Failed WTO Round Brings Increased Commodity Litigation

Oxfam report says United States is illegally subsidizing their production of corn, rice, sorghum to the tune o f$9.3 billion. Compiled by staff 

Published on: Nov 30, 2005

Brazil's successful challenges to European Union's sugar program and the United States' cotton program open the door for more challenges if the ongoing World Trade Organization's trade talks fail.

Clayton Yeutter, a former secretary of agriculture and U.S. trade representative, says if negotiations do not produce progress additional W.T.O. dispute settlements are sure to follow. "Those cases point out some of the vulnerabilities that both the E.U. and the U.S. have with some of their present farm programs," he's quoted as saying in the New York Times. 

A new report by Oxfam, Truth or consequences, reveals that the EU and U.S. are illegally subsidizing their production of corn, rice, sorghum, fruit juice, canned fruit, tomatoes, dairy products, tobacco and wine to the tune of $4.2 billion and $9.3 billion respectively.

Recently Canadian corn growers challenged U.S. corn subsidies, saying American corn is sold in Canada at prices lower than the cost of production. Uruguay has been preparing a challenge to American rice subsidies for quite some time.

Oxfam's new research found that the EU and the US were breaking the WTO's Agreement on Subsidies and Countervailing Measures. The subsidies are either prohibited because they are contingent on the use of domestic products over imported ones or actionable because they displace developing country exports, suppress market prices and harm other countries' domestic industries.

The group's report revealed that the U.S. has paid $25b to its corn farmers over the past five years for a crop that would otherwise have lost $20b over the same period. "Without subsidies, in 2004 alone, U.S. production would be down 15%, its exports would have disappeared and world prices would have been 7% higher," Oxfam says.

The U.S. also pays subsidies of around $1.2 billion a year to its rice farmers, representing 99% of the value of the total U.S. crop. Oxfam says major rice exporters such as Thailand, Uruguay, Guyana, India and Suriname could all have strong claims against the U.S. relating to third country market export sales, as could countries into which U.S. rice is dumped such as Haiti, Zambia, Mexico, Ghana and Costa Rica.