Iowa Public Television


Concerns Raised Over Trade-Distorting Subsidies

posted on January 25, 2002

After long-standing restrictions on U.S. trade with Cuba, agribusinesses in both nations seem ready for more trade opportunities.

Cuban leader Fidel Castro says the $35 million dollars in food contracts signed late last year with U.S. companies were a one-time deal. However, Cuba's president of food import enterprise says his government could buy more American farm products if it receives more encouraging signs from Washington.

The politics of trade could hit a snag there, for any number of reasons. Among them ... surging government subsidies to U..S. farmers that some claim are threatening present and future trade agreements.


Concerns Raised Over Trade-Distorting Subsidies

Since 1997, Congress has delivered billions of dollars of direct assistance to farmers to compenstae for low commodity prices. In fact, according to USDA, government payments now account for half of U.S. net farm income.

While farmes have come to rely on the payments, it now appears they may have put the U.S. at risk of violating international agreements governing trade-distorting subsidies.

Under the Uruguay Round Agreement on Agriculture, the U.S. and other countries agreed to reduce the amount of trade-distorting domestic subsidies given to farmers ... to reduce export subsidies ... and to increase access to foreign-produced goods. To date, the U.S. has honored those commitments. But USDA officials are warning that sharp increases in direct payments in recent years have pushed the U.S. closer to the ceiling allowed under the Uruguay agreement.

To that end, Brazil this week warned U.S. lawmakers that future trade talks cannot take place unless the United States cuts price-distorting subsidies to farmers. Brazil's agriculture minister said his nation is considering filing a formal complaint with the World Trade Organization over U.S. subsidies to its soybean farmers. The Brazilians claim they lose a billion dollars every year because of the subsidies.

Brazil is the world's second-largest soybean producer behind the U.S., but the production gap between the two is closing quickly because of the fast-rising production of low-cost Brazilian beans.


Tags: agriculture government money news trade