Financial Daily from THE HINDU group of publications
Friday, May 31, 2002
Agri-Biz & Commodities
Farm subsidy within limits, claims US
MUMBAI, May 30
IN the context of the US Farm Bill and US WTO (World Trade Organisation) obligations, even while conceding that it adopts trade-distorting policies, the US has defended them by claiming that its agricultural products subsidy is less than other countries.
According to the US Department of Agriculture (USDA), when the Federal Agriculture Improvement and Reforms Act of 1996 went into effect, the North American Free Trade Agreement (NAFTA) and the Uruguay Round Agriculture Agreement (URAA) were just beginning to be implemented.
``Today, the situation is different,'' USDA said. Trade obligations play a large role in the way countries support their farmers. The start of a new round following the Doha Development Agenda has brought into sharp focus the trade-distorting policies of developed countries, such as the European Union (EU), Japan and the US, the agency conceded.
Developed countries account for virtually all domestic support and export subsidies, which distort agricultural markets worldwide. However, the US subsidises agricultural products less than other countries.
For instance, it is pointed out that the US domestic support ceiling is $19.1 billion, compared to the EU ceiling of about $60 billion and Japan's ceiling with respect to trade-distorting policies of $30 billion.
In the area of market access, US tariffs on agricultural imports average a modest 12 per cent, compared to more than 60 per cent for all WTO-members, more than 50 per cent for Japan, and more than 30 per cent for the EU and Cairns group of 17 agricultural exporting nations.
Under URAA commitments, to which all member countries including the US adhere, policies that seriously distort trade were differentiated from those with minimal trade effects. The two respective categories were labelled ``amber box'' and ``green box''.
For amber box policies, countries are not able to exceed the level of support to which they have agreed as measured by their Aggregate Measure of Support (AMS). The AMS essentially totals, commodity by commodity, a country's support measures linked to price of production.
The WTO amber box ceiling for the US is $19.1 billion. With the enactment of Food Security and Rural Investment Act of 2002, (FSRIA) domestic spending levels appear high. ``However, they are no higher than what has been provided to US farmers over the past few years when one adds appropriations and the total of ad hoc programmes authorised in various acts to annual farm production costs''.
Much of the new support is minimally trade distorting, USDA said. In addition, the FSRIA contains a provision that mandates the Secretary of Agriculture to keep spending on domestic programmes within US WTO commitments. This so-called ``circuit-breaker'' provision will mean that the US will not exceed its WTO limits, the agency has pointed out.
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