Canada has launched fresh trade offensives against the U.S. over the subsidies the U.S. government provides to its farmers. Canada has alleged that the practice of providing billions in subsidies to farmers through U.S. farm bills has created unfair market advantage for the U.S. at the expense of Canadian Farmers.
Both the countries are looking forward to hold talks over the issue, however, experts are of the view that the prospective talks in all probability will fail to resolve differences. In the mean time, the Canadian government has said that in case of failure they have option of asking WTO to find a solution through its quasi-judicial process. In a similar case in 2005 WTO has ruled in favor of Brazil that U.S. cotton subsidies depressed the world prices making things difficult for cotton producers in Brazil and other countries.
The recent case filed in Geneva by the Canadian government appears to have been built up on this precedent and giving a substantial legal challenge to the structure of the U.S. farm subsidies.
The trade distorting subsidies in the U.S. are believed to be hovering around $20 billion that even include price-based support programs. Canada has challenged the entire subsidy structure of the U.S. but the action was taken specifically to protect Canadian corn producers. Canada has stated that Washington roughly provides a whopping $9 billion a year to their corn producer that has greatly distorted corn prices in Canada.
The argument is, these subsidies provided by the U.S. government lead to overproduction and it further result in dumping cheap products in global markets. Consequently it makes things difficult for the farmers of other countries to compete.
On the other hand, the recent decision by the Canadian government taken among the growing speculations that the democrat-congress in the U.S. may support the billion it allocates to its farmers. Speculations are high that many democrats support the U.S. farm bill which likely to be renewed this year when the current farm bill scheduled to expire in September 2007.
In the present circumstances, it would be premature to conclude whether these developments would affect a pending rewrite of U.S. farm policy and the vacillating global trade talks.
