Agricultural Trade Issues in the 108th Congress
Report for Congress
Agricultural Trade Issues
in the 108th Congress
April 3, 2003
Charles E. Hanrahan, Geoffrey S. Becker, Remy Jurenas, and
Randy Schnepf
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Agricultural Trade Issues in the 108th Congress
Summary
Agricultural exports contribute to the prosperity of the U.S. agricultural
economy. Their value is projected at $57 billion for FY2003, and they are expected
to grow over the long term. These exports are the equivalent of about a quarter of the
gross income of U.S. farmers and generate both farm and nonfarm employment. U.S.
agricultural imports, expected to reach $43 billion in FY2003, are fostered by low
average U.S. tariffs, the relative strength of the U.S. dollar, and consumer tastes and
preferences for high value food products, the largest component of imports. A large
share of agricultural imports compete against U.S. products, but they also generate
economic activity in the U.S. economy.
Although many world economic and other factors influence exports, many farm
groups believe that U.S. agriculture’s future prosperity also depends on such U.S.
trade policies as 1) negotiating improved market access for U.S. products bilaterally,
regionally, and multilaterally; 2) assuring market access and consumer acceptance at
home and abroad for products of agricultural biotechnology; 3) assuring that China
adheres to its World Trade Organization (WTO) agricultural market access
commitments; and 4) resolving contentious commodity trade disputes. Some farm
groups, mainly producers of import-sensitive commodities, question opening U.S.
markets to foreign competition. Agricultural trade issues that are being or could beth
considered during the 108 Congress include:
Free trade agreements (FTAs) with Chile and Singapore, which Congress will take
up according to expedited or fast track procedures in the Trade Act of 2002 (P.L.
107-210). The 2002 Trade Act also requires congressional-executive branch
consultation on trade negotiations, which currently include negotiation of FTAs with
12 other countries or regional groups, negotiations with 34 western hemisphere
countries for the Free Trade Area of the Americas (FTAA), and multilateral trade
negotiations in the WTO.
Biotechnology regulations in other countries, especially in the EU, which will affect
U.S. commodity exports.
China’s implementation of its WTO market opening commitments for
agriculture, which has been slow and uncertain, and has failed to meet expectations
of U.S. agricultural exporters.
Country-of-origin labeling for meats, fresh produce, seafood and peanuts,
established by the 2002 farm bill, but whose implementation has raised questions
about benefits versus compliance costs.
Other trade issues of interest to the 108th Congress include commodity trade
disputes over cotton, wheat, meat and poultry, and sweeteners; the scope of
restrictions that should apply to agricultural sales to Cuba; and funding for U.S.
agricultural export and food aid programs.
This report will be updated.
Contents
Introduction and Overview..........................................1
Agriculture in Bilateral and Regional Free Trade Agreements.......3
Agricultural Negotiations in the World Trade Organization.........3
Biotechnology and Agricultural Trade..........................4
China and U.S. Agriculture..................................4
Country-of-Origin Labeling..................................4
Agricultural Exports to Cuba.................................4
Bilateral Trade Disputes....................................5
Appropriations for Agricultural Export and Food Aid Programs.....5
U.S. Agricultural Exports.......................................6
U.S. Agricultural Imports........................................7
Agriculture in Bilateral Free Trade Agreements..........................8
Issue ........................................................8
Background and Analysis.......................................8
Role of Congress.............................................10
For More Information.........................................11
Agriculture in the Free Trade Area of the Americas (FTAA)...............12
Issue .......................................................12
Background and Analysis......................................12
Role of Congress.............................................13
For More Information.........................................13
Agricultural Negotiations in the World Trade Organization................14
Issue .......................................................14
Background and Analysis......................................14
Role of Congress.............................................18
For More Information.........................................19
Biotechnology and Agricultural Trade.................................20
Issue .......................................................20
Background and Analysis......................................20
Role of Congress.............................................21
For More Information.........................................22
China and U.S. Agriculture.........................................23
Issue .......................................................23
Background and Analysis......................................23
TRQ Implementation......................................24
Tariffs ..................................................24
Value-Added Tax (VAT)...................................24
Biotechnology Regulations.................................24
Export Subsidies.........................................24
Other Problems..........................................25
Role of Congress.............................................25
For More Information.........................................26
Country-of-Origin Labeling.........................................27
Issue .......................................................27
Background and Analysis......................................27
Role of Congress.............................................28
For more information .........................................29
Agricultural Exports to Cuba........................................30
Issue .......................................................30
Background and Analysis......................................30
Role of Congress.............................................31
For More Information.........................................31
U.S. - Brazil WTO Cotton Dispute...................................32
Issue .......................................................32
Background and Analysis......................................32
Role of Congress.............................................33
For More Information.........................................34
U.S.- Canada Wheat Trade Dispute...................................35
Issue .......................................................35
Background and Analysis......................................35
Role of Congress.............................................36
For More Information.........................................37
Meat and Poultry Trade Disputes.....................................38
Issue .......................................................38
Background and Analysis......................................38
Russia ..................................................38
Mexico .................................................39
European Union..........................................39
Japan ..................................................39
Role of Congress.............................................39
Sweetener Disputes with Mexico.....................................41
Issue .......................................................41
Background and Analysis......................................41
Role of Congress.............................................42
For More Information.........................................42
Appropriations for Agricultural Export and Food Aid Programs............43
Issue .......................................................43
Background and Analysis .....................................43
Role of Congress.............................................44
For More Information.........................................45
Agricultural Trade Issues
in the 108th Congress
Introduction and Overview*
The increasing globalization of markets, including in agriculture, has brought
not only opportunity, but also uncertainty, to U.S. farmers and ranchers, rural
communities, and the businesses that sell to them and market their products. Up until
30 or 40 years ago, clearer distinctions could be made between domestic and foreign
markets for the products of agriculture – and early federal farm policy reflected this
distinction. Farm support programs were initially developed primarily to support
farm income and commodity prices through government spending. These programs
were often combined with supply management measures that included import
restrictions. U.S. export competitiveness and impacts on world trade relations and
patterns were less important considerations.
Mounting productivity has enabled U.S. agriculture to produce far more than
needed simply to meet domestic demand, which is relatively stable. Foreign markets,
once viewed more as an outlet for surplus production, are increasingly becoming the
foundation of agriculture’s prosperity (see “U.S. Agricultural Exports,” below). A
robust world economy and strong demand (particularly in the developing world
where consumer incomes and populations are rising) suggest strong export prospects
and positive farm returns. Conversely, when exports decline, farm income suffers
– as occurred after 1998 when the Asian financial crisis signaled the start of a wider
recession that hurt U.S. agricultural exports. (Congress subsequently provided
billions of dollars in federal farm aid to bolster farm incomes.)
Even when world economic conditions are favorable, U.S. agriculture enters the
global marketplace facing stiff competition from foreign exporting nations like
Canada, Australia, Argentina, and Brazil, where production costs may be competitive
with those in the United States, and the European Union (EU) and China, where
strong government support in the form of subsidies and/or other aids also play an
important and often trade-distorting role, according to many analysts. Furthermore,
the EU and China, along with others like Russia, Japan and Korea, have imposed
what U.S. interests consider to be unjustified sanitary and phytosanitary (SPS) and
technical measures (labeling rules, segregation of imported from domestic product,
etc.), high tariffs, and other import barriers that choke access to their markets. These
countries are, and are expected to remain, leading customers for U.S. farm products
– not only bulk grains but, increasingly, higher-value products like meats, poultry,
fruits and vegetables, and processed food products. Furthermore, their views about
agricultural markets influence the views of policymakers in developing countries.
* Prepared by Charles E. Hanrahan, Senior Specialist in Agricultural Policy, and Geoffrey
S. Becker, Specialist in Agricultural Policy, Resources, Science, and Industry Division.
Farm groups and agribusinesses are well aware that many world factors
influence U.S. agricultural exports. They count on lawmakers and Administration
officials to develop and promote U.S. trade policies that (1) aggressively reduce
foreign-imposed barriers (including tariffs, non-tariff barriers, domestic subsidies,
and export subsidies) to U.S. farm products, (2) hold other countries accountable for
commitments they have already made in existing trade agreements, (3) resolve
festering agricultural disputes with major trading partners, and (4) fully use USDA
export and food aid programs.
Some U.S. farm groups point out that, by maintaining barriers to U.S. imports
and their own high export subsidies and internal farm supports, not all countries have
fully honored existing trade agreements. Such concern has on occasion dampened
U.S. agriculture’s enthusiasm for entering into new trade agreements. Even when the
United States wins a case in dispute settlement, as it did in 1997, when the World
Trade Organization (WTO) ruled in favor of the United States that the EU cannot
ban, without scientific justification, beef produced with hormones, a country may not
comply with the decision. In the beef case, the United States was authorized to
impose retaliatory tariffs but U.S. beef still cannot enter the EU. Although U.S.
officials say more trade disputes are resolved favorably than unfavorably (often
through negotiation at lower levels rather than formal dispute resolution), there is a
perception among some farmers that established international trading rules have not
always worked to their benefit.
Moreover, some U.S. producer groups (particularly those representing import-
sensitive commodities) have pressed for continued protection of their own
commodities, and for more restrictions on foreign farm and food imports into the
United States. The U.S. average tariff on agricultural imports (12%) is much lower
than the global average tariff (62%) imposed on similar imports. However, the
United States along with other developed countries restricts the entry of “import-
sensitive” agricultural products to protect certain domestic producers from foreign
competition and the economic adjustments that such imports might entail. U.S.
tariff-rate quotas allow zero or low duty access for specified amounts of foreign beef,
sugar, peanuts, cotton, tobacco, and dairy products. Imports above the quota may
enter, but face prohibitively high tariffs. This usually makes such imports
uncompetitive in the U.S. market. Safeguards (involving the temporary use of higher
tariffs and/or quotas) allow producers of an affected commodity or product sector
additional time to adjust to increased import competition. Such adjustments will be
more severe in areas whose production must compete with imported products. In
recent years, the United States has imposed safeguards on imports of lamb meat and
wheat gluten to allow U.S. producers of those products time to adjust to foreign
competition. *
Foreign trading partners argue that such efforts are ill-advised because free trade
must flow in all directions, including into the United States. In some cases, other
countries are using trade negotiations and, sometimes, dispute settlement procedures
* For a discussion of trade protection using safeguards and adjustment issues, see CRS
Report RL31296, Trade Remedies and Agriculture; and CRS Report RL30610, Vital Wheat
Gluten: U.S. Industry Performance and Foreign Trade Implications of Section 201 Quotas.
in the WTO, to enhance their access to the U.S. market for agricultural products, or
to reduce competition in third-country markets from subsidized U.S. production. For
example, both the lamb and wheat gluten safeguard actions were successfully
challenged by other WTO member countries in WTO dispute settlement and were
not renewed by the United States. More recently, in September 2002, Brazil initiated
a case at the WTO against certain aspects of the U.S. cotton program.
Many developing countries are particularly concerned about what they see as
limited access to the U.S. market for the above import-sensitive and other
commodities. Such countries also see high domestic farm supports in richer
countries like the United States and EU member states as trade-distorting and are
seeking substantial reductions in such support in multilateral negotiations.
It is within this context of competing U.S. agricultural interests and other
countries’ concerns, that agricultural trade issues are likely to be taken up in
legislation, congressional-executive branch consultations on trade negotiations, or in
oversight hearings during the 108th Congress. Among the most prominent are the
following, which are discussed in more detail later in this report:
Agriculture in Bilateral and Regional Free Trade Agreements.
Unique to free trade agreements (FTAs), as illustrated by the North American Free
Trade Agreement (NAFTA), are provisions designed to fully liberalize trade (e.g.,
reduce and eliminate tariffs and quotas) between partners within an agreed- upon
time period. Provisions affecting agricultural trade are found in two bilateral FTAs
the Bush Administration concluded with Chile and Singapore late in 2002.
Agriculture also will likely prove to be a contentious issue in negotiating other FTAs
the Administration has initiated, including with Australia. While some agricultural
commodity groups and food product manufacturers welcome the market openings
these agreements may provide, producers of import-sensitive commodities (e.g.,
sugar, dairy products, meats) will carefully monitor and seek to shape those
provisions that affect them.
The Administration also has placed a high priority on negotiating an agreement
to remove all trade barriers within the Western Hemisphere. The Free Trade Area
of the Americas ( FTAA) is intended to go beyond NAFTA to encompass all trade
and services among all of the region’s countries (except Cuba), and eventually
supersede both NAFTA and regional trading agreements, including the free trade
agreement the United States has just negotiated with Chile and the FTA being
negotiated with Central America. Crafting rules for liberalizing agricultural trade
and negotiating the fine details among the region’s 34 countries by 2005 will be
difficult and contentious.
