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EU, China and five other World Trade Organization members indicate subsidy may violate international rules

Bloomberg, Content provider

June 17, 2019

2 Min Read

by Bryce Baschuk

The European Union joined China and five other World Trade Organization members in criticizing the Trump administration’s $16 billion assistance program for U.S. farmers, indicating the bailout may violate international rules.

The U.S. Department of Agriculture’s latest farmer assistance program could exceed America’s WTO subsidy commitments and unduly influence U.S. planting decisions, according to a document published on the WTO website June 17.

Last month the USDA said it authorized as much as $16 billion in agriculture assistance programs in order to respond to the “impacts of unjustified retaliatory duties on U.S. agricultural goods.” The U.S. administration said last year that it would deliver as much as $12 billion to farmers after Beijing retaliated against U.S. agricultural products.

“The new U.S. farm subsidy package will throw a dark shadow over efforts to negotiate fairer WTO rules,” Jonathan Hepburn, a Geneva-based independent policy analyst, said in an interview.

Agricultural Targets

Over the past two years some of America’s largest trading partners have leveled tariffs on billions of dollars worth of agricultural goods to retaliate against President Donald Trump’s duties on steel, aluminum and other goods.

The U.S., which has not officially notified the WTO of the program, will have the opportunity to respond to the various questions at the WTO’s June 25-26 agriculture committee meeting in Geneva.

The EU asked the U.S. for details on the timing and eligibility criteria for the U.S. subsidies and questioned whether the U.S. measures would qualify as WTO-permitted subsidies or subsidies that distort international trade.

China went a step further and alleged that the U.S. program would exceed America’s WTO limits for trade-distorting subsidies if current prices and volumes remain stable.

It could be possible for the U.S. to craft its agricultural purchasing program in a way that adheres to WTO rules as long as the U.S. subsidies don’t exceed America’s WTO commitment to cap trade-distorting subsidies at $19 billion per year.

“The sheer scale of the proposed U.S. program makes it contrary to the spirit of the WTO’s Agreement on Agriculture, which sought to move governments away from subsidy programs considered by the WTO membership to be most trade distorting” former Australian WTO negotiator Dmitry Grozoubinski said in an interview.

To contact the reporter on this story:

Bryce Baschuk in Geneva at [email protected]

To contact the editors responsible for this story:

Ben Sills at [email protected]

Richard Bravo, Raymond Colitt

© 2019 Bloomberg L.P.

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