[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW AGRICULTURAL SUBSIDIES IN FOREIGN COUNTRIES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
JUNE 3, 2015
__________
Serial No. 114-16
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
______________
U.S. GOVERNMENT PUBLISHING OFFICE
95-133 PDF WASHINGTON : 2015
_________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001
COMMITTEE ON AGRICULTURE
K. MICHAEL CONAWAY, Texas, Chairman
RANDY NEUGEBAUER, Texas, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
BOB GOODLATTE, Virginia DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma JIM COSTA, California
STEVE KING, Iowa TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan SEAN PATRICK MALONEY, New York
JEFF DENHAM, California ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California PETE AGUILAR, California
RODNEY DAVIS, Illinois STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
----
______
Scott C. Graves, Staff Director
Robert L. Larew, Minority Staff Director
(ii)
C O N T E N T S
----------
Page
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1
Prepared statement........................................... 3
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4
Witnesses
Hudson, Ph.D., Darren, Professor and Larry Combest Chair for
Agricultural Competitiveness, Department of Agricultural and
Applied Economics, Texas Tech University, Lubbock, TX.......... 5
Prepared statement........................................... 7
Submitted questions.......................................... 69
Thorn, Craig A., Partner, DTB Associates, LLP, Washington, D.C... 16
Prepared statement........................................... 17
Supplementary material....................................... 43
Submitted questions.......................................... 70
Submitted Material
Houlding, Kimberly, Executive Director, American Olive Oil
Producers Association, submitted statement..................... 61
American Sugar Alliance, submitted statement..................... 62
HEARING TO REVIEW AGRICULTURAL SUBSIDIES IN FOREIGN COUNTRIES
----------
WEDNESDAY, JUNE 3, 2015
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:01 a.m., in Room
1300 of the Longworth House Office Building, Hon. K. Michael
Conaway [Chairman of the Committee] presiding.
Members present: Representatives Conaway, Neugebauer,
Goodlatte, Lucas, King, Thompson, Gibbs, Crawford, Hartzler,
LaMalfa, Davis, Yoho, Walorski, Bost, Rouzer, Moolenaar,
Newhouse, Peterson, David Scott of Georgia, Walz, McGovern,
Vela, Kuster, Nolan, Bustos, Kirkpatrick, Aguilar, Plaskett,
Graham, and Ashford.
Staff present: Bart Fischer, Callie McAdams, Carly
Reedholm, Haley Graves, Jackie Barber, Matt Schertz, Mollie
Wilken, Scott Sitton, Skylar Sowder, Andy Baker, Liz
Friedlander, Mike Stranz, and Nicole Scott.
OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS
The Chairman. The hearing will come to order. I will ask
Mr. Crawford to open us with a blessing. Rick?
Mr. Crawford. Thank you, Mr. Chairman. Heavenly Father, I
do bow humbly before you, thankful for every blessing of life,
Father, thankful for this nation that we have and the freedoms
that we enjoy through your divine providence. Father, I just
ask that you fill this body with wisdom and discernment and
that all that is said and done be pleasing to you. I ask in
Jesus' name, amen.
The Chairman. Thank you, Rick. This hearing of the
Committee on Agriculture regarding the review of agricultural
subsidies in foreign countries, will come to order. I am
pleased to have two expert witnesses with us this morning to
talk about the topic, and I will not steal any of their
thunder, but it is important for us to observe several studies
listing the high and rising subsidies, tariffs, and non-tariff
barriers being thrown up by our trading partners. Two of the
authors of these studies are with us today, and it is my
understanding that some of the subsidies, tariffs, and non-
tariff barriers they report are so blatant that they are clear
violations of the countries' WTO commitments.
I hope everyone takes a close look at these studies because
they underscore two things: First, the United States Government
needs to stand up to the countries that fail to abide by their
commitments, and, second, we need strong U.S. farm policy as a
modest response to foreign competitors that cheat.
It is disturbing that as this Committee worked to produce a
farm bill that significantly reformed U.S. farm policy,
achieving an estimated $23 billion in savings, many of our
biggest trading partners were apparently increasing to new
heights their already high tariffs, subsidies, and other trade
barriers.
This is a troubling development for three reasons. First,
free markets are the most effective means for ordering our
economy. Trade agreements foster free markets by establishing
rules for all countries to follow. We all know and agree on
these things. But when trading partners do not follow the rules
that they agreed to and it goes unchallenged, two serious
problems develop. One, the American farmer and rancher lose
market opportunities they were promised. This hurts our farmers
and ranchers, it harms our economy, and it costs American jobs.
As a result of the first problem, the second problem arises,
and that is America's farmers and ranchers lose faith in trade
agreements. Given the current debate over TPA, it is safe to
say that free trade cannot afford to lose the support of
American agriculture. The United States Government must enforce
our trade agreements.
Second, American agriculture is incredibly dependent on
trade. We all know this and agree on it. For example, 80 to 85
percent of the American cotton crop each year is exported. If
our trade agenda freezes up because American agriculture loses
confidence in trade, the biggest losers under that scenario are
America's farmers and ranchers. We cannot afford to let that
happen. Rigorous enforcement of our rights under trade
agreements is part of the solution, but addressing the double-
standard that exists between developed and large, emerging
economies is of vital importance as well.
The key to getting stalled multi-lateral efforts like the
Doha Development Agenda back on track is recognizing the
disproportionate impact trade-distorting subsidies from large,
emerging economies are having on world prices.
And, finally, my part of the country is particularly
dependent upon trade. Our biggest cash crop in Texas is cotton.
Unfortunately, trade in the world cotton market is neither fair
nor free. Communist China's Government controls most of the
world market. And what China does not control, countries like
India and Turkey fill in the void to make the global cotton
market absolutely haywire. For instance, we saw world cotton
prices reach a record level in 2011 as China pursued a policy
of building up stocks to an historic level. And then we saw
prices nose-dive toward the end of last year when the Chinese
Government changed its mind. Prices for cotton remain low
today, and according to USDA, the Chinese Government's change
in course could mean many years of depressed world cotton
prices. The U.S. Government must work to address these problems
through the WTO, and it must also stand by America's cotton
farmers while the situation is made right.
On a related note, concerning our largest competitors, I
recently read a report that Brazil is deliberating a new
challenge to U.S. farm policy, this time against corn and
soybeans. Let me just say this: Brazil's case against U.S.
cotton was without merit from start to finish, but the WTO was
determined to rule in Brazil's favor no matter the facts and
rules. The WTO must now work to right that wrong by being
vigilant and wary in regard to Brazil's latest saber rattling,
and the United States must defend its farmers in a world where
trade manipulation and distortions by foreign governments often
come at the expense of America's farmers.
[The prepared statement of Mr. Conaway follows:]
Prepared Statement of Hon. K. Michael Conaway, a Representative in
Congress from Texas
This hearing on agricultural subsidies in foreign countries, will
come to order.
I am pleased to have before us two expert witnesses on the topic of
today's hearing.