Agricultural Negotiations in the World Trade Organization. The
United States is engaged in a new round of multilateral trade negotiations, one of
whose aims is further liberalization of global agricultural trade. According to the
declaration agreeing to a new trade round, the objectives for agriculture are to
substantially improve market access for agricultural products, reduce and phase out
export subsidies, and substantially reduce trade-distorting domestic support. Most
U.S. agricultural interest groups support the inclusion of agriculture in a broader
multilateral trade round. These groups believe that trade-offs possible in a
comprehensive negotiation would result in improved market prospects for U.S.
agricultural exports. Others, such as producers of import-sensitive crops, who feel
disadvantaged by previous trade agreements (e.g., NAFTA) or threatened by possible
new agreements, are not as enthusiastic about U.S. participation in a new round. The
agricultural negotiations have important implications for farm bill programs that
provide price and income support to farmers and for export and food aid programs.
There are also important differences in negotiating positions among WTO member
countries, especially between the United States and the European Union, and between
those two WTO members and the developing countries.
Biotechnology and Agricultural Trade. Differences between the United
States and its trading partners over genetically engineered (GE) crops and food
products that contain or are derived from them pose a potential threat to, and in some
instances have already disrupted, U.S. agricultural trade. Corn and soybean exports
are the most seriously threatened crops. Underlying the conflicts are pronounced
differences, reflected in consumer attitudes and regulatory systems, between the
United States and several important trading partners about GE products and their
potential health and environmental effects.
China and U.S. Agriculture. There is mounting concern from U.S. producer
groups, Administration officials, and other trading partners that China has been slow
to implement, only partially implemented, or in some instances has failed to comply
with agricultural trade commitments made under recent international trade
agreements. The speed and manner with which China implements its trade
commitments are critical to the development of U.S.-China agricultural trade. While
U.S. agriculture and trade officials have been working to resolve these differences,
progress has been slow.
Country-of-Origin Labeling. The 2002 farm bill (P.L. 107-171) soon will
require many food stores to provide country-of-origin labeling (COOL) on fresh
fruits, vegetables, red meats, seafood, and peanuts. Proponents of COOL argue that
U.S. consumers have a right to know the origin of their food, particularly during a
period when food imports are increasing, and will continue to increase under both
existing and future trade agreements, and when there are concerns about food safety.
Critics of the new law, however, argue that such labeling does not increase public
health protection by telling consumers which foods are safer than others: all food
imports already must meet equivalent U.S. food safety standards, which are enforced
vigorously by U.S. officials at the border and overseas. Scientific principles, not
geography, must be the arbiter of safety, they add. Some critics are urging the 108th
Congress to revisit the new labeling law, on the grounds that implementation will be
extremely costly and hinder rather than help U.S. producers’ competitive advantage.
Proponents maintain that the expected benefits to U.S. farmers, ranchers, and
consumers will outweigh implementation and compliance costs.
Agricultural Exports to Cuba. U.S. policy is to exempt commercial sales
of agricultural and medical products from U.S. unilateral sanctions imposed on
foreign countries, subject to specified conditions and prohibitions. Debate continues,
though, among policymakers on the scope of restrictions that should apply to
agricultural sales to Cuba.
Bilateral Trade Disputes. The United States is engaged in a variety of trade
disputes involving individual countries. The outcome of a number of these could
prove critical to future application and recognition of WTO farm subsidy rules,
dispute settlement procedures, and other world trade issues of importance to U.S.
agriculture. Among the disputes are:
!A WTO case, instituted in September 2002, by Brazil against
certain aspects of the U.S. cotton program. Subsequent
consultations between the United States and Brazil in December and
January failed to resolve the dispute. Continuation of the WTO
dispute settlement process could lead to a “final” panel decision for
or against the complaining country. Resolution of the case in
Brazil’s favor could result in WTO recommendations concerning
implementation of U.S. cotton program provisions. Non-compliance
with such provisions on the part of the United States could result in
compensation or possible limited trade sanctions.
!A U.S. complaint that Canadian wheat trading practices,
particularly the export practices of the Canadian Wheat Board
(CWB), are inconsistent with Canada’s WTO obligations and
disadvantage U.S. wheat exporters in Canadian and international
markets. Canada maintains that Canadian import practices and the
CWB wheat export practices comply fully with international trade
rules and its WTO obligations. Successful resolution of this dispute
in favor of the United States could result in greater competitiveness
for U.S. wheat vis-a-vis Canadian wheat in international markets and
in U.S. wheat having improved access to the Canadian market.
! Import barriers by Russia, Mexico, the EU, and Japan, affecting
U.S. meat and/or poultry exports. The United States is one of the
world’s leaders in meat and poultry trade. Meat and poultry
products are among the fastest growing components of U.S.
agricultural exports. However, at the same time that the industries’
reliance on foreign markets is increasing, countries have instituted
barriers that have disrupted exports, threatened future growth, and
heightened trade tensions.
!Longstanding sweetener trade disputes between the United States
and Mexico. Mutual recognition that NAFTA sugar provisions have
not worked prompted U.S. and Mexican negotiators to intensify
efforts in mid-2002 to resolve two key issues: market access for
Mexican sugar in the U.S. market, and market access and sales of
U.S. high fructose corn syrup in Mexico. However, talks have been
stalled.
Appropriations for Agricultural Export and Food Aid Programs.
Congress is currently considering FY2004 appropriations for USDA’s international
activities. At issue are funding levels for agricultural export subsidies, export market
development programs, export credit guarantees, and foreign food aid. Congress and
the Administration have been at odds over the use of Commodity Credit Corporation
(CCC) funds to finance food aid programs and over the Administration’s decision in
U.S. Agricultural Exports
Agricultural exports, which totaled $53.5 billion in FY2002, are important to
both the farm and non-farm economy.* The U.S. Department of Agriculture
(USDA) estimates that the share of U.S. production volume exported is 43.5% for
wheat, 53.3 % for rice, 20% for corn, 43.1 % for soybeans and products, and 45% for
cotton. An estimated 25% of gross farm income comes from exports. According to
USDA, each dollar received from agricultural exports (in 2001) stimulates another
$1.47 in supporting non-farm activities. Agricultural exports generated an estimated
Agricultural exports account for 7.36% of U.S. merchandise exports and are the third
largest component of such exports after electrical machinery (9.88%) and vehicles
(7.45%).** U.S. agricultural trade has consistently registered a positive, though
recently declining, balance.
Nearly every state exports agricultural commodities. In FY2001, the leading
agricultural exporting states were (in order) California, Texas, Iowa, Kansas, Illinois,
Nebraska, Minnesota, Washington, Indiana, and North Carolina. These 10 states
accounted for nearly 60% of the total value of U.S. agricultural exports.
After growing rapidly in the 1970s, U.S. agricultural exports reached a high of
$43.8 billion in FY1981, but then declined by 40% to $26.3 billion by FY1986. A
decade later, exports had recovered and reached a new peak of nearly $60 billion
(FY1996), but then began a decline that dipped to $49 billion by FY1999. Main
reasons for the decline were continuing financial turmoil in East and Southeast Asian
markets, and increased competition for corn, wheat, and soybeans in global markets.
Exports since then have recovered, rising to $52.7 billion for FY2001, and an
estimated $53.5 billion in FY2002. USDA currently forecasts FY2003 export value
at $57 billion.
The commodity composition of U.S. agricultural exports has changed over time.
For years, bulk commodities such as grains, oilseeds, and cotton were the mainstay
of U.S. agricultural exports. Since FY1991, however, higher value products have
accounted for a growing share of total agricultural exports. These higher value
exports, which include intermediate products such as wheat flour, feedstuffs, and
vegetable oils and consumer-ready products such as fruits, nuts, meats, and processed
foods, accounted for 65% of the total value of U.S. agricultural exports in FY2001.
* Unless otherwise noted, data on U.S. agricultural trade in this report, including estimates
of the contribution of agricultural exports to non-farm output and employment, estimates of
state shares of agricultural exports, and the commodity composition of U.S. agricultural
exports and imports, are from USDA’s Economic Research Service. These data can be
found at: http://www.ers.usda.gov/Topics/View.asp?T=104200.
** U.S. Department of Commerce. U.S. Census Bureau. Statistical Abstract of the United
States: 2002, 122nd edition. Table 1284, p. 800.
Many variables interact to determine the level of U.S. agricultural exports:
income, population growth, and tastes and preferences in foreign markets; U.S. and
foreign production and commodity prices; and exchange rates. U.S. agricultural
export and food aid programs, domestic farm policies that affect output and price,
and trade agreements with others also influence the level of U.S. agricultural exports.
U.S. Agricultural Imports
The United States is also a major importer of agricultural commodities and food
products. USDA classifies these as either non-competitive or competitive imports.
Non-competitive products include primarily tropical products (coffee, cocoa,
bananas, rubber, and spices) that generally are not produced domestically. Imports
that compete against domestic output include red meats (primarily beef), fruits and
juices, vegetables and preparations, wine and beer, certain grains and feeds, certain
oilseeds, sugar and related products, and dairy products. USDA estimates the import
share of all U.S. food consumption was 8.8% in 2000. Agricultural imports have
risen by 83% over the last decade, from $22.7 billion in FY1991 to $41 billion in
FY2001. Factors contributing to this growth in import demand include the extended
U.S. economic expansion during this period, low commodity prices, the strong U.S.
dollar which made imports cheaper, and the effects of trade agreements. Non-
competitive imports (about $6.6 billion) accounted for 17% of all agricultural
imports in FY2001. The value of competitive imports was nearly $33 billion (83%
of the total).
Though a large share of agricultural imports–about 80% on average of total
agricultural imports–compete against U.S. products, they also generate economic
activity in the U.S. economy. These imports provide additional income to, and
increased employment at, businesses involved in food processing and in providing
transportation, trade, and related services. Consumers also benefit from agricultural
imports if they result in lower prices, and from a wider choice of products and off-
season availability of some foods, particularly fruits and vegetables. (For more
information see CRS Report 98-253, U.S. Agricultural Trade: Trends, Composition,
Direction, and Policy.)
Agriculture in Bilateral Free Trade Agreements*
Issue
Unique to free trade agreements (FTAs), as illustrated by the North American
Free Trade Agreement (NAFTA), are provisions designed to liberalize trade by
reducing and eliminate tariffs, quotas, and nontariff barriers) between partners within
an agreed- upon time period. Provisions affecting agricultural trade are found in two
bilateral FTAs the Bush Administration concluded with Chile and Singapore late in
2002. Agriculture also will likely prove to be a contentious issue in negotiating other
FTAs the Administration has initiated. While some agricultural commodity groups
and food product manufacturers welcome the market openings these agreements may
provide, producers of import-sensitive commodities (e.g., sugar, dairy products,
meats) will carefully monitor and seek to shape those provisions that affect them.
Producers are concerned about the transition periods before agricultural products
would be granted free access into the other country’s market, and about rules of
origin, safeguards against import surges, and the terms under which sanitary and
phytosanitary (SPS) rules are applied.
Background and Analysis
In 2002, U.S. agricultural exports to the 14 FTA candidate countries (including
Chile and Singapore) totaled $5.0 billion, and accounted for almost 9% of all U.S.
agricultural exports. Half of these sales were to the five Central American countries,
a growing U.S. market. Combined U.S. agricultural imports from these 14 countries
totaled $5.2 billion, and represented over 12% of all agricultural imports. Imports
from the Central American candidates totaled $1.9 billion (more than one third of the
import value entering from all FTA candidates). The largest single country supplier
was Australia (selling $1.9 billion in farm goods), followed by Chile ($1.2 billion).
Chile. In the Chile FTA, negotiating the agricultural provisions – especially the
terms of market access for sensitive farm products and the application of some SPS
rules – proved to be among the most contentious issues. These were resolved when
top trade officials from both countries became involved in the process to bring the
negotiations to a conclusion. Both the United States and Chile agreed to phase out
tariffs n the primary means of border protection n on a substantial portion of
agricultural products traded between them by 2007, but compromised to adopt a
12-year transition period before each market is fully open to import-sensitive
products entering from the other country. The market access provisions will apply to
all traded merchandise n no agricultural product is excluded. The agreement
eliminates the use of export subsidies on agricultural trade between both countries,
but allows the United States to respond if third countries use subsidies to displace
U.S. products in the Chilean market. It also includes an agricultural safeguard
provision sought by the United States to protect agricultural producers from sudden
surges in Chilean imports. Both sides also have committed to resolve outstanding
* Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science, and
Industry Division.
SPS issues that have, for example, limited U.S. sales of meat products and some
fruits to Chile.
