US Reports Major Shift in Farm Subsidy Focus Under 2014 Farm Bill

26 January 2017

Washington’s first official report to the WTO on its farm subsidy spending since the 2014 Farm Bill shows a major shift in the type of trade-distorting support that the US provides.

While the total amount of trade-distorting support remains almost unchanged, at US$14 billion, the figures show a twenty-fold increase in subsidies that are not directed specifically at particular products but which still distort trade. (See Bridges Weekly, 2 June 2016)

Sources told Bridges that new subsidised crop insurance schemes were likely behind a US$8 billion increase in support in this category. These were all classified as “de minimis” payments at the WTO, which are allowed so long as they do not exceed a threshold of five percent of the value of production.

In particular, the US was using this category to report subsidised revenue insurance under the Agricultural Risk Coverage (ARC) programme and subsidised crop insurance under the Price Loss Coverage (PLC) scheme, sources said.

“Most ARC and PLC payments were notified as non-product specific amber support,” said Joseph Glauber, senior research fellow at the International Food Policy Research Institute (IFPRI), in comments emailed to Bridges.

Farm Bill in practice

The surge in “de minimis” payments was matched by a corresponding decline in domestic support that was notified as counting towards Washington’s ceiling on highly trade-distorting “amber box” subsidies, the data showed.

Amber box payments reached almost US$4 billion, the notification showed – down sharply from the US$7 billion reported in 2013. (See Bridges Weekly, 2 June 2016)

Sugar was among the products benefitting from this type of product-specific support in 2014, the new data shows – with the US notifying US$1.5 billion in amber box payments to this product.

Other products, such as dairy, saw notified support levels fall in the wake of reforms introduced in 2014, Glauber told Bridges.

 

Some observers expect that the US notifications from 2014 onwards will report an increase in trade-distorting farm support payments, as the Farm Bill was drafted at a time when agricultural commodity prices were projected to remain high in the years ahead.

“Those assumptions have not turned out to be realistic or correct,” said Eric Muñoz, Senior Policy Advisor for Agriculture and Food Security at Oxfam America.

Farm subsidies loom over Buenos Aires ministerial

The US has agreed to respect an upper limit of US$19 billion in amber box subsidies, under commitments made over 20 years ago as part of the WTO’s Agreement on Agriculture.

While amber box support in 2014 was far below this legal ceiling, total trade-distorting support was very close to the US$14.5 billion limit that was proposed in 2008 as part of the WTO’s Doha Round of talks on trade.

This would have established a new cap on all forms of trade distorting farm support, composed of amber box payments, de minimis support, and production-limiting payments under the “blue box” – a category of payments which the US has not used since 1995.

Most WTO members want to update existing rules on agriculture, trade officials have said – with the organisation’s ministerial conference in Buenos Aires this December widely seen as a potential opportunity to do so. (See Bridges Weekly, 24 November 2016)

Domestic food aid: help for low-income individuals and families

The US also provided US$125 billion in payments that were classified as causing no more than minimal trade distortion under WTO rules – dubbed “green box” payments under the Agreement on Agriculture.

Of these, domestic food aid represented the lion’s share of outlays, accounting for US$102 billion in support. The Supplemental Nutrition Assistance Program, which is the food stamp scheme intended to help low-income individuals and families purchase food, alone counted for US$76 billion of this category.

The government indicated that another US$10 billion was spent on “general services” that are also seen as green box compliant under WTO rules, such as research, along with animal and plant inspection services.

Under this category, Washington also reported that US$1.4 billion was spent on administrative and operating reimbursements to insurers.

Subsidy comparisons

The US$14 billion that Washington provided in trade-distorting farm support in 2014 suggests that the US is second in the list of countries providing the most subsidies, a position shared with Japan. However, substantial delays in reporting current data hamper efforts to make meaningful comparisons across countries on the basis of their most recently reported figures.

China has indicated that its trade-distorting subsidies amount to ¥123 billion (US$18 billion) in 2010, while Japan has said it provided ¥1140 billion (US$14 billion) in 2012. (See Bridges Weekly, 13 May 2015 and 10 April 2014)

In contrast, farm subsidy reforms in the EU have meant that the bloc’s reported trade-distorting support has fallen significantly in recent years. Brussels has indicated that, in the 2012-13 marketing year, the EU’s trade-distorting farm subsidies amounted to just €6 billion (US$7.7 billion). Similarly, Russia reported that it provided ₽190 billion (US$5 billion) in 2014. (See Bridges Weekly, 12 November 2015 and 4 May 2016)

Other emerging economies have indicated they provide lower levels of support, with India reporting spending of just US$2 billion in 2010-11. (See Bridges Weekly, 18 September 2014) This figure nonetheless excludes input and investment subsidies for low-income farmers, which amounted to US$29 billion in the same period: developing countries can exempt these from subsidy ceilings under current WTO rules.

Meanwhile, agricultural trading giant Brazil has said it also provided just US$2 billion in trade distorting subsidies in the 2014-15 marketing year. (See Bridges Weekly, 3 November 2016)

ICTSD reporting.

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