U.S.-Canada WTO Corn Trade Dispute


 

Publication Date: May 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

Type:

Coverage: Canada

Abstract:

On January 8, 2007, Canada initiated a World Trade Organization (WTO) dispute settlement case (DS357) against certain aspects of U.S. commodity programs in general, and the U.S. corn program in particular, by requesting consultations with the United States under the auspices of the WTO dispute settlement process. Canada's WTO case represents the present manifestation of long-simmering concerns that previously surfaced in 2005 in the form of an anti-dumping (AD) and countervailing (CV) duty case brought by Canadian corn producers who sought legal action for alleged unfair subsidization and dumping of U.S. corn in Canadian markets. Canada's International Trade Tribunal (CITT) ultimately ruled in favor of the United States on the 2005 AD/CV duty case. However, Canadian corn producers continued to press their concerns with the Canadian government about perceived unfair subsidization of U.S. corn. This pressure, and other supporting factors, likely contributed to the Canadian government's decision to request WTO consultations with the United States, thereby setting in motion the WTO dispute settlement process with its explicit rules and timetables for resolving a trade dispute.

In making its charges, Canada clearly seeks to build on Brazil's successful challenge of various provisions of the U.S. cotton program (WTO dispute settlement case DS267). Canada raises three explicit charges against U.S. farm programs. First, Canada contends that U.S. corn subsidies have caused serious prejudice to Canadian corn producers in the form of market price suppression in Canadian corn markets during the 1996 to 2006 period. Second, Canada argues that the U.S. export credit guarantee program operates as a WTO-illegal export subsidy. Third, Canada claims that U.S. fixed direct payments are not green-box compliant and should therefore be included with U.S. amber box payments, in which case the United States would be in violation of its $19.1 billion amber box spending limit for 1999, 2000, 2001, 2004, and 2005.

Since Canada's initial request for WTO consultations, several other WTO members -- including Argentina, Australia, Brazil, the European Communities (EC), Guatemala, Nicaragua, Thailand, and Uruguay -- have requested to join the consultations as interested third parties.

If successfully litigated, this case could affect all U.S. agricultural policy since the charges against the U.S. export credit guarantee and direct payment programs extend beyond corn to all major program crops. Should any eventual changes in U.S. farm policy be needed to comply with a WTO ruling in Canada's favor, such changes would likely involve action by Congress to produce new legislation. Congress will be revisiting U.S. farm legislation this year and could potentially address some of the issues raised by Canada's WTO challenge. U.S. Secretary of Agriculture, Mike Johanns, who has been advocating that a new Farm Act should be designed to make U.S. farm policy be "beyond challenge," has recently proposed changes to U.S. commodity programs that, if accepted in a new Farm Act, potentially could alleviate many of Canada's concerns while minimizing the likelihood of future WTO challenges. This report will be updated as events warrant.