I will not steal the thunder from our witnesses but it is important
for me to observe that there are several studies listing the high and
rising subsidies, tariffs, and non-tariff trade barriers being thrown
up by our trading partners. Two of the authors of these studies are
here today, and it is my understanding that some of the subsidies,
tariffs, and non-tariff barriers they report are so blatant they are
clear violations of the countries' WTO commitments.
I hope everyone takes a close look at these studies because they
underscore two things. First, the U.S. Government needs to stand up to
countries that fail to abide by their commitments. And, second, we need
strong U.S. farm policy as a modest response to foreign competitors
that cheat.
It is disturbing that as this Committee worked to produce a farm
bill that significantly reformed U.S. farm policy, achieving an
estimated $23 billion in savings, many of our biggest trading partners
were apparently increasing to new heights their already high subsidies,
tariffs, and other trade barriers.
I am troubled by this development for three basic reasons.
First, free markets are the most effective means of ordering our
economy. Trade agreements foster free markets by establishing rules for
all countries to follow. We all know and agree on these things. But
when our trading partners do not follow the rules that they agreed to
and it goes unchallenged, two serious problems develop. First, American
farmers and ranchers lose the market opportunities they were promised.
This hurts our farmers and ranchers, it harms our economy, and it costs
American jobs. And, as a result of the first problem, the second
problem arises: America's farmers and ranchers lose faith in trade
agreements. Given the current debate over Trade Promotion Authority
(TPA), it is safe to say that free trade cannot afford to lose the
support of American agriculture. The United States Government must
enforce our trade agreements.
Second, American agriculture is incredibly dependent upon trade. We
all know and agree on this. For example, 80 to 85 percent of American
cotton is exported. If our trade agenda freezes up because American
agriculture loses confidence in trade, the biggest losers under that
scenario are American farmers and ranchers. We cannot afford to let
this happen. Rigorous enforcement of our rights under trade agreements
is part of the solution, but addressing the double-standard that exists
between developed and large, emerging economies is of vital importance.
The key to getting stalled multi-lateral efforts like the Doha
Development Agenda back on track is recognizing the disproportionate
impact trade-distorting subsidies from large, emerging economies are
having on world prices.
And, finally, my part of the country is particularly dependent upon
trade. Our biggest cash crop in Texas is cotton. Unfortunately, trade
in the world cotton market is neither free nor fair. Communist China's
Government controls most of the world market. And what China does not
control, countries like India and Turkey fill in the void to make the
global cotton market absolutely haywire. For instance, we saw world
cotton prices reach a record-breaking level in 2011 as China pursued a
policy of building up stocks to an historic level. And, then, we saw
prices nose-dive toward the end of last year when the Chinese
Government changed its mind. Prices for cotton remain low today, and
according to USDA, the Chinese Government's change in course could mean
years of depressed world cotton prices. The U.S. Government must work
to address these problems through the WTO, and it must also stand by
America's cotton farmers while the situation is made right.
On a related note, concerning our largest competitors, I recently
read a report that Brazil is once again deliberating a challenge to
U.S. farm policy, this time against corn and soybeans. Let me just say
this: Brazil's case against U.S. cotton policy was without merit from
start to finish, but the WTO was determined to rule in Brazil's favor
no matter the rules or the facts. The WTO must now work to right that
wrong by being vigilant and wary in regard to Brazil's latest saber
rattling, and the U.S. must defend its farmers in a world where trade
manipulation and distortions by foreign governments often come at the
expense of America's farmers.
With that I would recognize my good friend and Ranking Member for
any remarks that he may have.
The Chairman. With that I would like to recognize the
Ranking Member for any remarks that he may have.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
Mr. Peterson. Thank you, Mr. Chairman. Thank you for
calling this hearing. I think it is important that the
Committee address this issue because what is often lost during
these debates on our farm safety net is the fact that other
countries also provide agriculture subsidies to producers and
sometimes more than we do. If we are going to compete in the
global marketplace, we need to be on a level playing field.
That being said, I am concerned that some of these so-
called advanced, developing countries have started to increase
their subsidies and are arguing that we should push ahead with
negotiations in the Doha Round, and as I have told some people
in the Administration and the negotiators, I just think the
whole Doha concept is flawed. We have people in there that are
developing countries that are not developing countries. They
are subsidizing considerably more than people recognize. This
is not going to--they need to scrap this whole thing and start
over in my opinion.
Now, this idea that somehow or another you are going to fix
everything by using trade to help these developing countries,
in my opinion, was a flawed concept to start with.
So I don't know how we get back to doing something sensible
there, but currently what is going on is not working. I don't
think it is fair that these developing countries, no matter how
advanced, can designate themselves for special treatment.
So based on the testimony of our witnesses, I think it is
time for the United States to start challenging Brazil and
China, India and others when they fail to make their WTO
commitments. Now I realize that the testimony covers a lot of
ground, but to the extent possible, I hope that our witnesses
will be able to give us a little more guidance on specific
subsidies that we should consider challenging and what our
chances of winning such challenges might be. So I hope our
witnesses will be able to address some of these questions, and
I look forward to their testimony and yield back.
The Chairman. Thank you, Collin. I appreciate that. I
welcome our witnesses to our hearing today. I appreciate the
time and preparation you put into getting here. I will ask Vice
Chair Randy Neugebauer to introduce Dr. Hudson, and then I will
introduce Mr. Thorn.
Mr. Neugebauer. Well, thank you, Mr. Chairman, and thank
you for holding this very important hearing. It is my honor to
introduce Dr. Darren Hudson who is a Professor and the Larry
Combest Chair at Texas Tech University. Go Raiders. It is good
to have you here today. Dr. Hudson earned his B.S. at West
Texas A&M University and his M.S. and Ph.D. degrees in
agricultural and applied economics from Texas Tech University.
He has been a Professor at Mississippi State University and a
Farm Foundation Fellow. Hudson's research interests include
agricultural policy, trade, economic development, marketing,
and consumer demand in behavioral economics, and he
participates in the Food and Agricultural Policy Research
Institute consortium producing annual baseline projections for
cotton for the group. Hudson is the past President of the
Southern Agricultural Economics Association. Dr. Hudson, it is
a pleasure to have you here. We look forward to your testimony
today.
The Chairman. Thank you and welcome Dr. Hudson. I would
like to introduce Mr. Craig Thorn, Partner with DTB Associates,
LLP, here in Washington, D.C. Dr. Hudson, the floor is yours.
STATEMENT OF DARREN HUDSON, Ph.D., PROFESSOR AND LARRY COMBEST
CHAIR FOR AGRICULTURAL
COMPETITIVENESS, DEPARTMENT OF AGRICULTURAL AND APPLIED
ECONOMICS, TEXAS TECH UNIVERSITY, LUBBOCK, TX
Dr. Hudson. Thank you, Mr. Chairman and honorable Members.
Please accept my gratitude for this invitation to speak to you
today on foreign ag subsidies. As Congressman Neugebauer said,
I am the Larry Combest Endowed Chair in Agricultural
Competitiveness, named after a former Chairman of this
Committee, and I also am Director of the International Center
for Agricultural Competitiveness at Texas Tech.
