Bridges Weekly Trade News Digest • Volume  • Number  • 28th November 2007

WTO In Brief

WTO MEMBERS SCRUTINISE US AG SUBSIDY NOTIFICATION; FAO WARNS OF HIGH FOOD PRICES

Information provided by the US to the WTO on its agricultural subsidy spending between 2001 and 2005 came under close scrutiny at a 21 October meeting of the organisation’s Committee on Agriculture. Members criticised the notification for its tardiness as well as for the way in which Washington had classified certain types of payments (see BRIDGES Weekly, 10 October 2007, http://www.ictsd.org/weekly/07-10-10/story3.htm).

The ‘regular’ committee meets irrespective of whether negotiations are taking place to address issues such as Members’ compliance with their WTO obligations.

The US, which submitted its subsidy notification in October after a multi-year gap, sought to respond to some fifty written questions presented by Members such as Australia, Canada, the EU, Japan and New Zealand.

Members questioned the US decision to notify ‘direct payments’ to farmers as ‘green box’ subsidies, which face no spending caps since they are supposed to have minimal effects on trade and production. In its 2005 ruling in the Brazil-US dispute over cotton subsidies, the WTO Appellate Body found that these payments could not be placed in the ‘green box’: because they were not available for growing fruit or vegetables, they did in fact influence farmers’ production decisions. Canada and Brazil’s ongoing WTO complaint against US farm subsidies alleges that were it not for such inappropriate classification, Washington would have often exceeded its spending limits for trade-distorting payments since 1999 (see related story, this issue).

Brazil also probed why the US had decided to classify its ‘counter-cyclical’ payments to farmers, which rise when world prices fall, as "non-product specific" support. It emphasised that the WTO cotton ruling had deemed such payments to provide specific support to cotton.

Also at the meeting, the UN Food and Agricultural Organization (FAO) warned Members of the potential impact that current high prices for most food and feed commodities could have on food-importing developing countries. It said that developing countries could face an increase of over 25 percent in the price of imported foodstuffs. Least-developed countries (LDCs) and net-food importing developing countries (NFIDCs) faced paying twice as much for their imports in 2007 as in 2000. The FAO attributed this to an increase in the volume of imported foodstuffs; a large increase in the world market price of cereals driven in part by biofuels; declining volumes of food aid; and a large increase in ocean freight rates.

UNCTAD emphasised the need to find long-term solutions to food security problems in developing countries.

ICTSD reporting.