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U.S. & EU Face International Lawsuits If They Don't Eliminate Trade Distorting Agriculture Subsidies That Harm Poor Farmers

From: <http://www.iht.com/articles/2005/11/30/business/trade.php

International Herald Tribune - France

CHICAGO A failure by the United States and the European Union to make significant progress toward reducing agricultural subsidies in trade talks in Hong Kong could bring a slew of legal challenges on both sides of the Atlantic, trade and agricultural experts say.

In a report released Wednesday, the aid group Oxfam International highlights three U.S. commodity crops vulnerable to lawsuits and eight agricultural products in the European Union where cases could be brought.

Several independent experts agree with Oxfam's assertion that complaints could be brought against the corn, rice and sorghum programs of the United States, while the 25-country EU could be challenged on subsidies for tomatoes, tobacco, butter, wine and spirits, citrus juices and processed fruits like canned peaches and pears.

According to the report, the subsidies for the 11 crops and products noted by Oxfam total $9.3 billion for the United States out of the country's $19.5 billion in subsidy payments, and $4.2 billion for the EU out of $44.8 billion, on an annual basis.

Oxfam, a nongovernmental advocacy group involved in world poverty issues, has lobbied strenuously for rich countries to reduce agricultural subsidies so that developing countries in Africa and elsewhere can better compete and grow their economies. But several outside experts agree that more cases are likely if ministerial meetings of the World Trade Organization next month in Hong Kong do not produce a substantial agreement toward reducing so-called trade-distorting subsidies.

Brazil's successful challenges to the EU's sugar program and parts of the
U.S. cotton program have opened the door for more challenges before the WTO, trade experts say. The EU unveiled an overhauled sugar program last week that cuts support prices 36 percent.

"Those cases point out some of the vulnerabilities that both the EU and the
U.S. have with some of their present farm programs," said Clayton Yeutter, a former secretary of agriculture and U.S. trade representative. If negotiations do not produce progress, he said, "it would not be surprising to see additional WTO dispute settlement challenges of this nature."

The Hong Kong talks are part of a round of trade discussions that began in 2001 in Doha, Qatar. They were termed a "development round," meant to lift the world's poor countries out of poverty by giving their farmers better access to developed world markets.

U.S. trade officials said Tuesday that they could not comment on the accuracy of the Oxfam estimates, but that the United States is trying to eliminate the kinds of farm subsidies that could run afoul of the WTO rules. "The very subsidies that they're concerned about are the ones that we're proposing to eliminate," said Christin Baker, a spokeswoman for the U.S. trade representative, Rob Portman.

Anthony Gooch, a spokesman for the European Commission in Washington, said he could not comment on the Oxfam report until European officials had studied it.

Trade ministers from the United States, Europe and major developing countries, like Brazil, are still trying to salvage a framework of some type before the Hong Kong meeting. Portman will leave for Geneva on Thursday for talks that will last until Sunday.

In recent weeks, preparatory trade talks have stalled after the EU failed to match an offer by the United States to lower some trade-distorting subsidies by 60 percent over five years and eliminate them by 2013. Oxfam and other advocates of reducing subsidies have called the U.S. proposal inadequate and misleading.

The United States and the EU are still far apart on agricultural trade barriers. The United States proposal calls for much deeper cuts in farm tariffs than European officials have been willing to support. And large, developing countries are reluctant to make commitments on opening markets for services and industrial goods unless the wealthy countries do more to open their farm markets.

In the past year, some countries have threatened legal action against American farm programs. Uruguay has been preparing a challenge to U.S. rice subsidies, while Canadian corn growers have been clamoring for their government to fight the reported dumping of U.S. corn in Canada at prices they say are below the cost of production.

The Canadian International Trade Tribunal concluded two weeks ago that there was "a reasonable indication that the dumping and subsidizing of unprocessed grain corn have caused injury to the domestic industry." The U.S. agriculture secretary, Mike Johanns, and Portman said in a joint response that "U.S. corn exports pose no threat to Canadian corn growers."

The U.S. corn program is more vulnerable than ever to a trade challenge, trade experts say. Huge harvests the past two years and the lowest prices since the late 1990s are resulting in record subsidy payments to farmers. The United States paid $26.8 billion in corn subsidies the past five years, the most for any single American farm program.

Eleven corn exporters, including Argentina, Ecuador and South Africa, could have legitimate cases as well, the Oxfam report concluded. And in the case of rice, Mexico, India and Thailand are among 13 countries that could file cases against the United States.

So far, no formal challenges on major crops have been filed since Brazil won its cases in 2004 and this year. Pedro de Camargo Neto, a former top farm trade negotiator for Brazil, who led his country's cotton and sugar cases, said he is surprised other countries have not capitalized on the Brazilian precedents.

Fear of retaliation could be part of the reason, Camargo said by telephone. "Governments are afraid to challenge the empire."

In one case, the U.S. deputy assistant commerce secretary, Walter Bastian, met with Uruguayan officials in August and persuaded them to wait until after Hong Kong to file a rice complaint.

Most countries see trade negotiations as a faster road to agricultural reform than litigation, which is costly and can drag on for years. But the failure of the Doha talks will probably lead more developing countries to use the WTO's dispute settlement process, said Gawain Kripke, senior policy adviser for Oxfam.

"This hasn't been in their toolbox in the past," he said. "Brazil has shown that these cases are winnable."

Edmund L. Andrews contributed reporting from Washington for this article.