My testimony today is based on years of data accumulation
and analysis and, to the best of my ability, an objective
assessment of the state of agricultural subsidization globally.
We all know that the issue of subsidies is controversial
and contentious. And some groups such as the Environmental
Working Group, Oxfam, and others attempt to frame the issues in
such a way as to highlight the impact of U.S. subsidies. But
their logic and their arguments presuppose that the United
States operates in a vacuum, or more specifically, that the
United States is basically the only country subsidizing.
My objective today is to provide some perspective on global
subsidies so we can analyze those policy issues more
objectively.
Based on just looking at OECD data which are publicly
available, we can see that in 2012 the United States fits
basically into the middle ground of total subsidies provided.
The OECD data are not comprehensive in a sense that it covers
all countries but clearly indicates that subsidies are by no
means a U.S.-only phenomenon.
In fact, if we look at this case, China is much larger as
well as the EU in total subsidies provided. The single year is
helpful to look at, but the second figure also shows the trend
in support that has occurred over time, isolating the two big
developing countries in OECD data, China and Brazil, and the
United States for comparison.
So, clearly the United States' trend of support is down.
The word is everybody on this Committee is fully aware. But
developing country support is growing exponentially. What data
are available outside of the OECD data set show similar trends
in developing countries' support around the world.
Briefly, I think it is useful to understand the types of
support that are offered. The most transparent are direct price
supports through price and income. Countries like China, India,
and Brazil have moved to utilizing direct price supports on
several commodities. The EU by contrast offers direct income
support. For comparison's sake, the EU offers Spanish cotton
farmers a direct payment of =435 per hectare which is
equivalent to 32 per pound or 377 percent higher than the old
United States direct payment to cotton producers.
The second major type are indirect subsidies which are
subsidies on things like inputs, taxes and credits, R&D, among
other things that exist out there. Countries like Egypt, India,
Mexico, Pakistan, Turkey, Uzbekistan, and Brazil all use these
types of subsidies.
As an example, Brazil offers debts forgiveness,
restructuring, and broadly offers low-interest rates to
agricultural producers in 2011 to the tune of $64 billion. West
Africa offers free seed worth $30 to $60 per acre. And India
just recently announced this fiscal year they will provide $11
billion in fertilizer subsidies. So that gives you some
perspective on the scope of those types of indirect subsidies.
Finally there are the implicit subsidies that exist through
trade barriers, and although it is beyond the scope here,
China, for example, has used a myriad of tariffs, quotas,
domestic stock-piling, and other non-tariff barriers to support
domestic corn, some cotton, soybean, and other agricultural
prices.
Direct analysis of subsidies is often difficult because
subsidies are supposed to be reported to the WTO. We are often
years or even decades behind in reporting. China, for example,
just caught up to 2010 in its reporting to the WTO.
We have however collected data on subsidy rates, and I
provide a couple of examples here for cotton and corn. So if
you look at China, in cotton, offers cotton producers in their
most productive region a direct price support of $1.60 per
pound. Compare that to a U.S. loan rate of 45 to 52 per pound
depending on the adjusted world price, and that loan rate must
be either repaid or the crop forfeited, unlike a direct price
support that China offers. Even Brazil offers direct price
supports well above U.S. levels, whether or not they are in
effect depending on world price. Corn, as another example,
China offers three times the PLC reference price for corn and
much higher than that of the loan rate.
So if we look across a broad set of commodities globally,
the data clearly show that the United States is often in the
middle or bottom of the rankings. Overall, I hope this
information shows that global subsidization is deep and broad
and is an important part if we look at how we are going to
handle or address these issues. Many countries treat
agriculture as a strategic asset, and our failure to do so
would put our producers at a competitive disadvantage.
Mr. Chairman, thank you.
[The prepared statement of Dr. Hudson follows:]
Prepared Statement of Darren Hudson, Ph.D., Professor and Larry Combest
Chair for Agricultural Competitiveness, Department of Agricultural and
Applied Economics, Texas Tech University, Lubbock, TX
Introduction
Mr. Chairman and Honorable Members, please accept my gratitude for
the invitation to testify to you today. My name is Darren Hudson and I
hold the Larry Combest Endowed Chair for Agricultural Competitiveness
and the Director of the International Center for Agricultural
Competitiveness at Texas Tech University. I was asked to address the
topic of foreign agricultural subsidies. My testimony is based on years
of data accumulation and analysis and, to the best of my ability, an
objective assessment of the state of agricultural subsidization
globally.
The issue of subsidies for agriculture has been a contentious one
for quite some time. U.S. Federal budget concerns have continually put
pressure on lawmakers to find avenues for budget savings in all areas,
but agriculture has been a popular target because it is perceived as
``low hanging fruit.'' Groups such as the Environmental Working Group
(EWG) have framed agricultural subsidies as ``corporate welfare'' and
argued that these subsidies distort domestic and international markets.
International groups such as Oxfam have argued that U.S. subsidies
damage markets for subsistence farmers in developing countries. And,
while these groups make seemingly rational economic arguments, their
logic is based on the U.S. acting in a vacuum--that is, the U.S. is the
only country that subsidizes its agriculture, and, therefore, the only
country that impacts world markets.
The purpose of this testimony is not to justify the existence of
particular subsidies by particular players. Rather, the objective is to
provide some perspective on the scope of agricultural subsidization
globally, the means by which subsidies are provided, and some examples
of subsidies in commodities around the globe. What is presented here is
not exhaustive. The data are based on a database created and maintained
by the International Center for Agricultural Competitiveness at Texas
Tech University of which I am director. The database is simply a ``one
stop shop'' agglomeration of publicly available data on subsidies from
the USDA and various in country sources. No ``models'' or assumptions
are used in its construction. The database's only purpose is to collect
and disseminate factual information about agricultural subsidies.
Scope and Types of Subsidies
Virtually every major agricultural producing country provides some
sort of subsidies to their producers, be they complex systems as found
in the U.S. and Europe, or simply supporting research and development
projects to support agricultural productivity (e.g., Australia).
Figure 1 shows the 2012 OECD estimates of Producer Support
Estimates (PSE) spending in select agricultural producing countries.\1\
---------------------------------------------------------------------------
\1\ OECD provides a consistent measurement of PSEs, but only cover
a select set of countries outside of the OECD. But, it provides some
perspective on overall subsidization across countries. Data from 2012
were the last available for the developing countries in the dataset.
---------------------------------------------------------------------------
Figure 1. PSE Data for Major OECD Agricultural Producing Countries and
Select Non-OECD Countries, 2012
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Clearly, the U.S. provides support to agriculture, but that support
is orders of magnitude smaller than support provided by other major
producing countries/regions. For perspective, the OECD estimates that
about $492 billion in producer support was provided by all countries in
2012. Of that total, China provided 34% of the total compared with 7%
for the U.S. But the snapshot in time does not provide the full detail.
