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USDA report raises WTO issues

Let's see. Conservation payments go in the green box. Market Loss Assistance payments in the amber box. That check to Uncle Fred in the red box….

As if they didn't have enough arcane terminology, farmers are faced with still more jargon in the World Trade Organization's use of colored boxes to separate classes of support for agriculture.

The WTO's amber and green boxes made news when Agriculture Secretary Ann Veneman announced she was submitting notification of U.S. domestic support payments for the 1998/99 marketing year to the WTO.

USDA reported the United States provided $10.4 billion in trade-distorting “amber box” support to U.S. producers through market price support programs, loan deficiency payments and marketing loan gains under commodity loan programs in the 1998/99 year.

The report did not please agricultural leaders like House Ag Committee Chairman Larry Combest who fired off a letter expressing his “stern displeasure.

“USDA's decision to classify the 1998 payments as trade distorting is equivalent to a unilateral disarmament that cedes ground and gains nothing in return,” he said. “The USDA decision creates a precedent for classifying assistance that will apply to payments also made in 1999 and 2000 and restrict our ability to make those in the future.”

He said market loss payments are made after the production year and could have no effect on producers' planting decisions. “Additionally, since market loss payments are based on Agricultural Market Transition Act payments, this action could call into question the placement of non-trade distorting AMTA payments in the WTO green box.”

The United States has “strong adversaries in the international agricultural trade arena and must be resolute in its pursuit of free and fair trade,” Combest said. “Abandoning the principle of assistance to our farmers does not instill faith that the outcome of trade negotiations will be fair to U.S. agriculture.”

Veneman stood her ground in a press release. “Under WTO rules, these Market Loss Assistance payments must be classified in the amber box,” she said. “By classifying them properly, we set the right precedent for other nations in the way they classify their own trade-distorting subsidies, and we set an open and above board tone as we move toward a new round of trade negotiations.”

She noted that $10.4 billion is half of the permitted WTO ceiling for amber box payments for the United States for that year. “In no way does this notification jeopardize our continuing flexibility to support American farmers and ranchers in the future.”

The press release said WTO rules require that any domestic support payments linked to prices or production be considered trade-distorting and, therefore, amber box. Amber box support over a specified level is subject to WTO Uruguay Round disciplines.

While Combest would disagree with characterizing AMTA payments as being linked to price or production, the reasoning may reflect a philosophy that appears to be gaining ground within the administration. That is, by helping keep farmers in business, market loss assistance payments are, in effect, encouraging more production, which leads to lower prices, which leads to lower farm income or a downward spiral that threatens to take U.S. agriculture down with it.

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