The World Trade Organization (WTO) on Monday launched a formal investigation into billions of dollars in U.S. farm subsidies that Brazil and Canada claim break international trading rules.
The Canadian and Brazilian complaints to the WTO relate to whether U.S. support topped Washington's limit of $19.1 billion/year since 1999, except 2003, for the most trade-distorting support.
"Canada estimates that during these years the U.S. exceeded its WTO commitment levels by billions of dollars each year," the Canadian government said in a statement to the WTO.
While the WTO's 151 members agree that some types of farm supports are acceptable, international trade rules limit the type and size of assistance states can provide.
U.S. trade officials said they were disappointed with the Canada and Brazil’s action, as U.S. farm programs were designed to comply with WTO rules. They said many of the supports being challenged had already been discontinued.
"This case represents an unnecessary diversion of time, resources and attention from the important tasks before us in the Doha negotiations," Gretchen Hamel, a spokeswoman for U.S. Trade Representative Susan Schwab told Reuters News Service.
U.S. trade lawyer Juan Millan told Dow Jones News Service that Washington's payments have always been below the WTO limits.
"The U.S. has designed its farm programs to ensure compliance with the existing negotiated limits on domestic support," he said. "We believe that a panel will agree."
Millan criticized Brazil and Canada for including payments that "have ceased to exist – in some cases more than five years ago."
Several rich and developing countries joined the case as third parties, allowing them to participate in the panel. They are: the European Union, India, Japan, Australia, Argentina, China, Thailand, Mexico, New Zealand, South Africa, Chile, Taiwan and Nicaragua.
According to U.S. government figures released in October, U.S. farmers received an average of $15.9 billion/year in trade-distorting subsidies during the 2002-2005 period, while the most highly trade-distorting subsidies, known in WTO lingo as "amber box," averaged $10.3 billion/year.
Meanwhile, the U.S. reported that it boosted "green box" farm supports, which have minimal impact on trade and thus aren’t limited by WTO rules, to $71.8 billion during 2002-2005 from $58.3 billion in the previous reporting period.
However, Canada and Brazil argue that the U.S. is wrongly placing some supports in the green box category.
The two nations say the U.S. green box figures include some direct payments that were ruled trade-distorting by the WTO in a 2004 case brought by Brazil against U.S. cotton subsidies.
The WTO is expected to take about six months to issue a ruling in this latest case, with results likely to be made public in nine months.
Editor’s note: Richard Brock, Corn & Soybean Digest's Marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.