The federal government is going after U.S. farm subsidies at the World Trade Organization.
The government is challenging the United States over subsidies paid to corn growers, as well as its use of export credits and its total spending on agricultural support programs.
Ottawa this week formally requested consultations with the U.S., which is the first step in the WTO’s dispute settlement process.
If consultations fail, Canada can request that a WTO panel be set up to adjudicate the case.
“The U.S. has been providing subsidies to its agricultural producers that create unfair market advantages,” international trade minister David Emerson said in a Jan. 8 written statement.
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In a background paper released at the same time, Ottawa said U.S. government payments to its corn growers during the last two marketing years totalled $18 billion US and have significantly distorted corn prices in Canada by promoting increased corn production south of the border.
Canada is also challenging U.S. export credit guarantees that Ottawa says subsidize the export of certain agricultural products.
Canada also argued that total spending on trade-distorting domestic programs in the U.S. exceeds its commitments in certain years and is therefore in violation of the WTO agreement.
“We hope to see the U.S. live up to its WTO obligations, particularly given that it has the opportunity to do so when it rewrites its farm bill this year,” said Emerson.
Bob Friesen, president of the Canadian Federation of Agriculture, welcomed Ottawa’s decision to go after U.S. subsidies through the WTO.
“It’s a very good start. We’ve long implored the government to do whatever they have to do in order to level the playing field, whether it’s through a new WTO agreement or through actions such as this.”
He said the U.S. has essentially built its ethanol industry through corn subsidies, and the U.S. livestock sector has also greatly benefited.
“So we would certainly encourage them to try to get the U.S. to reduce its spending, in such a way that it wouldn’t hurt any of our other sectors,” he said.
Friesen was skeptical that the consultation stage will resolve the issue, but he said that should enable Canada to ascertain whether the U.S. is accounting for the corn subsidies in terms of its WTO commitments.
Officials with Canadian corn grower organizations could not be reached for comment by Western Producer deadlines for this issue. However, those associations have previously lobbied Ottawa to launch a WTO challenge.
In a Nov. 23, 2005, statement, Canadian Corn Producers spokesperson Doug Eadie urged the government to take action.
“Canada can viably make a claim under the WTO dispute resolution process that the U.S. subsidies cause adverse effects and serious prejudice to its interests,” he said. “The time for Canada to act is now.”
The CCP said subsidies to U.S. corn growers totalled $21 billion US from 2003 to 2005, adding that American farmers would have lost $11.7 billion during that period had they been forced to rely only on market revenue.
More support
The Canadian Wheat Board also welcomed the news.
“We’re really happy to see the government moving to try to do something to rein in the subsidies that are causing such distortion in world agricultural trade and potentially try to influence the next U.S. Farm Bill this year,” said spokesperson Maureen Fitzhenry.
While one phase of the case is specific to corn, the two other parts, involving export credits and total support levels, could have an impact on other commodities, including wheat.
“Any success they have can only bode well for the entire grain trade,” she said.
Meanwhile, the CCP is appealing in Federal Court an April 2006 ruling by the Canadian International Trade Tribunal that imports of subsidized U.S. corn are not injuring Canadian producers. As a result of that ruling, import duties of $1.65 US per bushel that had been imposed on imports of U.S. grain corn in December 2005 were lifted and refunded.
No date has been set for a decision on the appeal.
