Monday, January 22, 2007

Subsidy sadness: American nations call U.S. to task over corn subsidies


Terra Espana: Cinco paises latinoamericanos unen a queja contra EEUU por subvencionar maiz

CBC News: More countries join Canada's U.S. corn complaint

At last count, five Latin American countries—Brazil, Argentina, Guatemala, Nicaragua, and Uruguay—had joined Canada in filing a complaint with the World Trade Organization (WTO) regarding the United States’ continued and allegedly exorbitant subsidies for corn and other agricultural products. Brazil, Argentina, and Canada are counted among the world’s top ten producers of corn. The U.S. is the globe’s top corn producer. All countries involved in the complaint are members of the WTO.

The complaint to the WTO makes the following allegations:

***That U.S. corn subsidies--which have averaged nearly $9 billion per annum over the last two years--have caused a “significant distortion” in domestic corn prices.

***That the U.S. accounted for only 41% of global corn production in 2005-2006 but exported 68% of all corn traded over that period.

***That U.S. subsidies for other agricultural products, including wheat, sugar, and soybeans, exceed subsidy levels permitted by the WTO.

According to WTO procedures, the filing of the complaint marks the beginning of a consultation period, wherein parties have three months to resolve the dispute among themselves.

If there is no resolution at the close of the designated period, the parties may request that the WTO convene a panel of experts to formally investigate the matter and reach closure in a manner "mutually acceptable" to all parties.

One of the WTO’s primary purposes is to facilitate global trade. For international trade to function properly, protectionist behavior, such as subsidies is limited. This does not mean that countries may not subsidize domestic production, only that a subsidy may not be used in a manner that harms other competitors in the global market. This is because exorbitant subsidies permit producers to sell their goods at artificially low prices without a loss. The inability of producers in other countries to compete results in a distorted market and disgruntled trading partners.

Without dispute resolution processes provided by the WTO and international trade agreements, exorbitant subsidies by one country would doubtless cause a domino effect of protectionist trade policies by affected countries that would seriously disrupt global trade.


Is the health of the international market really that important? Why should any country sacrifice its sovereignty just for the sake of trade?

Assuming that a healthy international market is important, what does this say about the notion of a nation-state? Does it affect domestic politics (remember that in the U.S., agricultural subsidies are part of the annual appropriations process conducted by the U.S. Congress)?

Click here for more information on the WTO dispute resolution process.

Click here for more information on WTO limits on subsidies, anti-dumping, and countervailing measures.

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