WTO Trade Policy Review of U.S. Agricultural Policies


The WTO completed its biennial review of U.S. trade policy late last year.   The purpose of the review is to improve compliance by members for rules and commitments made under WTO agreements and provide greater transparency in understanding policies and practices of members. It is not intended to serve as a basis for enforcement of specific obligations or for dispute settlement.  It’s a snapshot of how the WTO and other members views U.S. trade policy.

The four members with the largest shares of world trade, the EU, U.S., Japan and China, are reviewed every two years, the next 16 every four years, and other members every six years.  A longer period may be used for least-developed country members.  The WTO secretariat prepares a report as does the reviewed country.  A two day meeting is held to hear prepared remarks and oral comments from all interested members.

The review of U.S. policies attracts considerable attention because the U.S. economy was estimated by the WTO at $15.1 trillion in calendar year 2011, the last full year available when the review was completed.  In 2011, 68 members of the WTO had the U.S. as their first, second, or third largest export market.  U.S. agriculture is of equal interest as one of the world’s largest with a value of farm production of $372 billion in 2011.  U.S. exports of $144.8 billion (WTO definition) in 2011 are the world’s largest and account for 11 percent of global agriculture exports.  U.S. imports are 6 percent of world imports.  From 2005 to 2011 the dollar value of U.S. agricultural exports more than doubled while imports increased by about 60%.  The U.S. share of global agricultural production and consumption is declining as the world totals grow at a faster rate than the U.S.

No major changes have been made in U.S. agricultural policy since the last review in 2010 because a new farm bill had not been passed when the report was written (and still has not).  The average U.S. agricultural import tariff is 8.5 percent, with 620 tariff lines at zero and a 350 percent tariff rate for a few tobacco products.  Other high tariffs are on sugar, peanuts, dairy products, beef, cotton and horticultural products like mushrooms.  The U.S. has notified the WTO Committee on Agriculture of 44 tariff rate quotas covering 171 tariff lines, mostly for dairy products, sugar products, dairy or sugar containing products and cotton.  For many of these same products the U.S. has reserved the right to use Special Agricultural Safeguards (SSG).  Volume SSGs have not been used since 2003, but price-based safeguards were used on 59 tariff lines in 2009 and 48 lines in 2010.

U.S. farm programs are followed closely by the WTO and member countries.  The report notes that direct payments are fixed, while price support loan costs and counter-cyclical payments have been declining due to higher market prices.  The 80 percent coverage of crop insurance for the principal crops was also explained as was the $7.3 billion premium subsidy and payment by the government of some insurance company operating costs and underwriting losses.

The Current Total Aggregate Measure of Support (AMS) for the U.S. has been declining with higher market prices, but the total support notified under the Amber Box, including amounts defined as de minimis levels with a limit of 5 percent of the value of production, increased from $8.5 billion in 2007 to $11.5 billion in 2009.  Crop insurance costs are included in the de minimis non-product-specific support and excluded from the Current Total AMS.

The report addressed sanitary and phyto-sanitary (SPS) issues, particularly the Food and Drug Administration (FDA) Food Safety Modernization Act (FSMA) that became law in January 2011.  Food facilities, including those outside the U.S., are required to renew their registration every two years.  Under the Food, Drug and Cosmetics Act, the facility is required to evaluate and prepare a written plan for hazards that may affect food it manufactures, processes, packs or holds.  FDA must set minimum standards for the production and harvesting of raw fruits and vegetables.  Food importers in the U.S. are now required to verify the food is produced in compliance with processes and procedures that ensure food safety.

The interest in U.S. agriculture could be seen in the remarks by the Trade Policy Review Body Chairman Eduardo Munoz Gomez, who is also Colombia’s ambassador to the WTO, as he closed the review.  In highlighting the areas where WTO members through prepared statements or questions encouraged the U.S. to take action, agriculture was the first area mentioned.  Topic raised included domestic support measures, SSG, food aid and export programs, beef, cotton, sugar and dairy.

Minutes of the meeting and questions and answers will not be available for several more weeks, but prepared statement by countries and media reports give indications of specific concern.  The next farm bill was at or near the top of the list with concerns that Amber Box payments will likely go up and the amount in the AMS will likely exceed the $7.6 billion cap for the U.S. proposed in 2006 for the Doha Round of WTO negotiations.  Since those talks stalled out several years ago, it remains just a proposal, but is used as a reference point.

In addition to farm policy, the EU in a prepared statement had concerns on sanitary and phytosanitary issues including U.S. import restrictions for deboned EU beef and beef products based on BSE risks, barriers to exports for plant and plant products and 100% scanning of cargoes for national security reasons.

According to Inside U.S. Trade, some countries raised questions about increases in inspections of foreign food manufacturing facilities as part of the FSMA that give FDA new regulatory authority over imported food.  Some countries see the kind of regulatory overreach which U.S. agriculture has long complained about in other countries.  Smaller, developing countries will likely have difficulties meeting all the requirements.

To producers in other countries, U.S. programs look inconsistent with obligations under WTO rules just as U.S. producers question the programs in other countries.  The Trade Policy Review provides a forum every two years to probe deeper to understand U.S. programs and how they may affect our trading partners.  The reviews are a healthy exercise for the U.S. and other countries.

Ross Korves is an Economic Policy Analyst with Truth About Trade &Technology (www.truthabouttrade.org)

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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