PDF _ RS22522 - Potential Challenges to U.S. Farm Subsidies in the WTO: A Brief Overview
1-Jun-2007; Randy Schnepf and Jasper Womach; 6 p.

Update: Previous releases:
October 25, 2006

Update: This report examines U.S. commodity subsidy programs against an emerging set of criteria that test their potential vulnerability to challenge in the World Trade Organization. The criteria are whether the subsidies cause adverse effects contributing to serious prejudice under the Agreement on Subsidies and Countervailing Measures (SCM), Articles 5 and 6.3. When measured against these criteria, available evidence suggests that all major U.S. subsidy program crops, particularly crops receiving benefits under both the counter-cyclical payments program and marketing loan provisions are potentially vulnerable to dispute settlement challenges. If such challenges occur and are successful, the WTO remedy likely would imply either elimination, alteration, or amendment by Congress of the programs in question to remove their adverse effects. Alternately, in light of an adverse ruling the United States could choose to make compensatory payments (under agreement with the challenging country) to offset the alleged injury. In spite of U.S. vulnerability, there are reasons why challenges may rarely be filed. Disputes are economically and diplomatically costly, and a lost challenge can help to legitimize the disputed program. This report, which will be updated, is an abridged version of CRS Report RL33697, Potential Challenges to U.S. Farm Subsidies in the WTO. Citations to sources appear in that report.

Abstract: Expiration of the WTO’s so-called Peace Clause on January 1, 2004, appears to have made U.S. export and domestic support programs more vulnerable to legal challenge under WTO rules. This report examines U.S. commodity subsidy programs against an emerging set of criteria that test their potential vulnerability. The criteria are whether the subsidies cause adverse effects contributing to serious prejudice under the Agreement on Subsidies and Countervailing Measures (SCM), Articles 5 and 6.3. When measured against these criteria, available evidence suggests that all major U.S. program crops, particularly crops receiving benefits under both the counter-cyclical payments program and marketing loan provisions (i.e., corn, soybeans, wheat, rice, cotton, peanuts, barley, sorghum, oats, and minor oilseeds), are potentially vulnerable to dispute settlement challenges. If such challenges occur and are successful, the WTO remedy likely would imply either elimination, alteration, or amendment by Congress of the programs in question to remove their adverse effects. Alternately, in light of an adverse ruling the United States could choose to make compensatory payments (under agreement with the challenging country) to offset the alleged injury. In spite of U.S. vulnerability, there are reasons why challenges may rarely be filed. Disputes are economically and diplomatically costly, and a lost challenge can help to legitimize the disputed program. This report, which will not be updated, is an abridged version of CRS Report RL33697, Potential Challenges to U.S. Farm Subsidies in the WTO. Citations to sources appear in that report.

 [read report]

Topics: Agriculture, Economics & Trade, Information

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