The U.S. Trade Representative (USTR) states the FTA’s provisions will grant
duty-free status to more than 75% of U.S. agricultural exports (valued at $111
million in 2002) to Chile within 4 years. Such treatment will apply to U.S. pork and
products, beef and products, soybeans and soybean meal, durum wheat, feed grains,
potatoes, and processed food products (i.e., french fries, pasta, distilled spirits and
breakfast cereals). Chilean tariffs on all other products will be phased out within 12
years. The agreement requires Chile to phase out with respect to imports from the
United States its price-band system designed to protect domestically-produced wheat,
wheat flour, vegetable oils, and sugar. Chile also committed to recognizing the U.S.
meat grading system – allowing for the sale of U.S. beef and pork products with the
USDA prime and choice labels in that market.
Chile views improved market access for its agricultural products to the large and
growing U.S. market as important to its economic growth, because agricultural
exports ($1.2 billion in 2002) represent about one-third of Chile’s total exports to the
United States. Its negotiators sought immediate reductions in U.S. tariffs on
horticultural and other products, as well as changes in how U.S. anti-dumping and
countervailing rules are applied. U.S. producers of apricots, mushrooms, cling
peaches, fruit juices, and other horticultural products, however, asked to be excluded
from the FTA’s coverage or sought long transition periods before tariffs on their
products were eliminated. According to Chile’s Foreign Minister, the agreement
grants 95% of Chile’s exports duty-free status to the U.S. market within four years.
With wine an important Chilean export, Chile agreed to reduce its tariff on wine
imports to the lower U.S. level, after which both countries will eliminate tariffs on
wine. Negotiating Chile’s terms of access for agricultural products viewed as
“sensitive” by some segments of U.S. agriculture reportedly were difficult to
conclude. Details that took time to resolve in creating tariff-rate quotas (TRQs) for
dairy, sugar, and horticultural products were the size of each quota, the pace at which
the over-quota tariff rate is phased out, the growth rate for each quota created, and
whether the within-quota tariff would be low or zero. Access for sugar reportedly
will depend on Chile (now a sugar importer) becoming a net exporter (i.e., produces
a surplus available for export).
Negotiations on SPS barriers proceeded along a track parallel to the market
access talks, but the FTA agreement appears to leave them unresolved. With U.S.
exporters having faced SPS obstacles in recent years in selling pork, beef, dairy and
poultry products, and certain fruit to the Chilean market, the United States pressed
to resolve outstanding SPS issues so that they would not affect U.S. exporters’ access
to the Chilean market once the FTA takes effect. Negotiators apparently did not
resolve SPS issues relating to U.S. beef and pork exports. The final text reportedly
does not include language sought by the United States that Chile would accept the
U.S. meat inspection system as equivalent to its own. U.S. trade officials indicated
last December that the Administration will not submit the FTA to Congress for
approval until Chile accepts the U.S. position.
The private-sector Agricultural Policy Advisory Committee (APAC) on
February 28, 2003, reported to USTR that the FTA with Chile “will improve U.S.
exports of agricultural products by opening the Chilean market and providing
reciprocal access for U.S. products, [and] ... provides a sensible timetable for the
elimination of agricultural tariffs for import sensitive products including a gradual
phase out of tariffs and an import safeguard.” Some of the commodity advisory
committees, though, in their separate reports raised concerns about some provisions
of the FTA. They complained, for example, that not being provided with the text of
the agreement by USTR hampered their ability to assess potential impacts.
Singapore. Being primarily urban, this city state produces little of its own food.
Reflecting this, its tariffs applied on imported agricultural commodities and food
products (except for beer, wine and spirits) are currently zero. U.S. agricultural and
food exports in 2002 totaled $240 million, compared to $56 million in similar
imports. Top U.S. agricultural exports were fruit and related products, vegetables
and related products, cooking oils, snack foods, and poultry meat. Purchases of
cocoa paste and butter, snack foods, rubber and related products, and spices from
Singapore accounted for more than half of agricultural imports.
Because Singapore is a major shipping hub, some U.S. commodity groups
sought the inclusion of rules of origin in the FTA to prohibit duty-free treatment of
food products transhipped through its port from neighboring agricultural producing
countries in Southeast Asia. The APAC reported to USTR on February 26, 2003,
that the agreement’s “rules of origin will protect U.S. producers from imports of
ineligible products from third countries through Singapore.” The majority on the
sweeteners and related products advisory committee, however, raised concerns about
whether these rules are written in such a way to prevent access to the U.S. market for
sugar-containing products shipped from Singapore. APAC’s report further stated
that this FTA achieves U.S. negotiating objectives of eliminating tariffs and securing
market opportunities “by permanently opening the Singapore market for U.S.
agricultural products,” making them eligible for duty free access.
Other FTAs. As part of its overall trade strategy, the Bush Administration has
initiated, or shortly will begin, FTA negotiations with four other countries or regional
blocs: five Central American countries (Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua), Morocco, the Southern African Customs Union (South
Africa, Botswana, Lesotho, Namibia, and Swaziland), and Australia.
Some U.S. agricultural interests concerned about the competitive pressures
expected from free trade with these countries oppose negotiating FTAs, preferring
that the Administration instead focus on efforts to secure multilateral trade
liberalization in the WTO’s trade negotiations. As examples, the U.S. sugar industry
advocates this strategy, since Central America, Australia, and South Africa are major
sugar exporters. The U.S. beef and dairy industries also are concerned about
Australia’s ability to supply the U.S. market, and oppose an FTA with that country.
U.S. food manufacturers, though, see opportunities in FTAs with Central America,
Morocco, and South Africa.
Role of Congress
The President notified Congress January 30, 2003 of his intent to sign free trade
agreements with Singapore and Chile, initiating a 90-day period mandated by the
Trade Act of 2002 (P.L. 107-210), after which the United States can sign the
agreements. The 2002 act further requires that the Administration consult with the
House and Senate Agriculture Committees, particularly on the potential impact of
free trade on U.S. import-sensitive agricultural products, as these FTA negotiations
proceed. Once agreements have been signed, the President and Congress will develop
draft implementing legislation which would be handled by Congress on an expedited
or fast track basis according to procedures established in P.L. 107-210.
For More Information
CRS Electronic Briefing Book, Agriculture Policy and Farm Bill, Agriculture in the
U.S. - Chile Free Trade Agreement.
CRS Electronic Briefing Book, Trade, U.S.-Chile Free Trade Agreement.
CRS Electronic Briefing Book, Trade, U.S.-Central America Free Trade Agreement.
CRS Electronic Briefing Book, Trade, Singapore-U.S. Free Trade Agreement.
CRS Electronic Briefing Book, Trade, U.S.-Southern African Customs Union
(SACU) Free Trade Agreement.
CRS Report RL31709, The U.S.-Singapore Free Trade Agreement.
CRS Report RL31144, The U.S.-Chile Free Trade Agreement: Economic and Trade
Policy Issues.
Agriculture in the Free Trade Area of the Americas
( F T AA) *
Issue
The Administration has placed a high priority on negotiating an agreement to
remove all trade barriers within the Western Hemisphere. The FTAA is intended to
go beyond NAFTA to encompass all trade and services among all of the region’s
countries (except Cuba), and eventually supersede both NAFTA and regional trading
agreements, including the free trade agreement the United States has just negotiated
with Chile and the FTA being negotiated with Central America. Crafting rules for
liberalizing agricultural trade and negotiating the fine details among the region’s 34
countries by 2005 will be difficult and contentious.
Background and Analysis
U.S. agricultural exports to the markets that an FTAA would open (the countries
of South America, Central America, and the Carribean) were $4.457 billion or 8.4%
of U.S. global farm product sales in 2002. Commodity and food imports from these
three regions, by contrast, accounted for $6.814 billion, nearly 17% of U.S.
agricultural imports.
At the third Summit of the Americas in April 2001, hemispheric leaders ratified
dates for concluding the FTAA negotiations (January 2005) and making the
agreement effective (December 2005). They further committed to make the
negotiating process more transparent and accessible. Trade officials reached
agreement on the modalities (formulas, targets, or schedules) to be followed for
making tariff reductions in late August 2002. They agreed that all countries (except
CARICOM members – comprising most Caribbean islands, Belize in Central
America, and Guyana and Suriname in South America) could start tariff cuts from
current applied rates rather than from the higher bound rates that all WTO members
adopted in the last multilateral negotiating round. CARICOM countries will be
allowed to identify those agricultural and other products where the maximum bound
rate could be used as the reference point for reducing tariffs. The November 1, 2002,
meeting of trade ministers in Ecuador finalized the negotiating pace and process to
be followed over the 2003-2004 period. These final stages of the FTAA negotiations
are being co-chaired by Brazil and the United States. All FTAA countries met the
February 15, 2003, deadline for presenting their initial tariff reduction offers. Each
country will respond to these in the form of market access requests, due by June 15,
USTR’s Ambassador Zoellick, on February 11, 2003, laid out the scope of the
U.S. tariff reduction offer on agricultural and other products. In unveiling this offer,
he said that the United States is prepared to grant immediate duty-free access on 56%
of the agricultural products that enter from non-NAFTA countries once the
* Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science and
Industry Division.
agreement takes effect. On politically-sensitive farm products, Ambassador Zoellick
stated that the United States proposes to eliminate tariffs with specific timetables that
would differ between countries or regional groups. Transition periods could be 5 or
10 years, or even longer, depending upon a country’s size and its level of economic
development, and the type of agricultural product. Ambassador Zoellick indicated
all agricultural products are on the table and subject to negotiation (i.e., no
exclusions), and that the United States will move forward with other countries
willing to take the same position.
Hemispheric free trade in agriculture by about 2020 is envisioned if negotiators
reach agreement on an FTAA in 2005. The agricultural component of the FTAA
negotiating process, though, could become problematic once negotiators begin to
apply negotiating modalities to specific commodities and food products that each
country historically has protected. Some Latin American countries, particularly
Brazil, seek increased access to the U.S. market for competitive products such as
beef, citrus, and sugar. U.S. commodity groups and agribusiness seek additional
openings for their products in the rapidly growing Latin American market. They also
seek legal assurances that all countries will abide by sanitary and phytosanitary (SPS)
rules with respect to agricultural imports. Though the United States will emphasize
eliminating tariffs and other barriers to agricultural trade, Brazil and other countries
have signaled they want the negotiating agenda to also address the issue of domestic
agricultural support (i.e., farm price and income support). They have suggested
linking reductions in their higher tariffs to a concession by the United States on the
domestic support issue. The United States has countered that this issue is not one of
the agreed-upon FTAA objectives, and should instead be addressed jointly by all
FTAA countries in the ongoing multilateral WTO agriculture negotiations.
Role of Congress
Congress would take up any agreement that results from negotiations to
establish the FTAA under fast track procedures (in P.L. 107-210) for congressional
consideration of legislation to implement trade agreements. In the meantime,
according to the procedures established in P.L. 107-210, Congress and the
Administration will be consulting as negotiations proceed.
For More Information
CRS Report RL30935, Agricultural Trade in the Free Trade Area of the Americas.
CRS Report RS20864, A Free Trade Area of the Americas: Status of Negotiations
and Major Policy Issues.
Agricultural Negotiations in the World Trade
Organiz a tion *
Issue
The United States is engaged in a new round of multilateral trade negotiations,
one of whose aims is further liberalization of global agricultural trade. According
to the declaration agreeing to a new trade round, the objectives for agriculture are to
substantially improve market access for agricultural products, reduce and phase out
export subsidies, and substantially reduce trade-distorting domestic support. Most
U.S. agricultural interest groups support the inclusion of agriculture in a broader
multilateral trade round. These groups believe that trade-offs possible in a
comprehensive negotiation would result in improved market prospects for U.S.
agricultural exports. Others, such as producers of import-sensitive crops, who feel
disadvantaged by previous trade agreements (e.g., NAFTA) or threatened by possible
new agreements, are not as enthusiastic about U.S. participation in a new round. The
agricultural negotiations have important implications for farm bill programs that
provide price and income support to farmers and for export and food aid programs.
There are also important differences in negotiating positions among WTO member
countries, especially between the United States and the European Union, and between
those two WTO members and the developing countries.
Background and Analysis
At the World Trade Organization (WTO) Fourth Ministerial Conference in
Doha, Qatar, in November 2001, trade ministers agreed on a declaration to begin a
new round of multilateral trade negotiations (MTNs), including negotiations on
agriculture. This new round, because of its emphasis on integrating developing
countries into the world trading system, is called the Doha Development Agenda
(DDA). A first phase of agricultural trade negotiations had been underway since
early 2000. The DDA incorporates those negotiations into a comprehensive
multilateral trade negotiation and begins a second phase of negotiations on
agriculture.
