Canada, Brazil Seek WTO Ruling on US Subsidies
8 November 2007 "We are trying to level the playing field for Canadian farmers, who have to compete against the large distorting agricultural subsidies provided by the U.S.," said Canadian agriculture minister Gerry Ritz. Brazil and Canada are scheduled to make their request to the WTO on Nov. 19.
Critics say farm subsidies drive prices down, making it difficult for poor countries to sell agricultural products worldwide, and impossible for small farms to compete internationally. Producers in richer nations such as Australia, Canada, and the European Union are afraid of being crowded out of their own markets.
In September, the US agreed to limit payments to between US $13 billion and US $16.4 billion; Brazil demanded additional reductions. Both Brazil and Canada claim that in six out of the past eight years, the US spent more than US $19.1 billion – the maximum amount WTO regulations allow for the most trade-distorting forms of subsidies, such as distribution, export credits, marketing assistance loans and price guarantees. The US maintains that payments have always been well under the limit.
Last year, the US spent only US$11 billion on trade-distorting subsidies, but the government wants flexibility in case of dropping world agricultural prices and American farmers needing greater assistance. The US blames the stalled Doha talks on emerging countries like Brazil for refusing to open up their manufacturing markets.
While economist Jagdish Bhagwati of the Council of Foreign Relations in New York believes WTO panels could force the US to make substantial cuts, the US Congress is currently negotiating a five-year, US $286 billion farm bill that would leave major crop subsidy programs largely unchanged. Bhagwati warned: "The U.S. needs to take notice that everything is going to be challenged."
Gretchen Hamel, a US Trade Representative spokesperson, has responded to Canada’s and Brazil’s complaint. "Given the opportunity before us in the Doha negotiations to make real progress in reducing trade distortion in agriculture," she said, "we think that a formal WTO panel procedure would be an unfortunate diversion of resources at a critical moment."
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