World Trade Organization launches inquiry into US farm subsidies; Canada, Brazil protests have effect

The WTO has commenced an investigation into US farm subsidies following protests from Canada and Brazil. The Canadians and Brazilians allege that the US has exceeded its $19.1 billion cap on farm subsidies in six of the past eight years, including subsidies for biofuel feedstocks such as corn and soya.

It will be the first time the World Trade Organization has ruled on energy subsidies.

The convergence of energy and agriculture in the biofuels industry is expected to pose thorny questions for the WTO. While neither sector has enjoyed free trade conditions, the subsidy mechanism which has supported national agriculture interests has attracted negative attention far more than the cartel approach employed in the oil industry.

The issue is a key point of contention imperiling the Doha round of global trade talks. The United States and European Union have blocked a Brazilian proposal to include biofuels among “environmental goods” scheduled for tariff reduction or elimination in the next world trade treaty. The US and European position is that the environmental designation rules are for industrial products, not agriculture.

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