US and EU Agricultural Subsidies May Face Legal Challenges

By Oxfam

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Subsidies by the United States and European Union for a variety of agricultural commodities violate international trade agreements and expose them to legal challenges at the World Trade Organization, according to new research published today by Oxfam America.

Oxfam’s new paper identifies subsidies totaling $13 billion for corn, rice, sorghum, fruit juice, canned fruit, tomatoes, dairy products, tobacco, and wine that violate international trade agreements. A team of legal experts and economists whom Oxfam consulted concluded that developing countries harmed by the subsidies could bring multiple cases against the US and the EU and win.

“The WTO cases on sugar and cotton against the EU and the US are just the tip of the iceberg,” said Gawain Kripke, senior policy advisor for Oxfam America. “Oxfam does not oppose all farm subsidies, but we know that many subsidies hurt developing countries, and now we’ve shown they are illegal under WTO rules.”

Oxfam found that the US has paid over $25 billion to its corn farmers over the past five years for a crop that would otherwise have lost $20 billion over the same period. Those subsidies have depressed world prices and caused losses of up to $4 billion for countries like Argentina, Paraguay, and South Africa. Rice farmers in the US receive over a billion dollars a year in subsidies, which equals the total value of the US crop. Major rice exporters such as Guyana, India, Suriname, Thailand, and Uruguay could all have strong claims against the US.

The report also details subsidies to EU tomato processors totaling $350 million a year, enabling EU countries to be the world’s leading exporters of tomato paste, while growers in Chile, South Africa, and Tunisia lose out. The EU also subsidizes its fruit-juice-processing industry at a rate of more than 300%, or $295 million a year. Growers from Argentina, Brazil, Costa Rica, and South Africa could earn an additional $40 million a year if the EU removed its subsidies and the world juice price rose by just 5%, according to Oxfam.

The WTO’s mechanism for settling trade disputes is an expensive, complicated option of last resort, says Oxfam, which contends that negotiation rather than litigation is the best way to reform global trade rules to promote development. But now, only weeks away from a crucial meeting in Hong Kong, Oxfam is concerned that the US and the EU are not keeping to their promises to reform trade rules and that the agricultural reforms crucial to poor countries will not be delivered.

“Poor countries shouldn’t have to seek development through the courts, but it seems that development is dangerously slipping to the bottom of the agenda in this round of trade talks,“ continued Kripke. “Unless the EU and the US live up to their promises at the WTO, they will leave developing countries no option but the courts.”

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