For agriculture, the Doha Ministerial Declaration states that “building on the
work carried out to date (in the sectoral negotiations)” and “without prejudging the
outcome of the negotiations, we commit ourselves to comprehensive negotiations
aimed at: substantial improvements in market access; reductions of, with a view to
phasing out, all forms of export subsidies; and substantial reductions in trade-
distorting domestic support.” The Declaration also provides that “special and
differential treatment for developing countries shall be an integral part of all
elements of the negotiations.” The Declaration takes note of “non-trade concerns
reflected in negotiating proposals of Members” and confirms that “non-trade
concerns will be taken into account” in the negotiations.
* Prepared by Charles E. Hanrahan, Senior Specialist in Agricultural Policy, Resources,
Science and Industry Division.
During 2002, WTO member countries discussed the issues of market access,
export competition, and domestic support. The United States, the Cairns Group of
agricultural exporting countries,* the European Union (EU), Japan, and several
developing countries submitted negotiating proposals during 2002.** The DDA
called for reaching an agreement by March 31, 2003 on “modalities” (e.g., formulas,
targets, timetables) for achieving the objectives mandated by the Doha Declaration,
but that deadline was missed. Now, negotiations on modalities will continue but
probably not be completed until the September WTO Ministerial Conference
scheduled for September 2003 in Cancun, Mexico.
Negotiating modalities has not been easy. Member countries differ sharply in
their choice of modalities. For example, some want to reduce high tariffs more
rapidly than lower tariffs, while others will want to protect “sensitive” products by
slowing the pace of tariff reduction. Similarly, some want rapid reductions in export
or domestic subsidies while others will want longer timetables for reductions. Once
an agreement on modalities is reached, WTO member countries would begin to
negotiate individual country schedules or lists of commitments.
The U.S. position, first tabled in June 2000 and amplified in a July 2002
proposal, includes the elimination of agricultural export subsidies; substantial
reductions in tariffs (with no country’s individual tariff exceeding 25%); 20%
increases in tariff-rate quotas on agricultural imports; disciplines on state trading
enterprises; and reductions in “amber box” spending (trade distorting domestic
support) to no more than 5% of the value of each country’s total agricultural
production – the objective being to make all countries’ domestic support levels
comparable in relative terms (i.e., harmonized).*** Most of these changes would be
* The 17 members of the Cairns group are: Argentina, Australia, Bolivia, Brazil, Canada,
Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay,
Philippines, South Africa, Thailand and Uruguay.
** Negotiating proposals submitted by individual countries, and background papers on
negotiating issues prepared by the WTO Secretariat, can be found at
[ h t t p : / / www.wt o.or g/ engl i s h/ t r at op_e/ a gr i c _e/ n egot i _ e.ht m] .
*** The WTO classifies domestic farm support policies into three colored box categories.
Green box programs are publicly funded programs (financed by direct outlays or foregone
revenue) that do not involve a transfer from consumers or have the effect of providing price
support to producers. Examples of green box programs are research programs, de-coupled
income support such as U.S. direct payments to producer that are not contingent on any
production, environmental program payments, such as the Conservation Reserve Program,
or disaster assistance. No WTO disciplines or reductions apply to green box programs.
Blue box program are direct payments made under a production limiting program. The EU
is the primary user of blue box program, making direct payments to producers for example,
based on fixed areas or yields or a fixed number of livestock. There are currently no U.S.
blue box programs. Blue box programs also are not subject to reduction commitments.
Amber box programs are payments that are contingent on participation in agricultural
production, i.e., producing a crop or raising livestock qualify a farmer for government
payments. U.S. amber box programs include price supports for dairy, sugar and peanuts and
loan deficiency payments or marketing loan and loan deficiency payments. EU amber box
payments include so-called intervention buying of farm products at prices administratively
(continued...)
phased in over 5 years. Ultimately, according to the U.S. proposal, tariffs and
domestic support also would be eliminated. The Cairns Group proposal, which is
strongly supportive of the U.S. position, also calls for deep cuts in tariffs and
domestic support and the elimination of export subsidies. Many in Congress have
expressed support for the U.S. negotiating proposal, but have made their support
contingent on reduction and harmonization of tariffs and subsidies by other WTO
members, especially the EU.
In sharp contrast to the U.S. position, the EU calls for applying formulas used in
Uruguay Round agriculture negotiations (1986-1994) as modalities. Such an approach
would yield progressive reductions in tariffs and subsidies but not harmonization or
elimination. The EU also has conditioned its support for export subsidy reduction on
negotiating disciplines for export credit programs and food aid programs. The EU
negotiating proposal, along with those of Japan and Korea place greater emphasis on
so-called non-trade concerns like protecting the environment, animal welfare, and
rural development. Those WTO members are seeking exemptions from WTO
reduction commitments and disciplines for subsidies provided to promote such non-
trade concerns. The U.S. position is silent on non-trade concerns, but U.S. trade
negotiators express fears that payments to producers to promote non-trade concerns
would be disguised trade-distorting measures.
Some suggest that the success of the agriculture negotiations depends on the pace
of agricultural policy reform in the EU and the United States. A recent agreement
between France and Germany to maintain EU domestic farm support at current levels
and postpone any reductions in support until after 2007 may make it more difficult for
the EU to agree to agricultural trade reforms in the current round. In the EU, efforts
to reform its Common Agricultural Policy face considerable opposition from several
EU member states. These reforms, which include substantial de-coupling of income
support from production and reductions in price supports, could, if adopted, facilitate
the EU’s ability to accept cuts in trade-distorting domestic support or the elimination
of export subsidies.
In the United States, the President on May 13, 2002, signed into law a farm bill
(P.L. 107-171) to replace the 1996 Federal Agricultural Improvement and Reform, or
FAIR, Act) that, many critics say, could raise trade-distorting domestic support above
U.S. WTO commitments to reduce such spending and also undermine the U.S.
position in the new round. However, the farm bill stipulates that the Secretary shall,
to the maximum extent possible, make adjustments in U.S. farm subsidies to ensure
that it does not exceed levels allowable under the WTO Agreement on Agriculture.
Moreover, U.S. trade officials insist that the United States has not wavered from its
negotiating objective of securing substantial reductions in domestic subsidies,
including U.S. subsidies, that distort trade, and that congressional support for the U.S.
negotiating proposal remains strong.
*** (...continued)
maintained above market prices. In contrast to green and blue box programs, amber box
payments are subject to WTO reduction commitments.
Developing countries who constitute the majority of WTO members are calling
for rapid dismantling of developed countries’ trade barriers and the elimination of
production-linked domestic subsidies. Developing countries are also seeking
exemptions for developing country domestic support deemed essential for economic
development. Developing countries are a large and diverse group with many different
position on negotiating issues, but many, especially those that are exporters of
agricultural products, have targeted both U.S. and EU subsidies for elimination in the
negotiations. While developing countries are seeking substantial reductions in
agricultural tariffs of developed countries, they are resistant to the idea of reciprocal
tariff reductions, preferring instead to be accorded special and differential treatment
which would entail maintaining tariffs or phasing them down over lengthy time
periods.
To facilitate the process of reaching agreement on modalities, the chairman of
the Agriculture Negotiating Group, Stuart Harbinson, issued on February 17, 2003 and
revised slightly on March 20, 2003, a draft paper with various proposals for
modalities. Harbinson’s “modalities “ report attempted to steer a middle course
between the U.S. and EU negotiating positions, while according special and
differential treatment to developing countries. Chairman Harbinson’s report dealt
with the three so-called pillars of the agriculture negotiations: market access, export
competition, and domestic support. On market access, he proposed that for tariffs
greater than 90% ad valorem the simple average would be reduced by 60% subject to
a minimum cut of 45% per tariff line; for agricultural tariffs lower than or equal to
90% but greater than 15%, the simple average reduction would be 50% subject to a
minimum cut of 35% per tariff line; and for all agricultural tariffs lower than or equal
to 15%, the simple average reduction would be 40% subject to a minimum cut of 25%
per tariff line.
On export competition, Harbinson’s modalities report recommends that export
subsidies be eliminated over a ten-year period. Export credit and food aid programs
would also be covered by new rules. Repayment terms for export credits would be
limited to a maximum of six months but developing countries would be allowed
longer repayment periods. Only grant food aid would be permitted under the
Harbinson recommendations. However, food aid provided in kind for development
projects could be provided through United Nations food agencies or UN food agency
projects operated by non-governmental or charitable organizations.
On domestic support, the modalities report calls for a 60% reduction in trade-
distorting (or amber box) support. The report also suggested that trade-distorting
support tied to production limits (blue box support used primarily by the EU) be
capped and then reduced by 50% over five years. The modalities report also included
an option for eliminating the blue box altogether by including it in the amber box
category and subjecting it to a 60% reduction.
While U.S. trade negotiators indicated they considered the modalities report as
a reference point for further negotiations, they were highly critical of specific
proposals. At a meeting of WTO trade ministers in Tokyo (February 14-16) where a
draft of the report was considered, the United States and the Cairns Group said the
recommendations fell far short of their earlier proposals. U.S. criticisms, among
others, were that the market access provisions did not result in harmonization of tariff
levels and that the application of the Harbinson approach would still leave very high
tariffs on many products, especially meat products. While the U.S. trade officials
welcomed the elimination of export subsidies, they noted that the ten-year phase-out
schedule should be considerably shortened. According to U.S. participants in the
Tokyo meeting, reduction proposals for amber box support would enable the EU to
maintain trade-distorting blue box payments and to continue to provide considerably
more trade-distorting amber box support than could the United States. U.S. amber
box support is capped at $19 billion annually, while the EU’s is capped at $67 billion.
Under the Harbinson proposal, U.S. amber box support would fall to around $8 billion
per year, while the EU’s would be capped at $27 billion per year.
Not only the Administration, but many in Congress reacted negatively to the
Harbinson proposals for the agriculture trade negotiations. A particular concern was
that the Harbinson proposal for a 60% reduction in trade-distorting or amber box
support, did not “level the playing field” between the United States and the EU.
Permitted EU trade distorting subsidies would still be more than three times the level
of permitted U.S. subsidies. Also in the 2002 Trade Act, Congress had made
preserving export credit guarantee programs a major negotiating objective. The
Harbinson proposals for tightening export credit program disciplines are thus likely
to come under intense congressional scrutiny.
The EU also reacted negatively to the Harbinson proposals. In the EU view, they
were unbalanced and placed most of the burden of adjustment on the EU. The EU
was particularly concerned that, with the exception of adding animal welfare subsidies
to the category of non-trade distorting (or green box) subsidies, the Harbinson report
ignored non-trade concerns. The EU criticized the report’s call for the elimination of
export subsidies without similarly disciplining export credit programs, such as U.S.
export credit guarantees. EU officials argued also that blue box subsidies are less
trade distorting than amber box support and should not be subject to the same
reduction requirements as amber box support.
Missing the deadline for agreeing to modalities, some observers suggest,
indicates that the agriculture negotiations are stalled with neither side prepared to
compromise. Some even suggest that the inability to agree on a way forward for
agriculture imperils the entire Doha round. However, both U.S. and EU negotiators
are maintaining that an agreement on modalities can be reached by the time of the
Cancun Ministerial and that the missed deadline, though serious, will not forestall
concluding the round by January 1, 2005.
Role of Congress
Congress would take up any agreements that results from the Doha round of trade
negotiations under fast track procedures (in P.L. 107-210) for congressional
consideration of legislation to implement trade agreements. In the meantime,
according to the procedures established in P.L. 107-210, Congress and the
Administration will be consulting as negotiations proceed. Interaction during the
period of consultation between Congress and the Administration on negotiating
positions and strategies will lay the groundwork for congressional consideration of an
agreement.
Meeting the 2005 deadline for completing negotiations in the new trade round
is critical as are the consultations with Congress required by the Administration under
the 2002 Trade Act. Congressional fast track procedures will expire by June 1, 2005,
but could be extended if the President satisfies the consultation requirements in P.L.
107-210 and if progress is being made in meeting the negotiating objectives set forth
in the Trade Act of 2002.
For More Information
CRS Electronic Briefing Book, Trade, Agriculture Negotiations in the World Trade
Organization.
CRS Electronic Trade Briefing, Trade, The World Trade Organization: the Doha
Ministerial.
CRS Issue Brief 98928, The World Trade Organization–Background and Issues,
updated regularly
CRS Report RS21085, Agriculture in WTO Negotiations
CRS Report RS21085, Agriculture in WTO Negotiations.
Biotechnology and Agricultural Trade*
Issue
Differences between the United States and its trading partners over genetically
engineered (GE) crops and food products that contain or are derived from them pose
a potential threat to, and in some instances have already disrupted, U.S. agricultural
trade. Corn and soybean exports are the most seriously threatened crops. Underlying
the conflicts are pronounced differences, reflected in consumer attitudes and
regulatory systems, between the United States and several important trading partners
about GE products and their potential health and environmental effects.
