The Hagstrom Report

Agriculture News As It Happens

IFPRI: More farm subsidy monitoring needed by WTO

The World Trade Organization needs a stricter system of monitoring members’ levels of farm subsidies and should consider more restrictions on conservation payments, biofuels programs and other farm policies that are not now considered trade distorting, the editors of a new book published by the International Food Policy Research Institute said today at a seminar in Washington.

The book, “WTO Disciplines on Agricultural Support: Seeking a Fair Basis for Trade” says that while the Uruguay Round agreement to limit farm subsidies has dampened the use of programs that lead to economic distortions in agricultural production and trade, it is hard for analysts to be certain countries are complying because governments are often years late in notifying the WTO of levels of domestic support.

India has not made a notification to the WTO since 1998, noted David Orden, a senior research fellow at IFPRI and professor at Virginia Tech’s Institute for Society, Culture and Environment, the lead editor of the book. Orden said there are so many differences among the subsidy programs and the way they are reported that the differences in the levels of support are not as great as they appear in charts.

The issue of subsidy levels may arise anew because fast-growing developing countries such as China, India and the Philippines do not have the same restrictions on subsidies as the developed countries, and may be more inclined to subsidize agriculture as they become richer from other economic activities, Orden said.

Former Agriculture Secretary and U.S. Trade Representative Clayton Yeutter, who was a commentator on the book at the seminar, said he considers the lateness in notifications by countries including the United States to be appalling.

“The director general of the WTO ought to be screaming bloody murder about this,” Yeutter said.

Orden and his co-editors — David Blandford, a professor of agricultural and environmental economics at Pennsylvania State University and Tim Josling, a senior fellow at the Freeman Spogli Institute for International Studies at Stanford — also recommended that programs known in agricultural circles as green-box measures should receive enhanced scrutiny for their potential effects on production and trade.

The direct payments that farmers in the United States, the European Union and China get have not been considered trade distorting because those payments are made no matter what crop the farmers plant. The income support may have an impact on production, however, and limits on those payments should be considered, the editors said.

The editors noted that while WTO rounds to date have focused on measures that stimulated production, other measures also distort production. Measures that restrict supply, such as conservation payments that keep land out of production and biofuels programs that increase market demand, should be analyzed “to ensure fairness in world markets for consumers, including those in low-income, net-food-importing countries, the editors said.

If the WTO were to adopt the recommendation that it take the interests of consumers into consideration, it would mark a change in the WTO’s world view, which has traditionally focused on fairness for agricultural producers.

The International Food Policy Research Institute, known as IFPRI, is the economics division of the Consultative Group on International Agricultural Research, a collection of 15 research institutes scattered around the world. Basic funding comes from the World Bank and country governments.

International Food Policy Research Institute brief on its book, "WTO Disciplines on Agricultural Support"