Figure 2 shows the trend in support for two major non-OECD countries
(China and Brazil) compared with the U.S.
Figure 2. Trends in PSE for Brazil + China Versus the U.S., 2001-2012
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: OECD.
Sometimes impressions persist well beyond the point where reality
has left the impression behind. In this case, the U.S. provided more
support than major developing agricultural producers, leading to the
impression that the U.S. was the primary distorter of markets. But,
clearly, that has changed with major developing countries far outpacing
the U.S., and, in fact, on an opposite trajectory with total support.
These data indicate, in general, that agricultural subsidization is a
multi-billion dollar enterprise in many major agricultural producing
countries globally. The broad scope of subsidization is associated with
a wide variety of subsidy types.
Direct Price and Income Support. The most widely recognized type of
support is direct price or income support. A direct price support is
akin to the old target price/deficiency payment program in the U.S., or
the PLC program in its most current decoupled formulation. China, for
example, is also transitioning to direct price supports for cotton and
other commodities. Pakistan, India, and Brazil all provide direct price
support to producers for several commodities including corn and cotton.
The European Union provides direct income supports as opposed to
price supports. For example, The EU provides Spanish cotton producers
with a direct transfer payment of =435/hectare. Assuming an average 605
pound per acre lint yield to be comparable with U.S. yields used in
direct payment calculations, this converts to $0.32/lb. of cotton, or
377% above the direct payment rate of $0.067/lb. for cotton under the
U.S. 2008 Farm Bill.\2\
---------------------------------------------------------------------------
\2\ U.S. direct payments were paid on 85% of base acres, so the
effective subsidy rate is lower.
---------------------------------------------------------------------------
These direct subsidies are more transparent than other types of
subsidies, and are, therefore, easier to identify and delineate the
potential effects. Because the U.S. has used these approaches for some
time, it has been much easier to target the U.S. subsidies in the
media. At the same time, these direct subsidies are crop specific and
relate to, at least for developed countries, commitment levels under
the World Trade Organization (WTO).\3\ A key issue in specific (non-
aggregated) analysis of subsidies is that while notification of subsidy
payments to the WTO is required, that requirement is rarely enforced.
For example, China just notified its 2010 subsidy payment. Thus,
specific analyses on subsidization levels often lags activity by years.
---------------------------------------------------------------------------
\3\ Self-designated ``developing'' countries are not subject to the
same types or magnitudes of restrictions on direct income/price support
subsidies. They are subject to total subsidy levels, or de minimis,
restrictions, but data on these subsidies are rarely reported in a
timely fashion and/or are not enforced.
---------------------------------------------------------------------------
Indirect and Non-Commodity Specific Subsidies
Indirect subsidies come in a variety of forms. The most commonly
used type of indirect subsidy is an input subsidy. Countries subsidize
such things as fertilizer, seed, transportation, energy/fuel, etc.
These subsidies are primarily used in developing countries such as
Egypt, India, Mexico, Pakistan, Turkey, Uzbekistan, and the countries
of West Africa, among others. Input subsides can be fairly innocuous
and low value like slight price breaks on electricity to quite
substantial like ``free seeds'' for cotton in West African countries
like Benin that can have a commercial value of $30-$60 per acre,
depending on the varieties and seeding rates used. As another example,
India recently announced $11 billion in fertilizer subsidies along this
fiscal year according to a Reuters news report (May 2015). Input
subsidies are often treated as ``decoupled'' in subsidy accounting, but
are coupled in the sense that they would not be provided unless
planting were taking place.
Less coupled indirect subsidies include credit/interest rate
subsidies (popular in Brazil, Nigeria, Mexico, Uzbekistan), favorable
tax rates and terms (popular in Australia, Brazil, and EU), and
government sponsored R&D and extension (popular in many countries
around the world). These subsidies are not product specific, but do
provide producers in those countries with indirect advantages over
producers in other countries that do not receive those types of
subsidies.
Finally, other indirect subsidies arise out of other types of
policies. For example, a popular target in the U.S. media has been the
impacts of the biofuels mandate on corn prices. It is interesting to
note, however, that a diverse set of countries including Brazil,
Canada, EU, Thailand and Turkey all have explicit biofuels mandates
within their agricultural/energy policies.
Implicit Subsidies Through Trade Policy. Direct and indirect
subsidization through standard agricultural policy is only one method
of providing support to a country's agriculture. Trade policy,
including tariffs, quotas, tariff rate quotas (TRQs), etc., all provide
support to domestic industries by driving a wedge between domestic/
internal prices and international prices. The Figure 3 below
illustrates average applied tariffs on agricultural products around the
world.
Figure 3. Average Applied Tariffs on Agricultural Products in Selected
Countries, 2013
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: World Trade Organization
While the U.S. does apply tariffs to agricultural imports, the
average applied tariff ranks it as one of the lowest trade barrier
countries among the major importing countries in the world. And, while
trade issues are generally beyond the scope of this testimony, it is
important to note that many countries do utilize trade policy to
support domestic industries. For example, China has used import tariffs
and quotas, domestic stockpiling, and even non-tariff trade barriers
\4\ to support domestic prices for corn, cotton, soybeans, and other
agricultural products.
---------------------------------------------------------------------------
\4\ A non-tariff barrier is any barrier to trade that is not
administered through a tariff or quota. In this case, China has used
the issue of genetic modification as a basis to reject shipments of
products and control the level of imports of corn below economically
viable levels, which has resulted in higher internal prices of corn to
the benefit of Chinese producers. This statement should not be
construed as implying motives, only outcomes of the decision to reject
shipments on the basis of GM corn.
---------------------------------------------------------------------------
Overall, we can think of subsidies in a continuum. Although not the
only two dimensional representation, a useful approximation of the
differences in subsidies can be found in Figure 4.
Figure 4. Author's Representation of Subsidy Differences on a Couple/
Value 2 Dimensional View
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Thinking of one dimension as the magnitude of the subsidies (on
average across all products) relative to the value of production, we
can compare that to the other dimension of being coupled (the degree to
which the subsidy depends on the linkage to actual production). In the
bottom right quadrant are the countries that have large subsidies
relative to production and those subsidies are relatively coupled
(again, on average across products). In the upper left are countries
that have low subsidies and are relatively decoupled. This diagram is
conceptual and does not include all countries, but does give a
reasonable idea of the scope and type of subsidies that are used
globally.
Some Examples for Perspective
It is useful to examine specific cases of differences in support to
provide some perspective on the relative position the U.S. holds in
that area. Figure 5 shows the example of minimum government support
prices for cotton in major producing countries.
