO’s regular agriculture committee. Officials took advantage of the deadlock in the Doha Round talks to scrutinise the trade measures that countries must notify regularly to the WTO, trade sources said.
Delegates also discussed how the ‘notification and review’ process could be improved to ensure that Members’ submissions are timely and complete. In recent years, many countries have slipped several years behind schedule in their notifications, prompting calls for the existing system to be reformed.
In a separate development, the chair of the agriculture negotiations, Ambassador Crawford Falconer, announced he was planning to return to capital in April (see article, this issue).
Exporters challenge US on subsidy notifications
Several countries questioned the US about its subsidy notification for marketing years 2006/07, submitted in January. Australia, Brazil and Japan queried why US direct payments were still being classed as minimally trade-distorting ‘green box’ subsidies, a category that is exempt from reduction commitments, despite a WTO dispute ruling that found the direct payments did in fact distort trade. Trade-distorting subsidies are normally classed as ‘amber box’, and subject to reduction commitments.
The US defended the classification, arguing that the payments were unrelated to production levels because they were based on fixed and unchanging historical base periods.
Subsequent dispute cases brought by Canada and Brazil have claimed that because these payments had been mis-classified, the US had been in breach of its maximum permitted levels of amber box support in several of the previous years (see Bridges Weekly, 17 January 2007, http://ictsd.net/i/news/bridgesweekly/7186/) and 18 July 2007, http://ictsd.net/i/news/bridgesweekly/6534/). The latest notification suggests that amber box subsidies were at a historic low of US$ 7.7 billion in 2006 and US$ 6.25 billion in 2007 – although green box subsidies were as much as US$ 76 billion in both years.
Overall trade distorting support was also at particularly low levels, with the US notifying only US$ 7.9 billion in 2006 and US$ 6.5 billion in 2007 – far below the current ceiling of around US$ 48 billion, and also lower than the proposed limit of around US$ 14.4 billion that would result from the cuts in the latest draft Doha negotiating text. Unusually high prices during the notification period had meant that US farmers had not benefited from ‘countercyclical’ support that is normally activated by low prices, sources said – although some expressed concern that the fall in commodity prices following the global economic downturn could now reverse this trend.
Australia, Brazil and Japan also queried why US countercyclical payments were classed as not being product-specific support, when the dispute settlement finding on the Brazil-US cotton case had said these payments did in fact support cotton. The US denied that the payments provided support that was specific to any one product.
US Quizzed on Farm Bill
The 2008 US farm bill also sparked a number of questions from exporters, with Argentina, Australia and Canada asking questions about the functioning and appropriate WTO classification of the ‘Average Crop Revenue Election Programme’ (ACRE). Canada reportedly cited research showing that this programme could potentially push subsidy levels to new highs, depending on how it was implemented. The US told the meeting that it was still too soon to be able to say how ACRE payments would be notified.
China lambasts US poultry prohibition
A dramatic statement from China lambasted a provision in a new US law which, officials said, unfairly singled out poultry imports from China. The clause – section 727 of the federal budget that was signed into law on 11 March – prohibits funds made available under the Act from being used “to establish or implement a rule allowing poultry products to be imported into the United States from the People’s Republic of China.” The law renews a similar provision included in a 2008 Act, despite US assurances to the contrary, China said.
The US suggested that the article should be dealt with under the WTO’s committee on sanitary and phytosanitary measures, which deals with food safety, animal and plant health – a proposal rejected by the Chinese, who argued that the SPS agreement was “irrelevant” to the clause in question.
EU export subsidies in the spotlight
Exporters expressed their disappointment at the reintroduction of export subsidies for EU dairy products (see Bridges Weekly, 28 January 2009, http://ictsd.net/i/news/bridgesweekly/38827/). Widely seen as amongst the most harmful and distorting of trade measures, Members had agreed under the current Doha Round that developed countries would eliminate export subsidies by the end of 2013, with developing countries doing so three years later – although their use is still technically allowed under existing rules. No end-point for the subsidies has been set, the EU said, in response to a question from New Zealand – even though the measure has been described as ‘temporary’.
In comments after the meeting, one delegate from an exporting country described the reintroduction of the subsidies as sending “a very negative signal… one that can be used by others to follow suit”. The EU has defended the legality of the new export subsidies under current WTO rules.
What data are countries obliged to provide?
Delegates debated the extent to which Members are obliged to provide each other with data relating to their agricultural support programmes, following an Argentinean request for data on the value of production used to calculate EU payments notified under the ‘blue box’ – covering certain kinds of support that have been partially decoupled from production. Countries disagreed with the EU’s argument that it was not obliged to provide the data under existing commitments, arguing instead that the current agriculture agreement allowed them to raise and seek information on “any matter relevant to the implementation of commitments.” The EU said it would try to provide the data.
Argentina also asked the EU to explain how it intended to classify support programmes that would replace blue box payments that reimburse farmers who must ’set aside’ land by taking it out of production. The EU indicated that in the future farmers would be compensated under ‘green box’ programmes that were decoupled from production – although Argentina observed that returning land to agricultural use would in fact affect production.
Notification delays: how to reform the system?
Members discussed how to overcome the ongoing problem of late notifications, which delegates have long complained hinders them from properly understanding other countries’ trade policies, and undermines Doha Round negotiations on subsidy and tariff reductions. Several delegations supported the idea of a workshop to discuss the problems countries face in submitting notifications, and suggested this could be held adjacent with the next meeting of the agriculture committee in June. Other ideas included circulating a questionnaire for countries to fill in, and initiatives to overcome a lack of capacity in developing countries.
Doha deadlock prompts renewed notification focus
Several delegates commented that slow progress in the Doha Round negotiations had prompted a renewed focus to the regular work of the agriculture committee, including sharper attention to trading partners’ notified trade measures, and a more interactive discussion than usual.
However, many also regretted the negotiating stalemate, with one negotiator observing that Members had been “taken hostage by one country.” The lack of clear signs of engagement from the new US administration has prevented talks from restarting this year, say many, although some hope that a meeting of 20 global economic powers on 2 April in London could revitalise the trade round.
ICTSD reporting.
One response to “US, EU, Quizzed on Farm Subsidies, Other Trade Measures”
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If the US and the EU are advocating to the world about free markets, them those large economies should become models to the rest of other world countries, by eliminating government subsides.
Fair for equal policies should be implemented to developed and developing countries, but it is the responsibility of huge economies to begin and make sure that new policies are created and carried-out for themselves as well.
Those individuals that make polycies on behalf of the human population, should list beneficial priorities begining with LDC’s economies first.
If Billions of Dollars are invested and expended to the space conquest, why not to invest and to expend in infants, elders and citizens in general on food, health issues. By offering quality of houses, better education and efficient jobs as well.
Kirk Nelson, Pres.
weSolutions.org
New York, NY.USA