Brazil, India, Other Developing Nations Violate Ag Subsidy Limits

November 28, 2011

A new study of official foreign government data unearthed by DTB Associates shows that a rapid run-up in farm subsidies have put many developing nations, including Brazil Thailand, and India, in direct violation of internationally agreed to subsidization limits.

The findings are consistent with a detailed handbook of foreign farm subsidies by Texas Tech University, which noted that the United States now ranks low on both the tariff and subsidization scale when compared to its competitors.

Crop support prices in many key developing nations are higher than in the United States and DTB explained, “Since the countries involved are major producers and consumers of agricultural products, the trade-distorting effects of the subsidies are being felt globally.”

The World Trade Organization (WTO) measures subsidies and price supports to the farm sector through a calculation known as the Aggregate Measure of Support, or AMS.

WTO member countries are required to maintain subsidization within the AMS cap or certain “de minimus” levels (5% for developed countries; 10% for developing countries).  Exceeding the caps constitutes a violation of WTO rules and can result in WTO-sanctioned punishments.

The United States and the European Union—long the focus of WTO negotiations—are both under their respective caps, while each of the developing nations examined have greatly exceeded WTO limits.

Because the spike in subsidization is a relatively new development, and because offenders have been lax about properly reporting policy changes to WTO officials, the trend has gone largely unnoticed.

“We believe that when trade officials examine these developments, they will discover clear violations of WTO commitments,” concluded the report, which was shared with Senate officials in November.

Larry Combest (R-TX), the former chairman of the House Agriculture and Intelligence Committees, says these findings are significant on two fronts.

“These same countries, while constantly attacking U.S. farm policies, essentially derailed international trade talks through an unwillingness to make significant concessions of their own,” he said.  “As Congress writes the next U.S. farm bill, lawmakers must be aware that our global competitors are aggressively stepping up their subsidies to the potential detriment of U.S. farmers and ranchers.  A strong U.S. farm policy and international reform are key—unilateral disarmament makes no sense.”

In the coming months, Farm Policy Facts will report on DTB’s findings for specific countries.