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Oxfam Warns U.S. And EU of Legal Challenges on Farm Subsidies

Posted on: Wednesday, 30 November 2005, 15:00 CST

By Alexei Barrionuevo

A failure by the United States and European Union to make significant progress in global trade talks in December to reduce agricultural subsidies could usher in a slew of fresh legal challenges to farm-support programs on both sides of the Atlantic, according to trade and agricultural experts.

In a report to be released on Wednesday, Oxfam International highlights eight potential cases that could filed against the European Union and three against the United States.

The EU faces challenges over tomatoes, tobacco, butter, wine and spirits, citrus juices and processed fruits like canned peaches and pears. The United States is vulnerable to challenges against its corn, rice and sorghum programs, Oxfam said. The subsidies for the crops and products noted by Oxfam total $4.2 billion for the European Union and $9.3 billion for the United States on an annual basis, according to the report.

Oxfam has lobbied strenuously for rich countries to reduce agricultural subsidies so that developing nations in Africa and elsewhere can better compete and grow their economies. But several outside experts agree that more cases are likely if ministerial meetings of the World Trade Organization next month in Hong Kong do not produce a substantial agreement toward reducing subsidies.

Brazil's successful challenges to the EU's sugar program and parts of the United States' cotton program have created precedents for yet more winnable challenges, trade experts say. The EU unveiled an overhauled sugar program last week that cuts support prices by 36 percent.

"Those cases point out some of the vulnerabilities that both the EU and the U.S. have with some of their present farm programs," said Clayton Yeutter, a former U.S. secretary of agriculture and trade representative.

"If things do not proceed well in the Doha round, it would not be surprising to see additional WTO dispute settlement challenges of this nature."

The talks in Hong Kong are part of a round of trade discussions that began in 2001 in Doha, Qatar. They were termed a "development round" meant to lift the world's poor nations out of poverty by giving their farmers better access to developed world markets.

In recent weeks the talks have stalled after the EU failed to match an offer by the United States to lower some subsidy categories by 60 percent, an offer that Oxfam and other advocates of reducing subsidies have called inadequate and misleading.

Already, Uruguay has been preparing a challenge against American rice subsidies, while Canadian corn growers have been clamoring for its government to fight the alleged dumping of American corn in Canada at prices below the cost of production. The Canadian International Trade Tribunal concluded two weeks ago that there was "a reasonable indication that the dumping and subsidizing of unprocessed grain corn have caused injury to the domestic industry." The American agriculture secretary, Mike Johanns, and Rob Portman, the U.S. trade representative, said in response that "U.S. corn exports pose no threat to Canadian corn growers."

But trade experts said the U.S. corn program, which generates the highest level of subsidies of any American farm program, was more vulnerable than ever. Huge harvests the past two years and the lowest producer prices since the mid-1990s are resulting in record subsidy payments to farmers.

"If there were ever a time for another country to go after our corn program, this is it," said Ken Cook, president of Environmental Working Group, an environmental research group based in Washington that has been critical of farm subsidies. "It is exactly the kind of conditions that prompted Brazil to go after our cotton program." Eleven corn exporters, including Argentina, Ecuador and South Africa, could have legitimate cases as well, the Oxfam report concluded. And in the case of rice, Mexico, India and Thailand are among 13 countries that could file cases against the United States. While the European Union also has created programs laden with heavy subsidy payments for farmers of traditional crops like sugar, it is at least as equally vulnerable for subsidy programs designed to encourage the processing of fruit and vegetables into finished products, trade experts said. The EU Common Agricultural Policy, which is the law now for its 25 members, provides millions of euros in subsidies for the production of everything from tomatoes to canned pears. These programs are the most vulnerable to suits filed with the WTO, Oxfam said.

But so far no formal challenges on major crops have been filed since the Brazilian cases. Pedro Camargo, the Brazilian trade representative who spearheaded his country's successful cotton and sugar cases, said he was surprised other countries had not capitalized on the Brazilian precedents.

Fear of retaliation could be part of the reason, Camargo said Tuesday in an interview. In the case of Uruguay, that government agreed to hold off filing its rice complaint after a U.S. assistant secretary of commerce, Walter Bastian, persuaded Uruguayan officials this year to hold off until after the Hong Kong meetings. Mexico, without a formal suit, has so far struggled to prevent U.S. rice from being sold at allegedly unfair prices that are damaging Mexican producers. A WTO panel ruled on Tuesday that Mexico had unfairly imposed antidumping tariffs on U.S. rice in 2002.

"Governments are afraid to challenge the Empire," Bastian said of the United States and Europe.

Most countries see trade negotiations as a faster road to agricultural reform than litigation that can drag on for years. But the failure of the Doha talks is likely to cause more developing countries to take notice and use the trade organization's dispute settlement process, said Gawain Kripke, senior policy adviser for Oxfam. "This hasn't been in their tool box in the past," he said. "Brazil has shown that these cases are winnable." The United States and Europe have made broad use of the trade organization's dispute process. The United States has filed 81 cases, more than any other country, and the European Union has filed 70. The United States has also been sued in 90 cases, more than any other country.

Trade experts disagree on what, if any, impact more suits with the trade organization could have on negotiations.

Peter Morici, a business professor at the University of Maryland, said developing countries "would be overplaying their hand" by seeking redress through more litigation.

But Camargo disagreed, saying that more successful challenges will only strengthen the trade organization. "It gives credibility to the dispute system," he said.

Source: International Herald Tribune

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