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By George Caldwell
Associate Director Commodity & Regulatory Activities
There is concern growing in the agriculture community as to what impact will be felt as a result of the recent ruling by the World Trade Organization (WTO), as it agreed with Brazil in its challenge to United States farm programs.
Brazil challenged numerous U.S. agricultural programs as being inconsistent with the trade provisions outlined in the WTO negotiations.
Brazil's principal claims were that:
•The U.S. domestic support for cotton in the farm programs caused "serious prejudice" to the Brazilian interests by depressing world cotton prices and unfairly expanding U.S. world market share.
•The U.S. export credit guarantee program for commodities acts as an export subsidy.
•The cotton "Step 2" payment program is a prohibited export subsidy.
Challenges included in the domestic support are direct payments, production flexibility contract payments, counter-cyclical program payments, marketing loan program and market loss assistance payments.
Step 2 is a program that is designed to help keep U.S. cotton competitive in the world market. The export credit guarantee program extends credit to other nations to purchase U.S. products.
The first deadline set by the WTO panel is July 1, 2005 to withdraw the Export Credit Guarantee and the Step 2 program. The U.S. Trade Representative (USTR) office has officially notified the WTO that we intend to comply and noted the United States requires a "reasonable period of time" to implement changes. The other findings in the ruling do not have a timetable for implementation of changes.
It is unclear at this time when the necessary changes will be implemented to make the programs compliant with the WTO guidelines. The programs in question are part of the current farm legislation and have some flexibility for minor changes that could correct the program. Any major changes, however, will require legislation and that could take months.
Representatives on the House and Senate Agriculture Committees and most of the agriculture organizations support keeping the current farm program intact and making as few changes as necessary to comply with the WTO ruling. Any changes in our farm program should be delayed until after the next round of WTO negotiations, which will address new agricultural trade guidelines. Changes, then, should be addressed in the next farm bill.
