TWN Info Service on WTO and Trade Issues (Oct07/11)

11 October 2007

Domestic farm support below WTO commitments, says US
Published in SUNS #6339 dated 8 October 2007
By Kanaga Raja, Geneva, 5 Oct 2007

After a three-year lull in its notification to the World Trade Organization (WTO), the United States on Thursday has finally notified the world trade body of its domestic support payments for the period 2002-2005, maintaining that these levels were within its commitments under the Uruguay Round.

In what appeared to be a well-orchestrated media event in both Geneva and Washington, US Special Doha Agricultural Envoy Joe Glauber made the announcement at a media briefing at the US Mission here, while a simultaneous announcement was made by Acting Agriculture Secretary Chuck Conner in Washington.

Glauber also participated in a tele-news conference with some US-based journalists.

At the media briefing in Geneva, Glauber was of the view that the upper end of $16.4 billion in agriculture negotiations Chair Crawford Falconer's text for Overall Trade Distorting Support (which the US does not currently report to the WTO) would result in effective cuts for the US.

He was also of the view that direct payments, which the US has notified under the Green Box, are consistent with the Green Box criteria.

[The payments that the US claims fall into the Green Box are however challenged by others as mis-labelled. In the cotton case brought against the US, Brazil successfully showed that several of the US domestic support payments purportedly in the Green Box are trade-distorting and illegal. Both Brazil and Canada have now separately challenged US farm support, and have sought consultations, as a preliminary step to raising disputes.]

The US has notified Amber Box payments of $9.637 billion for 2002; $6.950 billion for 2003; $11.629 billion for 2004; and $12.938 billion for 2005.

The US is allowed a ceiling of $19.1 billion in Amber Box support under the Uruguay Round.

Green Box support (not subject to limits under the Uruguay Round) for the US for 2002 is $58.321 billion; $64.062 billion for 2003; $67.411 billion for 2004; and $71.829 billion for 2005.

Overall Trade-Distorting Support (OTDS) of the US for 2002 is $16.328 billion; $10.187 billion in 2003; $18.087 billion for 2004; and $18.948 billion for 2005.

The US last notified the WTO of its domestic support levels in March 2004 for the years 2000-2001.

In a press release issued from Washington, Acting Agriculture Secretary Chuck Conner said that "in our notification, we have informed the WTO that US domestic trade-distorting support level remains below our $19.1 billion ceiling [applying to Amber Box support], demonstrating that the United States is in full compliance with our WTO commitments."

"We look forward to continuing to work with our WTO trading partners in broadening market access for all member nations," he added.

The US notification comes just as the WTO Agriculture Committee last week found that 78 members - over half of the membership - still have not supplied some or all of the required information on export subsidies, domestic support and market access measures (including tariff quotas and special safeguards) for 1995-2001.

Among those members who are allowed distorting domestic supports above minimal "de minimis" levels, a number of major players in the agriculture negotiations have not notified their spending since 2002 or earlier, including Argentina, Norway, and the United States. Canada has not notified since 2003, the European Union since 2004, and Japan, Korea and Switzerland since 2005.

At the media briefing in Geneva on Thursday, Glauber said that "there is an obligation under the Uruguay Round agreement to notify our domestic support." He added that this is an obligation that the US takes seriously.

Glauber said that the US notification contains information up through the 2005-2006 marketing year. "That might put us ahead of a few countries. It will bring us up to date with the most available data."

Referring to the Amber Box outlays that are below the $19.1 billion ceiling, Glauber said that this means that the proposed cuts in trade-distorting support put forward by the US in its October 2005 proposal - cutting the AMS by 67% down to $7.6 billion - if one looked at the last eight years, the US support levels exceeded the proposed $7.6 billion cap.

[A report by the Washington-based National Journal's Congress Daily cited Glauber as telling journalists at a tele-news conference that this showed that the US offer in the Doha Round to cap its subsidies at $7.6 billion should be regarded as a serious offer as the support levels have been higher than that level in seven of the last eight years.

[The National Journal report also cited Glauber as saying that the United States did not include its $5.2 billion annual direct payments to farmers in the trade-distorting or Amber Box, but put them in the non-trade distorting or Green Box section of the report. A WTO dispute panel ruling and DSB recommendation in Brazil's cotton dispute has raised questions about whether the direct payments should be categorized as non-trade distorting because a provision in the 2002 Farm Bill prohibits farmers who receive those payments from planting fruit and vegetables on their land. However, Glauber said the United States still considers them non-trade distorting. The US Trade Representative (USTR) had briefed the House and Senate Agriculture committees earlier this week, committee aides said, adding that members did not have any objections to the USTR's notification plan.]

Glauber explained at his Geneva briefing that the increase in Green Box outlays essentially reflected increases in domestic nutrition programmes, which included food stamp and child nutrition programmes.

