WASHINGTON, Sept. 16, 2013 – Business and trade organizations are concerned about the potential for provisions in the farm bill commodity titles to trigger a World Trade Organization (WTO) dispute – even as lawmakers hope to use other aspects of the bill to resolve an ongoing trade challenge involving U.S. cotton subsidies.
The U.S. Chamber of Commerce, the National Association of Manufacturers and the National Foreign Trade Council sent a letter to the House and Senate Agriculture Committee leaders, asking them to guard against a WTO challenge and the potential for retaliation.
Although work on a new farm bill has largely been stalled in recent weeks, a formal farm bill conference could start sometime after House conferees are named – an action expected after the full House votes on a stand-alone nutrition title later this week.
“We write to express our concern that the new Farm Bill may have the unintended consequence of exposing the United States to the risk of a World Trade Organization (WTO) finding of noncompliance and sanctioned retaliation that could harm American farmers, ranchers, workers, and companies,” the groups wrote.
Although the House and Senate Agriculture Committee staff did not respond to a request for comment on the letter, House Agriculture Committee Chairman Frank Lucas and Senate Agriculture Committee Chairwoman Debbie Stabenow have long maintained that their respective farm bills will be WTO compliant.
The business groups took direct aim at the Senate’s Adverse Market Payments (AMP) program and House Price Loss Coverage (PLC) counter-cyclical programs, noting that they “run the substantial risk of violating obligations the United States has undertaken as a signatory of the WTO agreements for the same reasons a WTO panel found the U.S. noncompliant in the U.S.-Upland Cotton dispute.”
In particular, they targeted a provision in the House version of the farm bill that recouples program payments with actual acreage, which “will quickly invite other nations to initiate dispute settlement against the United States—and do so with a good chance of success.”
The issues raised by the business groups echo some of the same concerns elevated earlier this year in a letter from the National Corn Growers Association, the American Soybean Association and the U.S. Canola Association.
The criticism also reflects bipartisan Senate Ag Committee angst over the commodity title, in comments filed as “Additional Views” in the Senate report language filed with S. 954, The Agriculture Reform, Food and Jobs Act of 2013.
“The reported bill’s inclusion of AMP and continued use of fixed reference prices for certain crops creates the risk for future WTO challenges. We are concerned that such challenges would be likely to be found inconsistent with our WTO commitments, putting the American economy at further risk from potential retaliation against our exports or requiring further payments of taxpayer funds to foreign agricultural industries,” wrote Senators Pat Roberts, R-Kan., John Thune, R-SD, Chuck Grassley, R-Iowa, Mike Johanns, R-Neb., Joe Donnelley, D-Ind., and Sherrod Brown, D-Ohio.
“Having reformed these programs away from market-distorting price fixing just last year, we should not consider reinserting such provisions as contained in AMP to be a reform of our commodity support policies,” the six senators noted.
Brazil initiated a case against the U.S. cotton and GSM-102 programs in 2002 and won a WTO challenge that includes the right to impose $830 million in retaliatory tariffs on U.S. goods while U.S. lawmakers work on crafting a new farm bill solution. In the interim, the U.S. government pays $147.3 million annually to the Brazilian Cotton Institute.
The three organizations relied on an analysis by law firm White & Case, which compared and contrasted the House and Senate farm bill provisions with WTO decisions made in the U.S. cotton case initiated by Brazil.
The analysis noted that the House PLC program “is highly problematic from a WTO perspective” but didn’t rule out potential WTO challenges to the Senate’s AMP program.
“Because payments under the AMP program would not be coupled to production acres, there is a smaller risk both that other WTO Members would challenge it and that a panel would conclude the program is inconsistent with U.S. obligations under the SCM Agreement. That said, it is important to bear in mind that AMP program would be similar to the current CCP
program, which was successfully challenged by Brazil with respect to cotton.”
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