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WTO's Impact on Commodity Subsidies

posted on July 23, 2004

Negotiations aimed at liberalizing world trade are moving into a critical phase and, by most accounts, the main stumbling block to success remains farm trade. The latest "drop dead" date to end the World Trade Organization talks is July 30. But earlier optimism for a breakthrough by that date is fading.

A draft text for a framework on farm trade has been drawn, but nearly everyone wants it revised. That's especially true of the U.S.-based National Cotton Council, which has been a leading critic of the broad plan to cut subsidies and import tariffs. But other commodity groups also are watching the trade talks, which seem to be pushing domestic farm programs in a greener direction.

WTO's Impact on Commodity Subsidies In May, the WTO ruled in a groundbreaking decision that cotton subsidies for U.S. farmers were unfair to Brazilian cotton producers by encouraging over-production and depressing world market prices. At a time when cotton markets already are bearish, many Americans also worry the decision will lead to restrictions on even more crops in the future.

In response to the ruling, and to try to prevent other WTO challenges, U.S. officials are considering rolling back billions of dollars of subsidies for a range of crops including soybeans, wheat and corn. According to the Environmental Law and Policy Center, this will mean less income for farmers, more agribusiness bankruptcies, and a weaker economy. However, in a press conference this week, the Center claimed there may be an opportunity in the midst of the WTO's pressure to cut U.S. commodity subsidies.

Howard Learner, Executive Director of the Environmental Law & Policy Center: "Conservation programs are important, but will become even more important if WTO continues its opinion of subsidies. An increased way for farmers to get more income is through conservation programs."

In WTO terminology, subsidies are identified by boxes which are given certain colors. All domestic support measures, including crop subsidies, considered to distort production and trade fall into the amber box.

Programs that are not targeted at particular products and geared towards environmental protection and rural development fall into the green box. Conservation geared subsidies for farmers would be unlimited because they are not subject to WTO challenges.

Howard Learner, Executive Director of the Environmental Law & Policy Center: "If the WTO goes where we think they are, we are going to have to be more creative in terms of 'green box' programs that get some advantages to farmers and make use of rural land in our country."

Tags: agriculture news trade