Figure 5. Minimum Stated Support Prices for Major Cotton Producing
Countries, 2015 \5\
---------------------------------------------------------------------------
\5\ Note, China is based on the $/RMB exchange rate as of 5/27/2015
and this trial subsidy program is targeted at the Xinjiang province,
which singularly produces over 67% of China's domestic cotton
production according to recent USDA-GAIN reports on China. Pakistan,
India, and Uzbekistan are officially on a seed cotton basis, but were
converted to lint cotton basis assuming a 35% gin turnout rate and
converted to U.S. dollars based on official exchange rate data in
December 2014. Brazil is based on the R$/U.S.$ exchange rate as of
December 2014.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Figure 5 provides a stark visualization of the differences in
support levels across different producing countries. With China at
$1.60/lb. (depending on the assumed exchange rate), it is a little over
three times the minimum support price found in the United States. Keep
in mind also that these are on an equivalent nominal basis. If one
adjusted for purchasing power differences, these nominal differences
would be much larger. Also, keep in mind that the minimum support
prices in China, India, and Pakistan are prices paid to producers. The
U.S. price is a loan rate where money must either be repaid (or crop
forfeited) leaving marketing responsibilities in the hands of the
producers.
Similarly for corn, reference prices in China ($10.11/bu), India
($5.70/bu), and Mexico ($7.20/bu) are all higher than the U.S.
reference price in the PLC program of $3.70/bu. Again, differences in
productivity per acre would need to be considered to arrive at an
anticipated revenue per acre and costs deducted to examine
profitability per acre. But, these data reflect the fact that U.S.
subsidy rates are at least at or below global subsidy rates for the
same given commodities.
Similar stories can be constructed for other commodities and other
countries and all of these data can be accessed at the ICAC-TTU
database at: http://www.depts.ttu.edu/ceri/index.aspx for more
information. This database in continually updated as new data become
available.
Conclusions
Thank you again for your attention and invitation to provide this
testimony. If I could summarize what I hope you take away from these
data I would say:
1. The scope of agricultural subsidization is broad and deep
globally with virtually all major producing countries
providing some type of support,
2. While the U.S. does provide significant support, the level of
U.S. support in only average or below average in most
cases, overall support is trending downward, and U.S.
support is small relative to other major producing
countries/region, and
3. There may be sound economic arguments that support a world
without subsidies, but we do not live in one; other
countries are treating their agricultural sectors as a
national asset for security purposes and for the U.S. not
to consider the implications of those choices would leave
us at a competitive disadvantage.
Attachment
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Dr. Hudson. Now Mr. Thorn?
STATEMENT OF CRAIG A. THORN, PARTNER, DTB ASSOCIATES, LLP,
WASHINGTON, D.C.
Mr. Thorn. Mr. Chairman and Members of the Committee, my
name is Craig Thorn, and I am a Partner in the firm DTB
Associates. Our firm represents a number of companies and trade
associations in the agricultural sector. But I am here today in
a personal capacity to present the results of a recent DTB
study of agricultural subsidies in certain advanced developing
countries.
Our study was prompted by trade problems our U.S. clients
are encountering in world markets. For example, low-priced
Turkish wheat flour displacing U.S. wheat exports in Asian
markets and increased competition from exports of corn, rice,
and wheat from Brazil. In investigating those issues, we
learned that a number of large developing countries had
significantly increased their support to farmers.
The run-up in subsidies began about a decade ago and has
continued unabated. Support in the countries we examined is now
higher than in most developed countries. I think you all have
an old-fashioned handout that we distributed.
The first table in that handout shows support prices for
wheat, corn, and rice compared with U.S. reference prices under
the Price Loss Coverage Program. As you can see, support price
levels are in most cases significantly higher in the five
developing countries. But this comparison is actually unfair to
the United States. The prices listed for the developing
countries act as floor prices in the domestic market and
incentive prices to the producer. Their governments use policy
instruments such as government purchases and export subsidies
to ensure that prices do not fall below the support level.
By contrast, as you know, reference prices in the United
States trigger payments to producers linked to a fixed payment
base. The PLC program is less production distorting because a
producer is not required to plant a specific crop in order to
receive payments and cannot increase payments by increasing
production.
All five countries offer other forms of support as well
such as input and credit subsidies and commodity-specific
direct payments. Of course, the United States also has other
programs, but the overall level of support for the products we
covered was significantly higher in four of the five countries
than in the United States. The exception is Brazil where the
level of support is comparable.
These policies have a global impact. They have stimulated
production, displaced imports and, in many cases, increased
exports. For example, Indian rice exports have more than
doubled since 2005 from 4.3 to 10 million metric tons. And
China now requires importers of corn, wheat, and rice to
purchase an equivalent quantity for domestic stocks.
The second table in the handout shows in the second column
from the right our calculation of the level of support using
the methodology specified in the WTO Agreement on Agriculture.
We show a range in some cases because of methodological issues
that we explain in our paper. The last column shows the support
limit these countries accepted at the end of the Uruguay Round
or when they joined the WTO. As you can see, they are all in
violation of their obligations, in most cases by a large
margin. Keep in mind that our study looks only at wheat, corn,
and rice and in one case, sugar. Since all five countries have
support programs for other commodities, our estimates of total
AMS are almost certainly lower than the actual figures.
These issues are important to American farmers for obvious
reasons. Subsidies in advanced developing countries are
distorting world markets. The United States, the biggest
agricultural exporter in the world, suffers most from these
distortions. WTO members are currently discussing in Geneva a
new work plan for negotiations on agriculture. American farmers
would certainly benefit from a new WTO agreement that included
additional disciplines on agricultural subsidies. However, some
of the same countries that we cover in our report are insisting
on a negotiating text that would require changes in U.S.
policies but would do nothing to tighten the rules that apply
to them. At the same time, India is arguing for rule changes
that would significantly weaken those disciplines.
U.S. officials have been working to shine the light on
these issues in Geneva. Unfortunately, there is no indication
that advanced developing countries are ready to acknowledge the
facts. In my opinion, it would be extremely foolish for the
U.S. to agree to restart the negotiations until we have a plan
to enforce existing rules and are convinced that any new
disciplines would be targeted at the policies that are most
responsible for current distortions.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Thorn follows:]
Prepared Statement of Craig A. Thorn, Partner, DTB Associates, LLP,
Washington, D.C.
Agricultural Subsidies in Advanced Developing Countries
Mr. Chairman and Members of the Committee:
My name is Craig Thorn. I am a partner in the firm DTB Associates.
Our firm represents a number of companies and trade associations in the
agricultural sector. But I am here today in a personal capacity to
present the results of a recent DTB study of agricultural subsidies in
certain advanced developing countries.
Our paper is actually an update of an analysis we did in 2011. That
study was prompted by trade problems encountered by U.S. clients in
world markets--for example, low-priced Turkish wheat flour displacing
U.S. wheat exports in Asian markets and increased competition from
exports of corn, rice and wheat from Brazil. In investigating those
issues, we learned that a number of large advanced developing countries
had significantly increased their support to farmers in recent years.
The 2011 study documented those increases and concluded the four
countries examined--India, Brazil, Turkey and Thailand--were all out of
compliance with their obligations under the WTO Agreement on
Agriculture. Our new paper updates the original study and looks at
China as well.