Background and Analysis
Widespread farmer adoption of bio-engineered crops in the United States makes
consumer acceptance of GE crops and foods at home and abroad critical to U.S.
producers, processors, and exporters. U.S. farmers, who use GE crops to reduce
production costs or make field work more flexible, planted 66% of the estimated 145
million acres planted to GE crops worldwide in 2002, according to the International
Service for the Acquisition of Agri-Biotech Applications. Supporters of GE crops
maintain that the technology reduces the use of environmentally damaging chemical
inputs. U.S. consumers, with some exceptions, have been generally accepting of the
safety of GE foods. More attention has been paid in the United States to the allegedly
adverse environmental impacts of planting GE varieties. In contrast, in the European
Union (EU), Japan, South Korea, and elsewhere, consumers, environmentalists, and
some scientists maintain that the long-term effects of GE foods on both health and the
environment are unknown and not scientifically established. The EU, in particular,
insists that precaution should be used in approving and regulating GE foods.
Elsewhere, China has announced new regulations for approving and labeling GE
products, which, U.S. officials and exporters contend, could be potential trade
barriers.
In the EU, a de facto moratorium, in effect since 1998, on approvals of GE crops
has effectively eliminated U.S. corn exports. Industry and USDA estimates are that
$300 million of corn exports are lost annually as long as the moratorium is in effect
because the EU has not approved GE varieties of corn produced in the United
States–varieties which EU scientific committees that advise the EU Commission have
found to be safe for consumption and for the environment. Although China’s
regulations for GE crops threaten U.S. soybean exports, so far soybean exports, which
have averaged around $900 million per year (2000-2002), have not been disrupted.
Supporters of GE crops maintain also that the technology holds promise for
enhancing agricultural productivity and improving nutrition in developing countries.
There are, however, many technical, legal, social and other obstacles to be overcome
before the potential contribution of biotechnology to food security in developing
* Prepared by Geoffrey S. Becker, Specialist in Agricultural Policy, and Charles E.
Hanrahan, Senior Specialist in Agricultural Policy, Resources, Science, and Industry
Division.
countries could be realized. In the meantime, concerns about the possible health,
environmental, and commercial risks associated with GE crops have posed some
difficulties in meeting urgent food aid needs in southern Africa. One country
suffering from severe food shortages in that region has rejected food aid shipments
containing GE corn, while others in the region have required that GE corn in food aid
be milled, thus adding to the costs of providing relief. Other developing countries
complain about the lack of international standards and procedures for assuring that
health and environmental risks associated with GE crops are manageable and
acceptable, thus minimizing commercial risks from producing and exporting GE
crops.
U.S. regulations for GE foods have facilitated their introduction into U.S.
agriculture and food processing. The principle has been that GE foods are
“substantially equivalent” to non-GE foods; therefore, existing regulations for
approving foods are appropriate and adequate. Labeling with respect to GE content
is not required, except where there is a significant difference between the conventional
and the GE food product (for example, the presence of an allergen). The EU, Japan,
South Korea, China, Australia, and New Zealand either have or are establishing
mandatory labeling requirements for products containing or derived from GE
ingredients. Japan, the EU, China, and South Korea are respectively the second,
fourth, fifth, and sixth largest overseas markets for U.S. agricultural exports.
Now that the EU has approved further EU-wide legislation for approving and
regulating GE products, for tracing GE crops through the marketing chain, and for
labeling products that contain or are derived from GE ingredients, there appears to be
some possibility that the moratorium would be lifted. The new regulations are
expected to be in place by mid-2003. Some EU member states, however, might still
object to such approvals. Meanwhile, Administration officials are considering
whether to challenge the EU’s moratorium on approvals of genetically engineered
crop varieties in WTO dispute settlement. A number of U.S. agricultural interest
groups and Members of Congress have been urging the United States to bring the EU
into WTO dispute settlement on the biotechnology issue. The U.S. challenge would
be based on the argument that there is no legal basis for a moratorium under WTO
rules.
The U.S. food and agriculture sector faces the challenge of responding to
consumer demand, especially overseas, for products differentiated as to their GE or
non-GE content. U.S. agribusinesses also are seeking to influence EU regulations for
tracing GE foods through the marketing chain and for labeling GE foods. U.S.
industry is assessing the costs and benefits of separating GE from non-GE crops and
of preserving crop identity in the marketing chain. U.S. regulators are making
changes to facilitate voluntary labeling or enhance systems for certifying statements
about the GE content of foods.
Role of Congress
The House and Senate Agriculture Committees, the House Ways and Means and
the Senate Finance Committees will be among those closely watching biotechnology
developments in the EU and elsewhere and the Administration’s response. A number
of congressional leaders, including the Speaker of the House and the Chairman of the
House Agriculture Committee, have publicly urged the Administration to formally
challenge the EU policy before the WTO. Whether new legislation will be offered
and advanced in the 108th Congress which promotes actions to support U.S. exports
of GE products remains to be seen.
The 107th Congress passed several measures of this type, including the following
provisions in the 2002 farm bill (P.L. 107-171): a biotechnology and agricultural trade
program, aimed at barriers to the export of U.S. products produced through
biotechnology (Section 3204); competitive grants for biotechnology risk assessment
research (Section 7210); agricultural biotechnology research and development for
developing countries (Section 7505); and a program of public education on the use of
biotechnology in producing food for human consumption (Section 10802). Also,
legislation that gives the President trade promotion (or “fast track”) authority (P.L.
107-210) contains language calling on U.S. trade negotiators to negotiate rules and
dispute settlement procedures that will eliminate unjustified restrictions and
requirements, including labeling, of biotechnology products.
Some bills introduced in the 2nd session of the 107th Congress that took other
approaches to, or address other aspects of, biotechnology might be reintroduced in the
108th. Such bills included H.R. 4814, which called for mandatory labeling of GE
foods. Other bills in the 107th (H.R. 4812, H.R. 4813, and H.R. 4816) dealt
respectively with legal issues raised by cross-pollination with GE plants, a study of the
safety of GE foods, and liability for injury caused by GE organisms.
For More Information
CRS Electronic Briefing Book Page, Biotechnology and Agricultural Trade.
CRS Electronic Briefing Book Page, Agricultural Biotechnology.
CRS Report RS21381, Adoption of Genetically Modified Agricultural Products.
China and U.S. Agriculture*
Issue
There is mounting concern from U.S. producer groups, Administration officials,
and other trading partners that China has been slow to implement, only partially
implemented, or in some instances has failed to comply with agricultural trade
commitments made under recent international trade agreements. The speed and
manner with which China implements its trade commitments are critical to the
development of U.S.-China agricultural trade. While U.S. agriculture and trade
officials have been working to resolve these differences, progress has been slow.
Background and Analysis
China (including Hong Kong) represents an important market for U.S.
agricultural products with prospects for strong growth. During FY2001 and FY2002,
U.S. agricultural exports to China (including Hong Kong) averaged $3 billion per year
making it the fifth largest market for U.S. farm products. U.S. agricultural imports
from China averaged over $800 million. To maintain access to this trade potential,
to help ensure China’s integration into the global economic community, and to bring
China’s trade regime under international rules and standards, the United States
successfully negotiated the bilateral U.S.-China Agricultural Cooperation Agreement
(ACA) in November 1999. The United States also granted China permanent normal
trade relations status, approved by the 106th Congress and signed into law (P.L. 106-
286) in October 2000. The market access commitments negotiated under the ACA
provided the eventual basis for China’s Protocol of Accession to the World Trade
Organization (WTO) in December 2001.
Under these agreements, China made very specific market access commitments
regarding the reduction of tariffs for agricultural products; the conversion of non-tariff
trade barriers to tariffs including the establishment of tariff-rate quotas (TRQs) for
bulk agricultural commodities; and the allocation of a growing share of within-quota
imports to private sector importers. China agreed also to comply with WTO rules for
sanitary and phytosanitary (SPS) and technical measures, to eliminate export
subsidies, to stop discriminating between domestically produced and imported
products, and to make its trade and policy regulations public and more transparent.
China’s progress in implementing its trade commitments is affected by a number
of factors including complications inherent in switching from a heavily regulated,
secretive centrally planned economy to an open market-based economy. Difficulties
in coordinating local or provincial with national interests also slow progress. Both the
U.S. Government and the WTO have established mechanisms to monitor China’s
implementation of its access commitments including those on agriculture. Several
compliance issues have surfaced and remain unresolved.
* Prepared by Randy Schnepf, Analyst in Agricultural Policy, Resources, Science, and
Industry Division.
TRQ Implementation. China repeatedly delayed announcement of
regulations for the 2002 TRQ allocations (its first full year of WTO membership).
When finally announced in May 2002, they did not appear to provide the market
access that the United States and other exporting countries had anticipated under
China’s WTO agreement. A key feature of China’s TRQ commitments included
distributing quota shares to private enterprises rather than through the tightly-
controlled state trading enterprises (STEs). However, U.S. officials complain that
U.S. exporters have been unable to identify clearly which users in China have received
TRQs and how much. In addition, U.S. exporters have reported additional problems
including delays in the issuance of import permits; supplementary requirements that
a portion of TRQ imports be destined for re-export in processed products, thus
shielding the domestic market; quota allocations restricted to unit-sizes smaller than
viable quantities for bulk commodities; unexpected contractual prerequisites for TRQ
eligibility; and additional import licensing requirements by the State Administration
of Quality Standards, Inspection and Quarantine (AQSIQ).
Tariffs. China agreed that, with accession, it would gradually reduce its tariffs
for agricultural products from an average level of 22% to an average of 17% by 2004.
“Bound tariff rates” were incorporated as part of China’s schedule of concessions to
provide ceilings for individual commodity tariff rates. However, several cases have
been reported by U.S. firms exporting to China where the ad valorem-equivalent
tariffs applied in 2002 (based upon actual Chinese import data for several agricultural
products) have exceeded the scheduled tariffs.
Value-Added Tax (VAT). Special tax treatment given to domestically
produced agricultural products appears inconsistent with WTO commitments. U.S.
agriculture officials have reported instances where China has applied its VAT at a
higher rate to imports than to domestic production.
Biotechnology Regulations. A temporary import regime governing rules
for approval and labeling of farm products containing genetically modified organisms
(GMOs) is presently in place. Under the regime, genetically engineered products are
supposed to be acceptable if exporting countries have approved them and they are
undergoing Chinese testing and approval procedures. U.S. producers have expressed
concerns about overly vague rules, uncertainties over how the import regime will
function, and likely extensive paperwork requirements. The U.S. soybean industry is
particularly concerned that this new regime may disrupt trade and cause economic
harm. China has been the second-largest destination for U.S. soybean exports over
the past three years (FY2000 - FY2002) averaging nearly $900 million annually in
value. To date, U.S. soybean exports to China have not been disrupted.
Export Subsidies. Although China had canceled direct export subsidies since
joining the WTO, other policies appear to have replaced them according to a report
by USDA’s Economic Research Service. As a result, China’s corn exports have
continued at a near-record pace through 2002 at prices significantly below ex-
warehouse prices in China’s production areas. The principal destination for China’s
corn exports is South Korea. Generally a buyer of U.S. corn, South Korea’s imports
of U.S. corn for the first eight months of 2002 were down 70 percent from a year
earlier.
Other Problems. U.S. exporters have also expressed concern over the
imposition of additional handling requirements and other hurdles for Pacific
Northwest wheat; access denied for other U.S. farm and food products on SPS
grounds including fresh potatoes, avocados, peaches, pears, and certain apple
varieties; and new restrictions for fertilizers.
Although these irregularities are inconsistent with WTO rules, the Chinese
authorities have offered various explanations. For example, China claims that the
slow issuance of import permits is intended to limit smuggling. U.S. exporters
acknowledge problems associated with smuggling, but prefer solutions that don’t
infringe on the timely handling of TRQ allocations. Also, China claims that public
identification of enterprises that have applied for or received TRQ allocations would
violate commercial confidentiality, a contention that U.S. authorities dispute.
The U.S. Government and the WTO have set up mechanisms to monitor and
review China’s progress in implementing its trade commitments. China’s Protocol
of Accession to the WTO included the establishment of a Transitional Review
Mechanism (TRM) which details a procedure for reporting on and evaluating the
implementation by China of its WTO commitments. The United States used the
TRM, in September 2002, to submit an extensive list of questions to China via the
WTO’s reviewing bodies. The list of questions identified many of the disputed trade
practices highlighted above. To date, the Administration has followed a course of
pursing bilateral discussions to remedy non-commitment, rather than multilateral
dispute settlement. However, the potential use of the WTO dispute settlement
mechanism remains a viable tool for resolving disagreements over implementation
issues and maintains steady pressure on China to meet its obligations.
