U.S. Reforms Farm Policy while Foreign Competitors Ramp Up Trade-Distorting Subsidies

February 27, 2015

The critics of U.S. farm policy should feast their eyes on a new study that puts into perspective what America’s farmers are up against on the global market. While the U.S. made sweeping reforms and cuts to farm policy in the 2014 Farm Bill, its competitors were busy ramping up trade-distorting subsidies for their own producers. For some countries, support price levels for certain commodities have increased by more than 100 percent over the last decade, according to the report.

The nations in question include Brazil, China, India, Turkey, and Thailand – all member countries of the World Trade Organization (WTO). The report, which was sponsored by U.S. commodity organizations including the USA Rice Federation and is an update of a 2011 study, explains that “these countries are major producers, consumers, and in many cases, exporters of agricultural products, the effects of [their] policies are felt globally.”

Whereas farm policy critics have vilified U.S. support payments, especially the now abolished direct payments, this research demonstrates that America’s foreign competitors are protecting their own agricultural producers with high and rising subsidies even as modest support for U.S. producers continues to decline. For example, for 2013/2014 China’s subsidies for wheat, corn, and rice were markedly higher than the support in the U.S. and in some cases they were more than double.

Most damaging, the study further exposes that these countries are in violation of their obligations under the WTO’s Agriculture Agreement. The extent of these violations is unknown as some of these countries are “delinquent in reporting their subsidy programs to the WTO” and are using dubious methodologies that “underestimate the true level of support.”

“Our joint study showed that these five advanced developing countries have steadily increased subsidies to their producers to the point of being out of compliance with their WTO obligations,” said USA Rice Chief Operating Officer Bob Cummings. “Several of these countries are also very likely using export subsidies to dispose of surplus production which runs counter to the spirit and letter of WTO agreements.”

All WTO member countries must abide by limits on the level of domestic support – described in the Agriculture Agreement as the Aggregate Measure of Support (AMS) – and are required to report their support levels to the WTO regularly. The study showed China, India, Turkey, and Thailand have exceeded their AMS commitments by large margins and more than 650 notifications were late as of November 2014. Turkey has not reported its support since its 2001 crop year. China has not reported since 2008 and India is only current through 2010.

Meanwhile, the United States has always met its annual reporting commitment and has never exceeded its AMS limit.

As WTO discussions continue in an effort to reach a Doha Round agreement, it is important that policy makers, trade negotiators, and the general public have a clear understanding of the status of the world’s farm policies.

“U.S. wheat farmers strongly support the goals of the WTO and the Doha Round,” said U.S. Wheat Associates President Alan Tracy. “We also believe every WTO member must follow the rules. Sadly, the facts we have uncovered show this is not the case.”

Further, given this reality, Congress must not put America’s farmers and ranchers at a competitive disadvantage by weakening U.S. farm policy.