Our study is an objective analysis, not an advocacy piece. The data
we used came from public sources, mainly reports by USDA agriculture
attaches. We identified our data sources and explained in detail our
methodologies and our legal reasoning. After 4 years of research, I am
confident in the accuracy of our analysis.
The run-up in subsidies in the countries we examined began about a
decade ago and has continued unabated. Support in those countries is
now higher than in many developed countries. The table below shows
support prices for wheat, corn and rice in the five countries we
examined, compared with U.S. reference prices under the Price Loss
Coverage (PLC) program.
Support Prices
(2013/14, unless otherwise noted)
------------------------------------------------------------------------
Long-grain
Country Wheat Corn Rice
------------------------------------------------------------------------
China * $384 $361 $438
India $232 $217 $332
Brazil * $231 $128 $224
Turkey $351 $310 $648
Thailand N/A N/A $450
United States $201 $146 $308
------------------------------------------------------------------------
* 2014/15 support price levels.
As you can see, price support levels are in most cases
significantly higher in the five developing countries. But this
comparison is actually unfair to the United States. The prices listed
for the developing countries act as floor prices in the domestic market
and incentive prices to the producer. The five governments use policy
instruments such as government purchases and export subsidies to ensure
that prices do not fall below the support level. By contrast (as you
know), reference prices in the U.S. trigger payments to producers
linked to a fixed payment base. The U.S. PLC program is less
production-distorting because a producer is not required to plant a
specific crop in order to receive a payment and cannot increase
payments by increasing production.
Price support programs are not the only type of support offered by
the five countries. Each also uses some combination of input subsidies,
investment subsidies and commodity-specific direct payments. Of course,
the United States uses other programs as well. In addition to the PLC,
we have the Agricultural Risk Coverage program and subsidized crop
insurance. However, the overall level of support for the products we
examined was significantly higher in four of the five countries than in
the U.S. The exception is Brazil, where the level of support is
comparable.
These policies have a global impact. They have stimulated
production, displaced imports and, in many cases, increased exports.
For example, India has raised its support prices for rice and wheat by
130% and 111% respectively since 2005. Over the same period, Indian
rice production increased by 13% and exports more than doubled, from
4.3 million metric tons to 10 million metric tons. In 2014 India became
the number one exporter of rice in the world. Wheat production has
increased since 2005 by 35%, and exports rose from 300,000 metric tons
to 6.5 million metric tons.
Chinese officials speak openly of their policy of subsidizing
producers to maintain self-sufficiency in wheat, corn and rice, despite
the fact that they agreed at the time of China's accession to the World
Trade Organization (WTO) to limit subsidies to no more than 8.5% of
value of production. They have raised the support price for wheat by
71% since 2006, for corn by 50% since 2008, and for rice by 100% since
2007. They have increased subsidies for fuel, fertilizer and other
inputs nine fold since 2006.
Why have these developments not gotten more attention in the WTO?
There are at least two reasons. First, the countries involved are all
delinquent to one extent or another in reporting their subsidy
increases to the WTO. More importantly, when they have submitted the
required notifications, they have used faulty methodologies that
misrepresent the level of support provided. Below is our calculation of
the actual level of support for the products we examined in our most
recent study:
Aggregate Measure of Support (AMS)
(Billions of Dollars)
----------------------------------------------------------------------------------------------------------------
Country Wheat Corn Rice Other Total AMS Limit
----------------------------------------------------------------------------------------------------------------
China $15.4-$18.4 $20.6-$54.4 $12.4-$37.0 N/A $48.4-$109.8 $0
India $12.1-$15.8 $2.5-$3.8 $13.3-$28.2 $33.0 $36.1-$93.4 $0
Brazil $0.8 * 0 $0.6 N/A $1.4 $0.912
Thailand N/A $0.5 $1.4-$10.1 N/A $1.9-$10.6 $0.634
Turkey $5.7 $1.0 $0.3 N/A $7.0 $0
----------------------------------------------------------------------------------------------------------------
* Support below de minimis level (10% of value of production).
The second column from the right shows our estimate of the level of
support. We used in our calculations the methodology specified in the
WTO Agreement on Agriculture. We show a range in some cases because of
methodological issues that we explain in the paper. The last column
shows the support limit these countries accepted at the end of the
Uruguay Round or when they joined the WTO. As you can see, they are all
in violation of their obligations, in most cases by a large margin. A
couple of points to keep in mind while looking at this table:
The support levels are high in absolute and in relative
terms. The U.S. AMS limit is $19.1 billion. By our estimate
China's AMS is at least double the U.S. limit, and perhaps as
much as five times higher. In all cases except one, the levels
of support for all commodities are a very large relative to
value of production.
Our study looks only at wheat, corn and rice. (In the case
of India we added sugar.) China also has generous support
programs for pork, cotton and soybeans. India has support
prices for 17 other commodities, including soybeans and cotton.
Turkey has high support levels for barley, oats, rye, soybeans,
sunflower seed and sugar. Thailand subsidizes sugar production
and Brazil supports cotton. Thus, our estimates of total AMS
are almost certainly lower than the actual figures.
As I indicated previously, all of these countries have used or are
currently using export subsidies. China used export subsidies for corn
until a few years ago. India made subsidized export sales from
government stocks within the past year and is currently subsidizing
sugar exports. Thailand is using export subsidies for rice, and Turkey
is using sales from government stocks and a WTO-inconsistent duty
drawback scheme to subsidize wheat flour exports. When prices fall
below the support levels in Brazil, the government uses programs called
PEP and PEPRO to move surpluses onto the world market. The programs
closely resemble the old U.S. Step 2 program for cotton. A WTO panel
and the Appellate Body ruled that Step 2 payments were export
subsidies, and the U.S. eliminated the program.
These issues are important to American farmers for obvious reasons.
Subsidies in advanced developing countries are distorting world
markets. I am convinced that they have become significantly more trade-
distorting than subsidies in developed countries. The U.S., as the
biggest agricultural exporter, suffers most from these distortions.
WTO Members are currently discussing in Geneva a new Doha Round
work plan for agriculture. American farmers would certainly benefit
from a new WTO agreement that included additional disciplines on
agricultural subsidies. However, some of the same countries that we
examined in this report are arguing that the only acceptable basis for
negotiation is the text that was developed in the early stages of the
Doha Round, before the developments we are discussing took place. That
text would require changes in U.S. farm policy but would do little or
nothing to tighten the rules that apply to advanced developing
countries. At the same time, India and others are arguing for rule
changes that would significantly weaken the disciplines on developing
country subsidies.
U.S. officials have been working to change the narrative in Geneva.
Ambassador Michael Punke has been particularly forceful and effective
in this regard. Unfortunately, I have not yet seen any indication that
advanced developing countries are ready to acknowledge the facts. In my
opinion, it would be extremely foolish for the U.S. to agree to restart
the negotiations until we have a plan to ensure compliance with current
commitments, and we are convinced that any new disciplines will be
targeted at the policies that are most responsible for current
distortions.
Thank you, Mr. Chairman.
Below is a link to the DTB study: http://dtbassociates.com/docs/
DomesticSupportStudy11-2014.pdf.