In late July 2002, Agriculture Secretary Veneman spent 3 days in China to
discuss these issues, and appointed USDA Senior Trade Counsel David Hegwood to
lead a working group on biotechnology with China. Administration officials are
continuing to meet with their Chinese counterparts in efforts to resolve problems.
USTR chairs the Trade Policy Staff Committee (TPSC) Subcommittee on China
WTO Compliance. The TPSC works closely with the various U.S. government
departments and their agencies involved in international contacts with U.S. industries
operating in China as well as with Chinese government officials. During his February
2003 visit to China, U.S. trade Representative Robert Zoellick, expressed strong
concern over non-compliance but also expressed optimism about China’s willingness
to engage in discussions intended to resolve the many issues surrounding its WTO
trade commitments.
Role of Congress
Given the huge market potential of China, and the importance of adherence to
trade commitments, Congress will be closely monitoring developments in China’s
implementation of its WTO obligations. Under Section 421 of the U.S.-China
Relations Act of 2000 (P.L. 106-286), the USTR is required to report annually to
Congress on compliance by China with commitments made in connection with its
accession to the WTO, including both multilateral commitments and any bilateralth
commitments made to the United States. During the 108 Congress, congressional
oversight and consultation with the Administration about China’s compliance with its
WTO commitments will be the major vehicles for Members to monitor developments
and express their views on the issues.
For More Information
CRS Report RS21292, Agriculture: U.S.-China Trade Issues.
CRS Report RS20169, Agriculture and China’s Accession to the World Trade
Organization.
CRS Electronic Trade Briefing Book, China’s Accession to the WTO.
Gale, Fred. China Corn Exports: Business a Usual, Despite WTO Entry, FDS-1202-
http://www.ers.usda.gov/publications/fds/dec02/fds1202-01/
Country-of-Origin Labeling*
Issue
The Farm Security and Rural Investment Act (FSRIA) of 2002 (P.L. 107-171)
soon will require many food stores to provide country-of-origin labeling (COOL) on
fresh fruits, vegetables, red meats, seafood, and peanuts. Proponents of COOL argued
that U.S. consumers have a right to know the origin of their food, particularly during
a period when food imports are increasing, and will continue to increase under both
existing and future trade agreements. Such information is particularly important to
consumers whenever specific health and safety problems arise that may be linked to
imported foods, proponents add. They cite, as examples, the 1997 hepatitis outbreak
linked to strawberries grown in Mexico, and concerns about the safety of some foreign
beef due to outbreaks of bovine spongiform encephalopathy (BSE or “mad cow
di sease”).
Critics of the new law, however, argue that such labeling does not increase public
health protection by telling consumers which foods are safer than others: all food
imports already must meet equivalent U.S. food safety standards, which are enforced
vigorously by U.S. officials at the border and overseas. In fact, they note, several
serious outbreaks of food borne illness in recent years have been linked to
contaminants in perishable agricultural commodities produced in the United States,
including the bacteria e. coli 0157:H7 and salmonella. Scientific principles, not
geography, must be the arbiter of safety, they add. Some critics are urging the 108th
Congress to revisit the new labeling law, partly on the grounds that implementation
will be costly and hinder rather than help U.S. producers’ competitive advantage.
Proponents maintain that the expected benefits to U.S. farmers, ranchers, and
consumers will outweigh implementation and compliance costs.
Background and Analysis
Federal law has long required most imports, including many foods, to bear labels
informing the “ultimate purchaser” of their country of origin. The 2002 farm law
(FSRIA) extends new COOL requirements to ground and muscle cuts of beef, lamb
and pork, farm-raised and wild seafood, peanuts, and fresh and (fresh frozen) fruits
and vegetables – which were among the raw agricultural products generally exempt
from the existing COOL requirements. Starting September 30, 2004, supermarkets
and many other food stores must inform consumers of these products’ country of
origin “by means of a label, stamp, mark, placard, or other clear and visible sign on
the covered commodity or on the package, display, holding unit, or bin containing the
commodity at the final point of sale to consumers.” The law exempts the products if
they are ingredients of processed foods, and it also exempts food service
establishments, such as restaurants and cafeterias.
* Prepared by Geoffrey S. Becker, Specialist in Agricultural Policy, Resources, Science, and
Industry Division.
USDA’s Agricultural Marketing Service (AMS) issued guidelines for the
prescribed voluntary phase of COOL on October 8, 2002; rulemaking on the
mandatory phase is scheduled to begin in April 2003. The voluntary guidelines have
reignited debate over a number of policy issues, among them:
!Will COOL provide U.S.-raised products with a competitive
advantage over foreign products, because U.S. consumers can more
easily identify and choose fresh foods of domestic origin? Or will
industry (including on-farm) compliance costs outweigh any potential
benefits – particularly for beef, lamb, and pork producers competing
with poultry, whose products are not subject to COOL?
!As the AMS voluntary guidelines imply, will “every person” who
prepares, stores, distributes, or supplies the covered commodities for
retail sale – extending back to the farm or ranch – have to maintain
detailed records, and even track the identity of each animal (or plant)
from birth (harvest) through retail sale because they might be
criminally or at least contractually liable for non-compliance? Or
will record-keeping be far less onerous, partly because modern
production and marketing methods already incorporate many aspects
of this information?
!Is the AMS preliminary estimate of recordkeeping costs, at $2 billion
in the first year, evidence of a huge burden industry is facing (or as
some critics suggest, an insufficient burden), or are the figures grossly
exaggerated, as COOL supporters believe?
!Is the new COOL law deliberately intended to increase costs for
importers – thereby undermining U.S. efforts to break down other
countries’ trade barriers, and violating existing U.S. trade
obligations? Or is it simply extending to raw products the same U.S.
requirements that almost all other imported consumer products, from
automobiles to most other foods, already must meet – and that many
foreign countries themselves now impose on food and farm products?
To what extent is COOL comparable to EU proposals for mandatory
labeling of GE products?
Role of Congress
Some food industry and producer trade associations are calling for a re-
examination of the new COOL requirements, and its impacts on industry costs and
competitiveness. A few have suggested that the law should be changed or even
repealed. As of early March 2003, no such legislation had been introduced. Some
observers anticipate that Congress will at least be asked to hold hearings on the
matter. At the same time, those who pressed for passage of the law can be expected
to defend its necessity and efficacy.
For more information
CRS Report 97-508, Country-of-Origin Labeling for Foods.
Agricultural Exports to Cuba*
Issue
U.S. policy is to exempt commercial sales of agricultural and medical products
from U.S. unilateral sanctions imposed on foreign countries, subject to specified
conditions and prohibitions. Debate continues, though, among policymakers on the
scope of restrictions that should apply to agricultural sales to Cuba.
Background and Analysis
The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA)
codified the lifting of U.S. sanctions on commercial sales of food, agricultural
commodities, and medical products to Iran, Libya, North Korea, and Sudan, and
extended this policy to apply to Cuba. TSRA’s provisions place financing and
licensing conditions on sales to these countries. Those applicable to Cuba are more
restrictive than for the other countries, and are permanent. Including Cuba in this
exemption to U.S. unilateral sanctions policy generated the most controversy.
Proponents argued that the prohibition on sales to Cuba (a sizable nearby market)
harmed the U.S. agricultural sector, and that opening up limited trade would be one
way to pursue a “constructive engagement” policy. Opponents countered that such
an exemption would undercut current U.S. policy designed to keep maximum pressure
on the Castro government until political and economic reforms are attained. In the
compromise adopted by conferees, opponents succeeded in inserting the permanent
restrictive provisions that apply uniquely to Cuba.
Cuban officials initially stated that no purchases would be made under TSRA’s
conditions; however, food stock losses due to devastation caused by a hurricane in late
2001 prompted a reversal. This development, and Cuba’s strategy to use this issue as
one way to remove the longstanding U.S. embargo, led to $170 million in cash
purchases of U.S. farm commodities and food products from late 2001 through 2002.
Another $50 million in sales made at a trade fair last fall will be shipped through April
The President, on May 20, 2002, in a major Cuba policy speech reiterated his
opposition to any repeal of the prohibition on private financing of agricultural sales,
stating it “would just be a foreign aid program in disguise, which would benefit the
current regime.” Bush stated he would veto legislation that relaxes the embargo in
any way until the Cuban government introduced reforms. The Administration has
held to this stance, and with its allies in Congress, succeeded in dropping provisions
added to the 2002 farm bill and FY2003 spending bills that would have repealed the
prohibition on the use of private financing on agricultural sales to Cuba and limited
Treasury’s ability to enforce TSRA’s trade and travel restrictions, respectively.
* Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science, and
Industry Division.
Role of Congress
Proposals that some Members of Congress have indicated they will pursue in the
108th Congress include: streamlining or eliminating U.S. export licensing and
reporting requirements, shipping restrictions, and other bureaucratic regulations to
make it easier to sell food, medicine, and medical products to Cuba; expanding the
types of products that may be sold to include agricultural equipment and supplies; and
permitting private (but not public) financing for commercial transactions (e.g., food
sales) now allowed on a cash-only basis. Two bills introduced in the 108th Congress
(H.R. 187 and S. 403) reflect some of these proposals.
For More Information
CRS Issue Brief 10061, Exempting Food and Agriculture Products from U.S.
Economic Sanctions: Status and Implementation, updated regularly.
CRS Electronic Briefing Book, Trade, Cuba Sanctions.
U.S. - Brazil WTO Cotton Dispute*
Issue
In September 2002, Brazil initiated a case at the WTO against certain aspects of
the U.S. cotton program. Subsequent consultations between the United States and
Brazil in December and January failed to resolve the dispute. Continuation of the
WTO dispute settlement process could lead to a “final” panel decision for or against
the complaining country. Resolution of the case in Brazil’s favor could result in WTO
recommendations concerning implementation of U.S. cotton program provisions.
Non-compliance with such provisions on the part of the United States could result in
compensation or possible limited trade sanctions.
The outcome of this case is also critical to future interpretation of WTO farm
subsidy rules since it represents the first formal challenge to the protection otherwise
afforded domestic commodity support programs under the “peace clause” provision
(see below) of the WTO Agreement on Agriculture.
Background and Analysis
Brazil argues that the United States is supplying domestic and export subsidies
to its cotton sector in excess of its WTO commitments; that the subsidies provided to
U.S. cotton growers have led to significant overproduction and a huge increase in U.S.
cotton exports; and that the larger world cotton supplies have contributed to a steep
decline in world cotton prices and have caused serious injury to Brazilian cotton
exporters. U.S. trade officials argue that the subsidies provided to U.S. cotton growers
have been within the allowable WTO limits and are consistent with WTO obligations.
The key to Brazil’s case against U.S. domestic cotton subsidies is its argument
that the United States is no longer exempt from WTO dispute proceedings under
Article XIII, the so-called “peace clause,” of the WTO’s Agreement on Agriculture.
Article XIII(b) exempts domestic support measures that comply with the Agreement
on Agriculture’s requirements from being challenged as illegal subsidies through
dispute settlement proceedings, as long as the level of support for a commodity
remains at or below the benchmark 1992 levels. Brazil argues that U.S. cotton
subsidies were about $2 billion in 1992 (other sources suggest a figure closer to $1.9
billion) compared with over $4 billion in 2001.
Brazil also argues that both the “Step-2" provisions of the U.S. cotton program
and the favorable terms provided under U.S. export credit programs function as export
subsidies and are inconsistent with U.S. WTO obligations regarding export subsidies.
(Step 2 payments are made to U.S. cotton users and exporters when U.S. cotton prices
are higher than world prices.) The United States notifies to the WTO any Step-2
payments as “amber” box (trade distorting) domestic support payments and not as
* Prepared by Randy Schnepf, Analyst in Agricultural Policy, Resources, Science, and
Industry Division.
export subsidies. U.S. trade officials also contend that U.S. export credit program
operations are consistent with WTO obligations.
U.S. trade officials argue that the immunity granted by the peace clause is
important, however, and that even if a country is no longer in compliance with the
peace clause, it is still incumbent on the complaining party to prove there has been
injury. Brazil claims that injury to its economy due to low cotton prices, measured as
the sum of individual negative impacts on income, foreign trade revenue, fiscal
revenues, related services (transportation and ginning) and employment, exceeded
$600 million in 2001 alone.
Once a WTO dispute settlement process is initiated, it must adhere to a
disciplined time frame that will produce a final panel decision within one year without
appeal or 15 months with appeal. However, the WTO process welcomes an “out-of-
court” settlement between the principal parties at any time during this process. The
12-month WTO dispute settlement period was initiated on December 3, 2002, when
Brazil and the United States held their first consultations in Geneva to discuss the
dispute over U.S. cotton subsidies.
