Agricultural subsidies targeted

U.S. and European agricultural subsidies, worth billions of dollars to farmers, will be open to attack at the World Trade Organization as soon as next month.

Trade analysts do not foresee an onslaught of disputes but do expect some countries to challenge subsidies on specific commodities or to throw up barriers against subsidized products. The threat of a WTO case also offers leverage in ongoing trade negotiations.

“I think U.S. and European subsidy policies are subject to legal challenge at the WTO. There are billions or tens of billions of dollars in consequences,” said Richard Steinberg, a law professor at the University of California at Los Angeles.

Mr. Steinberg co-authored a paper on the so-called peace clause that expires Dec. 31. He is considered a leading authority on its legal implications.

The clause protects countries that use agriculture subsidies from WTO dispute resolution, the global trade equivalent of a lawsuit. Subsidies generally are illegal, but the 1992 clause grants an exemption for farm payments.

Most rich countries offer some support to farmers, with the European Union, Japan and the United States leading the way. South Korea, Norway, Switzerland and Iceland also offer significant payments to producers.

“We are entering into some uncharted territory. What we would hope to see … is that people focus on working to move WTO negotiations forward so that we can achieve some comprehensive global trade reform,” said Richard Mills, spokesman for the U.S. Trade Representative’s Office.

WTO delegates are scheduled to meet in Geneva Dec. 15 to try to revive global trade talks, but expectations for the meeting are low. Negotiations collapsed in September partly because of a fight over agriculture subsidies.

“We definitely have our problems. … We’re already beginning to see some challenges occurring,” said Chris Garza, a trade specialist at the American Farm Bureau Federation, an industry group.

Mr. Garza said U.S. producers are not worried. Cases would play out over several years as countries develop the information necessary to mount a case, and then as attorneys battle over the law.

Countries and groups already are angling over technical interpretations of the clause, with some arguing it does not actually expire until sometime in 2004 or that subsidies below 1992 levels do not violate rules.

Developing countries face political pressure and technical barriers that deter filing a case, said Sophia Murphy, trade program director of the Institute for Agriculture and Trade Policy, a free-trade skeptic.

“It is hard to put a case together,” she said.

But farm-subsidy programs face risks on both sides of the Atlantic.

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