The Chairman. Gentlemen, thank you very much. The chair
will remind Members they will be recognized for questions in
order of seniority of the Members who were here at the start of
the hearing. After that, Members will be recognized in order of
arrival. I appreciate Members' understanding, and I recognize
myself for 5 minutes.
We had a General Farm Commodities and Risk Management
Subcommittee hearing yesterday. Every producer-witness said one
of the biggest impacts to the financial health in the U.S.
agricultural industry is competition from foreign governments,
and particularly, foreign subsidies and tariffs. So it is
timely that we are having this hearing.
Dr. Hudson, you mentioned in your written testimony that
the minimum support price for cotton in China is three times
the minimum support price for cotton right here in the United
States. How does that support level compare to current world
prices and what impact do you think that will have on producers
here at home?
Dr. Hudson. Thank you for your question. The minimum
support price in China is at $1.60 a pound. If we look at a
typical U.S. or futures price at this point, it is about 65 a
pound, or if you go to world prices, somewhere around 80 per
pound. At least twice the quoted world price level is what
China is supporting its producers at.
Certainly the elements we are looking at here in terms of
China, because it is either depending on the year the largest
or second-largest producer of cotton, that level of support is
significantly distortionary to world markets. Obviously they
have had a stock-piling policy that has accumulated 65 million
bales of cotton, and that has tremendous impacts on U.S.
producers in terms of price suppression and the ability for us
to work our way out of that overstock situation over time. We
are going to see extended periods of lower prices because of
that policy.
The Chairman. Put 65 million bales into context. How much
does the world use every year?
Dr. Hudson. The typical production year is about 115
million bales. So it is over \1/2\ of world production in any
given year.
The Chairman. Thank you, Dr. Hudson. Mr. Thorn, can you
describe some of the strategies that you have documented that
countries use to obscure their WTO violations and their
commitments under the WTO such as delinquent reporting, faulty
methodology or other classifications from what is submitted?
Can you talk to us, go into a little in depth, on the way they
are hiding the ball from everybody?
Mr. Thorn. Sure. Thank you. Well, that has been a problem.
One of the reasons that these issues haven't gotten more
attention in Geneva is because countries have been delinquent
in reporting changes in their subsidy programs. And then even
more importantly, when they have submitted notifications, the
required notifications, they have used methodologies that
understate the level of support, misrepresent the level of
support. And the most common methodological problem that we see
in these notifications is that when they are calculating the
level of support resulting from price support policies, they
would normally be required under the WTO methodology to use in
the calculation 100 percent of production. They are using
instead just quantities purchased under the government program.
You don't have to know very much about price programs to
know that the support really benefits all producers. It
benefits every ton, it doesn't only affect the tonnage
purchased.
And so when they do the calculations using quantities
purchased, you get a much lower number than you would if they
used the proper methodology.
Let me add though that I don't think that the problem,
especially the problems with delays in reporting, needs to
affect our handling of the issues because the data are
available. There is no reason for us to wait for countries to
report their subsidies before we take action.
The Chairman. On the methodology issue, is it something for
which the WTO should establish a standard methodology that
everybody would have to comply with to avoid these kind of
cooking-the-books kind of things?
Mr. Thorn. I think the WTO already has established a
standard methodology, and it is contained in the Agriculture
Agreement. That agreement has actually been interpreted in a
couple of dispute settlement cases. The United States, if we
were to challenge the calculations that countries have
notified, would stand on very firm ground. The methodology that
we used in the calculations we did in our paper is the same
methodology the United States has used in all of its
notifications to calculate.
The Chairman. So in terms of us evaluating whether or not
somebody is violating the rules, just simply the way they come
about their number, we can challenge that if we so choose?
Mr. Thorn. Absolutely.
The Chairman. I thank the gentleman. Mr. Peterson, 5
minutes.
Mr. Peterson. Thank you, Mr. Chairman. I don't know. Dr.
Hudson, in your detailed information you gave us here, in the
case of Argentina where they have these crazy export taxes that
fund their government, soybeans now are 35 percent, somewhere
in that neighborhood, and oil is 32 percent. As I understand it
the last time I was there, there is no export tax on biodiesel.
So my biodiesel people were complaining that basically because
of these other export taxes on soybeans, what they are doing is
building biodiesel plants in Argentina and then sending the
soybeans to us as biodiesel. Is that the case of what is going
on?
Dr. Hudson. Yes, that is correct. The last indication I
have had, there is no export tax on the biodiesel. And what an
export tax does generally is it makes it more expensive for
foreign people to buy that product outside of Argentina which
lowers the price inside Argentina.
Mr. Peterson. Yes. Well, and I had a----
Dr. Hudson. And then it passes straight through in terms of
biodiesel to whoever buys the biodiesel.
Mr. Peterson. Now I had a long 2 hour meeting with the
President of Argentina about this, and she clearly was doing
this, she thought, to lower the price for her poor people. I
mean, that is her whole mentality.
So these countries that have exceeded their WTO limits, do
either one of you know any or do you know efforts to challenge
this in the WTO? I think it is clear they are doing it. Is
anybody in this country trying to challenge that? Either of you
know?
Mr. Thorn. I will take that one. The short answer is no.
There hasn't been a challenge.
Mr. Peterson. Why?
Mr. Thorn. Well, I guess various reasons. For one thing,
this is a relatively new phenomenon. It has really been only in
the past few years that we have started noticing the effects of
this run-up in subsidies. Also, normally you don't jump right
into a dispute settlement case. The Administration is raising
the issue in Geneva, especially in the context of the
discussion of the relaunching of the Doha Round negotiations.
Eventually though I do believe that it will be necessary to
go to dispute settlement. You try to avoid that whenever you
can, but if you assume that these countries aren't going to
change their policies on their own, you probably have to be
willing to take that step and go to dispute settlement.
Mr. Peterson. Thank you. Dr. Hudson, you mentioned that
Brazil's PEP and PEPRO Programs are moving surpluses into the
world market. What commodities are they moving in under this?
And can you tell us a little bit more about the similarities of
this program? Are they old Step 2 Program that they sued us
over?
Dr. Hudson. Well, there are a number of policies that
Brazil uses among others. I won't go into the details of those.
They are available. But the notion is that they are export
subsidies, either provided by payments directly to the person
exporting or through another mechanism which moves product out
into the world market. That is essentially, for all intents and
purposes, the same thing as the Step 2 Program which was both a
subsidy for exports and a subsidy for domestic use.
So the characteristics or the design of it might appear
superficially different, but the operation of it is very much
the same.
Mr. Peterson. And we are not doing anything about that
either, apparently.
Dr. Hudson. As far as I know, no. No cases have been filed
or complaints have been filed.
Mr. Peterson. Mr. Thorn, in your OECD information here, it
has identified Canada as having higher subsidies than the
United States as measured by producer support estimates.
According to the OECD, Canadian producers receive 14 percent of
each dollar from public policies rather than the marketplace.