The consultations were unsuccessful and on February 19, 2003, Brazil requested
the establishment of a dispute panel to rule on its complaint. In accordance with WTO
rules, the United States, as potential defendant, successfully objected to formation of
the panel. However, Brazil has announced its intentions to request the formation of
a panel a second time at the March 18 meeting of the WTO Dispute Settlement Body.
Second requests are approved automatically. The panel would be formed within 45
days (by May 2). Once formed, the panel has 6 months to hold hearings and gather
testimony before issuing its final report to both parties. If the panel decides that the
disputed policy measure does break a WTO agreement or an obligation, it
recommends that the measure be made to conform with WTO rules. The panel may
suggest how this is to be done.
Either side can appeal a panel’s ruling, although appeals have to be based on
points of law such as legal interpretation–they cannot reexamine existing evidence or
examine new evidence. Once the case has been decided, the losing “defendant” is to
bring its policy into line with the ruling or recommendations. If complying with the
recommendation within “a reasonable time” proves impractical, Brazil and the United
States would have to enter into negotiations in order to determine mutually-acceptable
compensation (e.g., tariff reductions in areas of particular interest). If the two sides
are unable to agree on compensation, the complaining side may ask the Dispute
Settlement Body for permission to impose limited trade sanctions against the other
side.
Role of Congress
Given the importance of cotton in the U.S. agricultural economy, Congress will
be closely monitoring developments in the U.S.-Brazil cotton dispute. Under fast
track, or Trade Promotion Authority, legislation, Congress will be engaged in
consultations with the Administration on negotiations of the Free Trade Agreement
for the Americas and the agriculture negotiations in the WTO. Such consultations will
be a major vehicle for Members to monitor developments in this dispute and the
negotiating issues it raises.
For More Information
WTO. “Settling Disputes.” Chapter 3, Trading into the Future: Introduction to the
WTO, 2nd Ed., March 2001, pp. 38-42.
http://www.wto.org/ english/thew to_e/whatis_e/tif_e/disp0_e.htm
For listings of WTO Dispute Cases see:
http://www.wto.org/ english/tratop_e/dispu_e/dispu_e.htm
For text on the WTO Agreement on Agriculture see:
http://www.wto.org/ english/docs_e/legal_e/14-ag.pdf
For text on the WTO Agreement on Subsidies and Countervailing Measures see:
http://www.wto.org/ english/ docs_e/legal_e/24-scm.pdf
U.S.- Canada Wheat Trade Dispute*
Issue
U.S. trade officials contend that Canadian wheat trading practices, particularly
the export practices of the Canadian Wheat Board (CWB), are inconsistent with
Canada’s WTO obligations and disadvantage U.S. wheat exporters in Canadian and
international markets. Canada maintains that Canadian import practices and the CWB
wheat export practices comply fully with international trade rules and its WTO
obligations.
Concern over alleged unfair trade practices has led to numerous investigations
and charges by U.S. trade officials about the wheat trading practices of Canada and
the CWB. A recent finding under a countervailing duty investigation by the U.S.
International Trade Commission (ITC) resulted in the imposition of preliminary
punitive duties being levied on Canadian durum and hard red spring wheat imports.
Perhaps more significantly, the United States recently initiated a WTO trade dispute
settlement procedure against the wheat trading practices of Canada and the CWB.
Successful resolution of this dispute in favor of the United States could result in
greater competitiveness for U.S. wheat vis-a-vis Canadian wheat in international
markets and in U.S. wheat having improved access to the Canadian market. It could
also establish precedent under WTO dispute settlement procedures for regulating the
activities of state trading enterprises.
Background and Analysis
In accordance with Canadian law, the CWB has the exclusive right to purchase
and sell Western Canadian wheat (durum and nondurum) and barley for export and
for domestic human consumption. While Canadian farmers are free to choose the
crops that they grow each year, all Canadian producer sales of wheat and barley must
be to the CWB. Critics argue that such monopsony (single buyer) power gives the
CWB extraordinary market power, particularly in the North American markets for
durum and hard spring wheat.
Representatives of the U.S. wheat industry, as well as U.S. agriculture and trade
officials, also complain that the CWB’s “monopoly” control over Canada’s wheat
trade permits it to practice discriminatory pricing in international markets, thereby
gaining unfair competitive advantage over other wheat exporters. Because the CWB
does not publicly report the terms and conditions of individual sales these charges
have been difficult to prove. This alleged lack of transparency by the CWB has long
been the subject of criticism in the United States. The CWB does not engage in wheat
imports. However, according to U.S. trade officials, the Government of Canada has
certain rules and regulations in place that discriminate against imported grains at grain
elevators and within Canada’s rail transportation system.
* Prepared by Randy Schnepf, Analyst in Agricultural Policy, Resources, Science, and
Industry Division.
These multiple allegations against Canadian wheat trading practices have led to
a series of investigations by U.S. agriculture and trade authorities at various levels.
In October 2000, the U.S. Trade Representative (USTR) initiated an investigation
under Section 301 of the Trade Act of 1974 concerning the acts, policies, and
practices of the CWB. The investigation was in response to a petition filed by the
North Dakota Wheat Commission which charged that certain wheat trading practices
of the Government of Canada and the CWB are unreasonable, and that such practices
burden or restrict U.S. commerce.
In April 2001, the ITC initiated an investigation (No. 332-429, under Section
332(g) of the Tariff Act of 1930 as amended) which culminated in a December 2001
report that identified several features of the CWB which, as a State monopoly, afford
it “unfair” market advantages over U.S. wheat exporters. Several members of
Congress followed up on the ITC report with a January 21, 2002 letter to the USTR
highlighting the key findings of the ITC report and recommending that the CWB be
held accountable for its alleged unfair trade practices.
In October 2002, the ITC initiated a countervailing duty and antidumping
investigation on durum and hard red spring wheat imports from Canada. The ITC
investigation was in response to petitions filed by the North Dakota Wheat
Commission, the Durum Growers Trade Action Committee, and the U.S. Durum
Growers Association. U.S. millers and pasta makers dispute the allegations of price
discounts on Canadian wheat and have expressed concern over potential trade
restrictions that might limit their access to high quality grain supplies. On March 4,
2003, the U.S. Department of Commerce issued a preliminary finding of illegal CWB
transportation subsidies and loan guarantees in the countervailing duty investigation,
and imposed a provisional 3.94% punitive duty on Canadian durum and hard red
spring wheat imports. A final determination is due July 15. In May, the Commerce
Department is scheduled to decide whether to impose anti-dumping duties as well.
In December 2002, U.S. trade officials submitted a request for dispute settlement
consultations with Canada via the Dispute Settlement Body of the WTO. U.S. trade
officials have insisted that WTO trade provisions governing the trade behavior of state
trading enterprises require them to undertake trade in a manner consistent with the
general principles of non-discriminatory treatment as prescribed in the GATT 1994
(Article XVII). Consultations were held on January 31, 2003. During the
consultations Canada expressed no willingness to make any modifications to its wheat
trading practices. On March 6, the USTR announced the intention to seek formation
of a WTO dispute settlement panel to examine the wheat trading practices of the
Government of Canada and the CWB. Once a WTO dispute settlement panel is
established, it must adhere to a disciplined time frame that will produce a final panel
decision within one year without appeal or 15 months with appeal.
Role of Congress
Given the importance of wheat in the U.S. agricultural economy, Congress will
be closely monitoring developments in the U.S.-Canada wheat dispute and the ITC
countervailing duty and antidumping investigations on durum and hard red spring
wheat imports from Canada. Congress will also be closely following WTO dispute
settlement in this case.
For More Information
U.S. International Trade Commission. Wheat Trading Practices: Competitive
Conditions between U.S. and Canadian Wheat, Publication 3465, report on
investigation No. 332-429 under Section 332(g) of the Tariff Act of 1930 as amended,
December 2001.
ftp://ftp.usitc.gov/pub/reports/studies/pub3465.pdf
Economic Research Service, USDA. “The Canadian Wheat Board,” Canada briefing
room. Http://www.ers.usda.gov/Briefing/Canada/wheatboard.htm
The U.S. dispute settlement case against the Canadian Wheat Board (DS276) is found
under the listings of WTO Dispute Cases at:
http://www.wto.org/ english/tratop_e/dispu_e/dispu_e.htm
Meat and Poultry Trade Disputes*
Issue
The United States is one of the world’s leaders in meat and poultry trade. Meat
and poultry products are among the fastest growing components of U.S. agricultural
exports. However, at the same time that the industries’ reliance on foreign markets
is increasing, some countries have instituted barriers that have disrupted exports,
threatened future growth, and heightened trade tensions.
Background and Analysis
The United States is the world’s leading producer, consumer, and importer of
beef, and the second leading exporter, now holding 20% or more of the world export
share, according to USDA. The United States is the third leading pork producer,
consumer, importer and exporter, also with an approximately 20% market share. It
is also the leading consumer, producer, and exporter of poultry meat, dominating
global exports with about 45% of market share. Total red and poultry meat exports
experienced strong annual gains for 16 years through 2001, reaching nearly 5 million
metric tons (MMT) valued at $7.4 billion, before declining in 2002. Both red meat
and poultry meat exports are expected to begin increasing again in 2003, USDA
reports.
USDA analysts note that, while trade prospects look brighter, a number of
uncertainties could hamper foreign (and domestic) demand, including sluggish
economic conditions, and animal disease and food safety concerns in some markets,
for example, beef demand in Japan was disrupted when that country in September
2001 reported its first cases of bovine spongiform encephalopathy (BSE or “mad cow
disease”). Adding to these uncertainties are a number of existing or impending
foreign-imposed import barriers in key export markets, which U.S. trade officials are
working to reduce or eliminate. Following are various trade disputes of concern to the
meat and poultry industries.
Russia. U.S. agriculture groups have expressed alarm over Russia’s
announcement that it will impose import quotas on poultry and tariff-rate quotas on
beef and pork, all effective April 1, 2003. U.S. exports of poultry to Russia, by far our
largest poultry customer, already had declined by approximately a third in 2002 after
Russia banned them effective March 10, 2002, ostensibly out of concerns about
product safety. U.S. interests charged that Russia was seeking to protect its domestic
producers and also to retaliate against newly imposed U.S. tariffs on imported steel.
After extensive negotiations, U.S. and Russian officials reached an agreement
whereby Russian veterinarians would re-inspect and certify U.S. exporting plants by
June 1, 2003. However, that process bogged down after the Russians failed many
U.S. plants and no recent inspections have been scheduled, USDA reported. Russia’s
new import quota for poultry is expected to be 1.64 billion pounds annually, of which
* Prepared by Geoffrey S. Becker, Specialist in Agricultural Policy, Resources, Science, and
Industry Division.
the United States would receive 1.22 billion pounds. In 2001, the United States
exported a record 2.3 billion pounds of broiler products to Russia, USDA added.
Although the United States does not sell much pork or beef to Russia, new tariff-rate
quotas on these products would effectively block any future U.S. growth there,
industry officials contend. In a February 14, 2003, letter, two dozen U.S. agricultural
organizations called on the Administration to self-initiate a Section 301 investigation,
which could lead eventually to trade retaliation.
Mexico. U.S. pork and poultry exports to Mexico are both jeopardized by
developments in the wake of the scheduled January 1, 2003, end to import duties for
those and other agricultural products under the North American Free Trade Agreement
(NAFTA). In late January, the Administration announced an agreement on poultry
that establishes a 6-month safeguard tariff-rate quota of 50,000 MT on U.S. chicken
leg quarters with an over-quota tariff of 99%. The Administration is continuing to
negotiate for a longer-term agreement to head off an ongoing Mexican safeguard
investigation that could result in tariffs of up to 240% (Inside U.S. Trade, January 24,
2003; various USDA attache reports). Mexico, the United States’ second largest pork
market, also launched on January 7, 2003, an anti-dumping investigation of U.S. pork
imports. Preliminary findings, expected as early as July 2003, could result in high
duties and depress U.S. exports there. An anti-dumping case also is under way for
beef, and a safeguard investigation could begin on beef cattle and breeding stock
imports as well, Inside U.S. Trade has reported.
European Union. Among a number of longstanding trade disputes with the
European Union is the EU’s ban, in effect since 1989, on the import of U.S. beef
produced with hormones. In 1997, the WTO ruled in favor of the United States that
the EU cannot ban, without scientific justification, beef produced with hormones. The
WTO authorized U.S. retaliation of $117 million in prohibitively high U.S. duties on
a variety of EU agricultural imports. The EU offered to compensate the United States
by enlarging the 20,000 ton quota for non-hormone treated beef in lieu of lifting the
ban. The United States has maintained that compensation, unless contingent on
removing the ban, is unacceptable.
