Another Blow from the WTO
Trade organization hands down its third ruling against the US in as many weeks
LOS ANGELES - 09/09/04 - For the third time in as many weeks, the World Trade Organization has handed down?decisions against US ruling against?US anti-dumping and cotton subsidy policies, and rejecting Washington's?appeal of an earlier ruling upholding Canadian wheat subsidies.
Yesterday, the Geneva-based trade organization acted on a complaint from Brazil, ordering the US to withdraw some of its support programs for producers of cotton and several other as-yet-unnamed commodities.
The WTO panel, which ruled on a complaint from Brazil, found that many US programs are illegal export subsidies or domestic payments that are higher than permitted by WTO rules and that some of the US credit guarantee programs are export subsidies because they are provided at rates "that did not cover the long-term cost of running the program."?
Brazil had charged that the US has maintained its position as the world's second-largest cotton grower and largest exporter through a system of subsidies to growers amounting to more than $12 billion in the four-year period between August, 1999 and July of last year.
In response to the 351-page ruling, US Secretary of Agriculture Ann Veneman said, "US farm programs were designed to be fully compliant with our WTO obligations. We will strongly defend the US position and work to ensure a level playing field for U.S. producers."
The WTO decision was reached in June, but details were reportedly withheld until yesterday.
Washington has insisted that the subsidies are "within permitted levels," saying the bulk of the payments to growers are not subsidies "as defined by the WTO and should not be included in the calculations."
The panel, though, found that the payments led to "significant price suppression" on the world market, causing "serious prejudice to the interests of Brazil" and recommended that the US should remove the illegal subsidies "without delay."
US Trade Representative Robert Zoellick reacted to the?cotton decision calling it a "mixed verdict" and saying'the US would appeal "parts" of the ruling.
"We strongly disagree with some aspects of the panel report, which we will be appealing," he said. "The facts do not show that US farm programs have distorted trade and caused low cotton prices."
Zoellick reiterated the US position that some of the issues raised by the panel "should be resolved in the ongoing WTO negotiating round, not in dispute-settlement" proceedings.
"At any rate," the USTR said, "the lengthy appeals process will mean no change to US farm programs any time soon."
One part of the cotton ruling concerned what is called the "peace clause" from the 1994 agreement creating the WTO.
The clause?generally prohibited challenges to domestic and export agriculture subsidies during the agreement's implementation period.
The panel ruled, however, that, in the case of cotton,'the peace clause did not cover US domestic subsidies and export credit guarantees.
The cotton subsidy ruling comes just a week after the WTO gave the European Union and seven other countries - Japan, Canada, Brazil, India, Mexico, Chile, and South Korea - the go-ahead to impose some $150 million in sanctions on US-sourced exports because of a failure by the US Congress to revoke the so-called Byrd Amendment.
The?controversial law gives US companies a share of the money raised through anti-dumping duties levied on foreign firms.
The amendment, which became law in 2000, was repeatedly declared illegal by the WTO and has been consistently opposed by the Bush Administration, which has urged Congress to drop the measure several times over the past three years.
The European Union and its co-complainants argued successfully at the WTO that the payments to US-based ball bearing, steel, candle, pasta, seafood and other companies amounted to an illegal subsidy.
The WTO panel ruling on the amendment - named after its primary sponsor Democrat Senator Robert Byrd of West Virginia - set no amount for retaliation, but laid down a formula which complainant countries could use to fix punitive duties.
They had asked for sanctions equal to the amount the US firms have received since the amendment went into effect, but arbitrators set the figure at 72%.
Japan would be the biggest beneficiary of the ruling as Japanese companies have been slapped with some two-thirds of the anti-dumping levies imposed by the US so far this year, according to trade officials.
The day before the trade organization announced its Byrd Amendment decision, it rejected a US appeal against a ruling earlier this year exonerating the export policies of the Canadian Wheat Board.
The WTO's appellate panel upheld the findings of a panel of trade judges in February that the Wheat Board's exclusive right to buy and sell western Canadian grain for export, and its right to set the initial price, did not break world trade rules.
In the earlier verdict, the judges backed a US challenge to parts of Canada's import policy, but neither side appealed that part of the decision.
The industry-controlled and politically influential Wheat Board has a monopoly on wheat exports from Canada's "Grain Belt" provinces of Alberta and Manitoba and has been a frequent target of complaints from the US over the past decade that it subsidizes farmers.
Under the terms of the February WTO ruling, Ottawa must change rules that prohibit the mixing of eastern and western grain for export sales and modify its rail revenue cap.
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