Most of the increase reflects increases in nutrition programme spending, said Glauber, pointing out that programme spending in 2002 of roughly $38 billion, increased to almost $51 billion in 2005.

Decoupled income support payments - of roughly $5.3 billion - remained constant over that period, he added.

On the issue of Overall Trade-Distorting Domestic Support (OTDS - the sum of Amber Box, Blue Box and de minimis support), Glauber said that this is not a measure that the US reports to the WTO. This is a new measure under the Doha Development Agenda, not something under the Uruguay Round.

Glauber nevertheless said that the reason that he wanted to put out this data is that even the upper end in the Falconer text for OTDS ($16.4 billion) would mean quite binding constraints and would result in effective cuts for the US.

"Our OTDS levels would have exceeded the $16.4 billion in five of the past eight years... that is why we believe they are effective cuts [in domestic support]".

"We have indicated our willingness to work within the Chairman's text - the ranges and flexibilities in these texts for both agriculture and NAMA. Time is short obviously... Our believe is that others need to come forward and make the same commitments," Glauber said.

The US agriculture envoy also referred to US Trade Representative Susan Schwab's comments on Wednesday challenging the leaders of Brazil, South Africa and India to make similar commitments in their upcoming Trilateral meeting in Pretoria on 17 October.

(A Financial Times report of 4 October quoted Schwab as saying that the US was looking for a bold statement from the leaders endorsing a plan to advance the trade talks on the basis of cuts to agricultural and industrial tariffs proposed in Geneva.)

Glauber said that it is clear that without new trade flows, there's no new development. Without development, there is no alleviation of poverty.

Trade development and the alleviation of poverty are clearly the key goals of this Round, he said, adding, "we believe that the singular best way to improving trade flows is through opening markets."

In response to a question in relation to a figure of $5.2 billion (in direct payments) being placed in the Green Box, Glauber said that as far as direct payments are concerned, the US notified them as Green Box payments as he believed that they are consistent with the Green Box criteria.

It is true that the cotton panel, for 'peace clause' purposes, made a determination on direct payments, he said. They however avoided a decision for notification purposes.

Glauber also believed that the finding of the panel in so far as direct payments do not contribute to price suppression just emphasizes the fact that these have limited trade-distorting effects and why the US believes that they are Green Box payments.

In response to another question, Glauber elaborated that the actual impact of the cotton case in terms of what effect cotton programmes have on cotton production and exports, the finding was that a variety of programmes - crop insurance and direct payments, being the two primary ones - had no substantive impact on world prices and are minimally trade-distorting.

The US felt that they are consistent with the Green Box criteria.

As for why the domestic support figures are only being released now, Glauber said that what was important here was that they are being brought forward. The years 2005-2006 will actually put the US ahead of many countries.

Asked as to why the US felt that the figure of $16.4 billion for OTDS (in the Falconer text) is untenable as it is spending only $10 billion a year, Glauber said that many of the programmes are variable - many of its programmes are price-based and there is quite a deal of variation in those programmes.

If one were to just look at one year, one could say that it is below the range, according to Glauber, who noted that the most recent notification of the US on OTDS in 2005 was over the upper end of the range under the Falconer text.

Without providing any figures, Glauber also said that the US has notified its counter-cyclical payments as non-product specific Amber Box support.

In response to another question, Glauber said that in terms of the OTDS, the US thought that it has made a lot of movement on this, and the acceptance to negotiate within the range (in the Falconer text) is a movement of some $6 billion or so from its initial offer in October 2005.

"The key to what number we end up with, we feel that we have shown a lot of flexibility on OTDS... the upper end of this range results in effective cuts on our overall trade-distorting support."

He said that "if you can show that binding limits are indeed a lot less than historical expenditure levels, I believe that is an effective cut - and a real cut."

Meanwhile, in reaction to Acting Agriculture Secretary Chuck Conner's formal notification of US farm spending levels to the WTO, Raymond C. Offenheiser, President of Oxfam America, said: "For the first time in a while, the USDA [US Department of Agriculture] has provided information regarding farm subsidies to the WTO. Notwithstanding Acting Secretary Connor's statement, the US has violated WTO rules by spending too much on farm subsidies, as evidenced by the fact that the US has already lost one major WTO case, which challenged the vast subsidies for cotton."

"Even if we go with the numbers stated, they still show that the US is not willing to offer any substantial cuts within the Doha negotiations, as these numbers do not even rise up to the lowest ceiling American negotiators indicated they were willing to work with just a few weeks ago. Ultimately, what is now on the table would leave overall spending almost untouched.

"The real tragedy will be if the Acting Agricultural Secretary's statement today will be used as cover for the US Congress to proceed with a Farm Bill that continues farm subsidies largely unchanged, leaves the US vulnerable to WTO challenges, and undermines good relations with our trading partners. This would be most tragic for the millions of people in developing countries whose livelihoods are threatened on a daily basis because of US agricultural subsidies."