Japan. The United States and other countries (Australia, New Zealand, and
Canada) that export beef to Japan anticipate that Japanese tariffs on frozen and chilled
beef imports will be increased sometime in 2003 to 50% from their current 38.5%.
Under so-called “snapback” tariff provisions of the WTO trade rules, Japan can
impose the higher tariffs if imports increase by 117%. Japan is expected to use, as the
base period for calculating this increase, the time when Japanese consumption was
unusually low due to the BSE outbreaks (see above). The higher tariffs could remain
in effect until March 31, 2004, according to USDA officials.
Role of Congress
Generally, Congress conducts vigorous oversight over the Administration’s
conduct of trade policy. On the Russian meat and poultry issue, for example, many
Members of Congress have signed onto letters to the President urging him to be more
aggressive in resolving the problem. For example, Section 407 of the Trade and
Development Act of 2000 (P.L. 106-200) directs the U.S. Trade Representative
(USTR) periodically to revise the list of products subject to trade retaliation, on the
premise that rotating products subject to higher duties will expose a broader swath of
an offending country’s economy to penalties, thereby creating more pressure for
compliance. This so-called “carousel” provision was enacted partly out of frustration
over the EU beef hormone and other disputes, but the USTR so far has not employed
the provision. Observers attributed USTR’s restraint in using the carousel to U.S.
concerns about possible EU retaliation against the United States in the U.S.-EU
Foreign Sales Corporation dispute in which a WTO panel found the United States had
violated WTO rules with its tax subsidies to off-shore U.S. business entities. An EU
challenge to the carousel provision in WTO dispute settlement was not pursued.
Lawmakers also have withheld, or threatened to withhold, support for other
Administration trade initiatives. The Administration has been seeking congressional
support for granting permanent “normal trade relations” (PNTR) status to Russia,
which it failed to obtain in 2002 largely due to the poultry dispute. Under the
Jackson-Vanik amendment to the Trade Act of 1974 P.L. 93-618, section 410, NTR
status for Russia must be renewed on a year-to-year basis, but the Administration
wants to make it permanent so that the United States can take full advantage of any
benefits gained if and when Russia joins the WTO.
Sweetener Disputes with Mexico*
Issue
Mutual recognition that NAFTA sugar provisions have not worked, prompted
U.S. and Mexican negotiators to intensify efforts in mid-2002 to resolve two
longstanding sweetener trade disputes. Talks remain stalled on two key issues–market
access for Mexican sugar in the U.S. market and market access and sales of U.S. high
fructose corn syrup in Mexico.
Background and Analysis
The United States imports sugar to cover the balance of its needs that the
domestic sugar sector cannot produce – about 12% of consumption. The level of
imports affects the domestic supply, and in turn, U.S. sugar prices and the functioning
of the domestic sugar program. U.S. imports of sugar from Mexico are governed by
NAFTA provisions, which Mexico, seeking additional access, began to dispute
starting in 1997. Mexico’s sugar industry, concerned that imports of a competing
sweetener – high-fructose corn syrup (HFCS) – from the United States were
increasingly displacing sales of Mexican sugar in its own market, succeeded in
persuading its government in 1998 to impose high anti-dumping duties on imports of
U.S.-produced HFCS. In response, the United States challenged these duties, taking
advantage of trade dispute mechanisms under both NAFTA and WTO.
Negotiations on Mexico’s sugar access did not begin in earnest until mid-2000,
just before Mexico became eligible under NAFTA’s “sugar side letter” to ship much
more sugar duty free to the U.S. market than allowed to enter in earlier years. These
negotiations faltered, as U.S. and Mexican negotiators disagreed over just how much
sugar Mexico actually could ship north. Their disagreement centered on which
version of NAFTA governed this issue. U.S. negotiators based their position on the
sugar side letter struck in last minute talks between the U.S. Trade Representative and
his Mexican counterpart in November 1993, just before the House voted to approve
NAFTA. Mexican negotiators based their stance on the sugar provisions found in the
NAFTA agreement concluded in August 1992 and signed by each country’s president
that December. Relatedly, the NAFTA and WTO dispute panels issued successive
decisions questioning the process Mexico followed to impose its HFCS duties and
called for changes. Mexico did not respond until April 2002, when it announced it
would replace its anti-dumping duties with a quota on HFCS imports equal in quantity
to the U.S. quota for Mexican sugar.
Legislation passed by Mexico’s Congress on January 1, 2002, and still in effect,
imposed a tax on soft drinks containing corn syrup but not sugar. This law has
eliminated much of the market for U.S. HFCS imports to Mexico and jeopardized the
viability of two U.S. companies located in Mexico that manufacture HFCS from U.S.
corn. The U.S. corn and corn refining sectors viewed this action as a step back in
* Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science, and
Industry Division.
negotiating a resolution to the HFCS dispute and have pressed Administration
officials to persuade Mexican authorities to remove this tax. Subsequently,
negotiators from both sides agreed to lay aside whether or not the sugar side letter
applies, in favor of pursuing negotiations to arrive at a comprehensive, mutually
acceptable sweetener agreement.
In July-September 2002, negotiators exchanged details of a prospective
agreement. Though both sides appear to agree on some issues, differences remain on
the length of a prospective agreement (temporary or permanent) and how to handle
over-quota Mexican sugar exports to the U.S. market. The U.S. sugar industry seeks
provisions that would apply beyond 2008 when sugar trade under NAFTA is
scheduled to be completely liberalized, and that would restrain Mexican over-quota
shipments. How these are resolved, in turn, will likely influence the terms reached on
future U.S. HFCS sales to Mexico. Some observe that Mexico’s interest in reaching
an agreement in the short term has diminished, due to the small quantity of Mexican
sugar available for export this year and the political dynamics associated with
upcoming mid-term congressional elections in July. Also, with the Mexican Congress
having adjourned in December 2002 without dropping the tax on soft drinks
sweetened with corn syrup–viewed by the U.S. side as necessary to reach a
comprehensive agreement–prospects for a quick resolution have faded.
Role of Congress
Members of Congress that represent the sugar and corn sectors continue to
monitor developments in U.S.-Mexican sweetener negotiations. In letters to
Administration officials, some have called for more movement in these talks. Most
recently, on December 16, 2002, lawmakers called on the Administration to work
toward an immediate conclusion to the negotiations, expressing particular concern
about the growing economic fallout of no agreement on the U.S. corn and corn
refining sectors.
For More Information
CRS Issue Brief IB95117, Sugar Policy Issues (“Sweetener Disputes with Mexico”).
Appropriations for Agricultural Export and Food Aid
Programs *
Issue
Congress is currently considering FY2004 appropriations for USDA’s
international activities. At issue are funding levels for agricultural export subsidies,
export market development programs, export credit guarantees, and foreign food aid.
Congress and the Administration have been at odds over the use of Commodity Credit
Corporation (CCC) funds to finance food aid programs and over the Administration’s
decision in 2003 to begin phasing out food aid based on surpluses. WTO agriculture
negotiations could result in restrictions on agricultural export and credit guarantee
programs, the preservation of which the Trade Act of 2002 lists as an objective for the
WTO agriculture negotiations. Any changes in these programs resulting from a trade
agreement would ultimately be subject to congressional scrutiny under fast-track
procedures for considering trade agreements.
Background and Analysis
The 2002 farm bill (P.L. 107-171) authorizes USDA to operate a number of
programs to promote U.S. agricultural exports or to provide foreign food aid. The
Foreign Agricultural Service operates USDA’s international programs. These
programs include: agricultural export subsidies, export market development, export
credit guarantees, and foreign food aid. Legislative authority for most of these
programs now extends to the end of 2007. Export subsidies, but not other types of
export and food aid programs, are subject to reduction commitments agreed to in the
1994 Uruguay Round Agreement on Agriculture (URAA). On-going WTO
agriculture negotiations are considering new rules and disciplines for export credit
programs and food aid based on surpluses.
U.S. agricultural export subsidies include the Export Enhancement Program
(EEP) and the Dairy Export Incentive Program (DEIP). Market promotion programs
include the Market Access Program (MAP) and the Foreign Market Development or
“Cooperator” Program (FMDP). Considered to be non-trade distorting, programs to
promote exports are exempt from Uruguay Round reduction commitments. The
FSRIA authorizes export credit guarantees by USDA’s Commodity Credit
Corporation (CCC) of $5.5 billion worth of farm exports annually, plus guarantees of
an additional $1 billion for emerging markets through 2007.
The FSRIA also authorizes P.L. 480 Food for Peace programs and Food for
Progress through FY2007. P.L. 480 Titles I (Trade and Development Assistance) and
II (Emergency and Private Assistance) are the main vehicles for U.S. foreign food aid.
Food for Progress (FFP) provides commodities to developing countries and emerging
markets that are developing their private sectors. Another food aid program, Section
* Prepared by Charles E. Hanrahan, Senior Specialist in Agricultural Policy, Resources,
Science, and Industry Division.
commodities for donation overseas. The 2002 farm bill also established a new food
aid program, the McGovern-Dole International School Feeding and Child Nutrition
Program.
Some of these programs, notably food aid provided under P.L. 480 and the
salaries and expenses of USDA’s Foreign Agricultural Service (FAS), require annual
appropriations. Other programs (food aid other than P.L. 480, export subsidies,
export market development, export credit guarantees) are funded or guaranteed by
USDA’s Commodity Credit Corporation (CCC) and do not require line item
appropriations. Congress is presently considering proposals in the President’s budget
transmitted to Congress on February 3, 2003 for funding USDA export and food aid
programs in FY2004. The President’s budget estimates that agricultural export and
food aid programs would have a program value of $6.2 billion. Of that amount,
approximately $1.4 billion (for P.L. 480 and FAS) would require authorization of
budget authority in an appropriations act; the rest would be funded by CCC borrowing
from the Treasury.
The biggest item requiring authorization of budget authority is $1.185 billion
requested for P.L. 480 Title II, the same as requested in FY2003. However, the
President’s budget request for Title II is less than the amount appropriated in FY2003.
The farm bill authorized $100 million of CCC funding for the McGovern-Dole school
feeding program in FY2003. Beginning in FY2004, however, the program will be
funded by appropriations and the President requested $50 million for McGovern-Dole
in FY2004. The President’s budget envisions $151 million of CCC funding for FFP.
That program level is expected to provide the minimum 400,000 tons of commodities
in FFP required by the 2002 farm bill.
The President’s budget assumes a program level of $28 million in FY2004 for
EEP. The farm bill, however, allows EEP spending of $478 million, which is the
maximum allowed under the World Trade Organization/Uruguay Round agreement
on subsidy reduction commitments. EEP is capped at $28 million in FY2003 by P.L.
108-7, but for FY2004, unless Congress decides otherwise, USDA retains some
flexibility to increase the level of EEP subsidies.. For DEIP, the budget expects a
program level of $57 million for FY2004, an increase above the $36 million estimated
for FY2003. The budget request assumes that the CCC will guarantees commercial
financing of $4.2 billion of U.S. agricultural exports in FY2004. Consistent with the
farm bill reauthorization of MAP, the budget provides for MAP funding of $125
million in FY2004. The budget assumes the farm bill authorized level of $34.5
million for FMDP in FY2004.
Role of Congress
Following House and Senate Appropriations Committee deliberations, spending
measures will be brought to the floor of each chamber. In addition to hearings and
congressional action on appropriations for USDA’s international activities, several
committees have indicated that they will be carrying out oversight of the
Administrations’s implementation of the export and food aid programs authorized in
the 2002 farm bill. Some USDA agricultural export and food aid programs–especially
USDA’s export credit guarantee program–could be affected by agreements reached
in WTO agriculture negotiations.
Many in Congress are closely following the WTO agricultural negotiations and
the consideration being given to proposals to tighten multilateral restrictions on U.S.
export credit programs which guarantee, on average, private financing of around $3
billion annually of U.S. agricultural exports. Under provisions established by the
Trade Act of 2002 (P.L. 107-210), Congress and the Administration will be consulting
on these negotiations and their implications for legislatively authorized programs.
For More Information
CRS Issue Brief IB980-06, Agricultural Export and Food Aid Programs.
CRS Report RL31301, Appropriations for FY2003: U.S. Department of Agriculture
and Related Agencies (see section on “Agricultural Trade and Food Aid”).
CRS Report RS21425, The Administration’s FY2004 Budget Request for the U.S.
Department of Agriculture (USDA) (see section on “Agricultural Trade and Food
Aid”).
CRS Report RS20285, Agricultural Export Subsidies, Export Credits, and the World
Trade Organization.