December 18, 2007 / 3:22 AM / in 10 years

WTO launches probe of U.S. farm support

GENEVA (Reuters) - The World Trade Organisation (WTO) launched an investigation on Monday into multi-billion dollar U.S. farm subsidies that Brazil and Canada say break international trading rules.

<p>A farmer holds baby corn as he inspects the crop at his family farm in Rancho Santa Fe, California October 5, 2007. The World Trade Organization (WTO) launched an investigation on Monday into Washington's multi-billion-dollar farm subsidies that Brazil and Canada say break international trading rules. REUTERS/Mike Blake</p>

The size of U.S. farm subsidies is a major battleground in the WTO’s six-year-old Doha round talks on opening world trade.

Monday’s WTO probe of U.S. agricultural support for wheat, corn, rice and other crops comes three days after the U.S. Senate passed a $286 billion farm bill, following a similar bill from the House of Representatives in July.

The White House has threatened to veto the bills, saying they failed to overhaul crop subsidy rules.

The Canadian and Brazilian complaints to the WTO relate to whether U.S. support topped Washington’s limit of $19.1 billion a year since 1999, except 2003, for the most trade-distorting support.

“Canada estimates that during these years the United States exceeded its WTO commitment levels by billions of dollars each year,” the Canadian government said in a statement to the WTO.

Subsidies distort trade by allowing producers to sell their goods more cheaply than those in other countries, who risk going out of business because they cannot compete.

While the WTO’s 151 members agree that some forms of farm support are acceptable to help secure food supplies, preserve the countryside and give farmers stability, international trade rules limit the type and size of assistance states can give.


Washington said it was disappointed at the Canadian and Brazilian move, as its farm programs were designed to comply with WTO rules. It 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,” said Gretchen Hamel, a spokeswoman for U.S. Trade Representative Susan Schwab.

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.

In October, Washington issued figures for 2002-2005 showing that overall trade-distorting support averaged $15.9 billion a year in the period. The most trade-distorting forms, known in WTO parlance as “amber box,” averaged $10.3 billion.

But “green box” support, which has minimal impact on trade and so does not come under WTO limits, rose in the period to $71.8 billion from $58.3 billion. Ottawa and Brasilia say some supports were wrongly accounted for in that category.

The U.S. “green box” figures include some direct payments of a type the WTO says should be classified as trade-distorting in a 2004 ruling in a Brazilian case against U.S. cotton subsidies.

The chairman of the agriculture negotiations in the WTO’s Doha round talks has suggested that the United States cut its overall trade-distorting support to between $13 billion and $16.4 billion, a range Washington has said it could accept, with “amber box” support falling to a maximum of $7.6 billion.

Record commodities prices that are boosting farmers’ incomes would make it easier for Washington to push through cuts in the politically sensitive subsidies.

WTO investigations typically lead to rulings on disputes after about six months, in confidential reports to the parties. The reports are made public around three months later.

Additional reporting by Missy Ryan in Washington; Editing by Richard Balmforth

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