In the United States it is eight percent.
But in Figure 4 of your testimony, why do you place Canada
in the low subsidy quadrant and the United States in the large
subsidy quadrant, given those facts?
Mr. Thorn. I will defer to Dr. Hudson on that one.
Dr. Hudson. I think that was actually my testimony.
Mr. Peterson. I am sorry. Yes.
Dr. Hudson. No, that is fine. Figure 4 in my testimony is
based on total volume, not per unit. And so the Canadian and
the OECD data on a per-unit basis is higher across the board
than the United States. But in a total volume it is not.
So my figure is based on total volume, but you are
absolutely right. On a per-unit basis, the OECD data is pretty
clear that Canada has higher per-unit subsidies on the products
covered.
Mr. Peterson. Is that partly because of the supply
management in dairy and poultry?
Dr. Hudson. Yes.
Mr. Peterson. Thank you, Mr. Chairman. I yield back.
The Chairman. I thank the gentleman. Mr. Neugebauer, 5
minutes.
Mr. Neugebauer. Thank you, Mr. Chairman. Dr. Hudson, I want
to go back to China just a little bit. So basically it looks
like they are stockpiling what, about \1/2\ of the world's
production on an annual basis? They are supporting their cotton
at like almost $1.50 is the number.
So kind of walk through with me, currently how much cotton
has China been actually exporting? Are they exporting any of
their domestic cotton or are they taking all of their domestic
cotton into their stockpiling? Because if they are paying their
producers $1.48, I am trying to figure out how that economic
model works where you have a world price of what, 70 ?
Dr. Hudson. Thank you for the question. The first issue in
that is that an assumption of an economic model. I am not sure
that they are operating rationally. But China has recently
changed. They were in a stockpiling scenario where they were
purchasing domestic use or domestic-produced cotton at a high
rate. They were also buying it off the world market at whatever
the going rate was and then selling it off or auctioning it off
to domestic users. It actually created an interesting
distortion in the market from the standpoint that they were
drawing cotton off. It was still selling at a very high price
inside of China to domestic mills. So domestic mills actually
quit spinning as much cotton and started buying spun yarn out
of India into China to fulfill contractual needs.
So the way that they manipulated that price was through
that border protection of restricting the amount of cotton
allowed to come in at certain tariff levels. They have moved or
stated that they are moving away from the official stock-piling
policy and to this direct price support program. And the direct
price support program will operate in a way that the stated
reference price, depending on exchange rates, somewhere between
$1.50 and $1.60 a pound. They just pay the difference between
the market-landed prices at mills versus this reference price
or this target price if you will. And they allow that cotton to
flow into the mills at whatever the going market rate is.
So it is a throwback to the Target Price Deficiency Program
we had years ago in the United States. So it is very different.
Mr. Neugebauer. So their domestic mills that the government
sets the price of which, what, domestic mills have to pay for
cotton?
Dr. Hudson. Yes, in an indirect way. The state-owned mills
are required to pay a certain rate. The privately owned mills
buy out of the market, but they buy off of the government
reserve which is auctioned off by the government. And so they
determine those prices.
Mr. Neugebauer. So you would use some gross or some total
numbers for subsidies in comparing the United States and other
countries. One of the things I was wondering about, when you
look at subsidies as a percent of total farm income, for
example, in the United States, what percentage of total farm
income would be attributed to U.S. subsidies?
Dr. Hudson. I don't know the exact figure from this last
year, but it is certainly less than five percent now, depending
on what you measure and how you measure it. But it is very low
on that spectrum. I believe that is Congressman Peterson's
point with the Canadian OECD data was somewhere up around 12
percent, 12 or 14 percent. So the U.S. subsidy rates are
actually much lower as a percentage of total value.
Mr. Neugebauer. Chairman Conaway alluded to the fact that
Brazil is thinking about another round now and going after
different commodities. But when we look at these, the
presentation that both of you made today, I am having a hard
time figuring out on what basis, if they are subsidizing at a
much higher rate than the United States, what basis, how are
their subsidies different and how are they more market
distorting than the U.S. subsidies?
Dr. Hudson. Well, I will briefly do this and turn it over
to the former trade negotiator, but that is a good question. I
don't know that there is a very good leg for the Brazilians to
stand on in that basis. And so their target at the United
States would have to be aggregate measure of support
violations, and we are not there.
The ability to tie the decoupled programs to any specific
trade-distorting policies would be a much more difficult task.
Mr. Thorn. I would agree that I do not think the United
States is vulnerable to a challenge on soybeans or corn right
now. I think the Brazilians are much more vulnerable than the
United States is.
Mr. Neugebauer. Thank you. Thank you, Mr. Chairman.
The Chairman. Mr. Scott, for 5 minutes.
Mr. David Scott of Georgia. Thank you, Mr. Chairman. It is
very interesting, but I would like to get your take on this
issue and the impact of currency manipulation. China is
notorious in currency manipulation, and not only China. Mr.
Thorn, you mentioned in your analyses that in calculating its
aggregate measure of support, AMS, India converted its
external-reference prices to dollars using an exchange rate
that was seriously distorted by government controls.
I think it would be very interesting to get y'alls take on
the implications because all of these countries--and let's just
take for example cotton which is very vital to the United
States. And cotton is so dependent because most of what is
produced here is exported. So it would be very interesting to
get your take on how this currency manipulation plays into all
of these and the disadvantage that it is holding us to and what
we need to do about it. Mr. Thorn? Dr. Hudson?
Mr. Thorn. Okay. Yes, I will kick it off. In the specific
case of India, that is a very clear case of the effects of
currency manipulation on a very specific aspect of WTO
disciplines. India fixed its reference price that it used in
the calculation of its aggregate measure of support at the end
of the Uruguay Round based on the exchange rate between the
Rupee and the dollar that existed back in the period 1986 to
1988. At that time, the Rupee was not convertible. It was a
government-mandated exchange rate.
When they later started moving toward convertibility and
submitted their first notifications to WTO, they converted that
reference price into dollars. They used the old exchange rate,
which meant that their reference prices were more than double
the reference prices that you saw from most other countries.
The practical effect of that is that it reduced the level of
support from their price support policies when they do their
calculations. It is clear that they didn't have the right to
make that conversion to dollars and that we could challenge if
we were taking a case, for example, against India for violating
its AMS obligations, I think we could successfully challenge
that conversion at a distorted exchange rate.
Mr. David Scott of Georgia. I see. Dr. Hudson, your
thoughts on that?
Dr. Hudson. Yes, and I agree with that, and in a more
general sense, currencies are a macro problem. And so I don't
think governments necessarily manipulate currencies to have any
effect on AMS support or anything like that. But it is a side-
effect of what they do. But when they pursue particular
policies in terms of the currency, it is usually basically to
either enhance their export, the ability to export the product
by devaluation if they are facing high inflation. But if you
look at Brazil, for example, one of the reasons that their
aggregate measure of support appears lower than it has in the
past is the depreciation of the real. So it actually looks
better for them than it probably is in effect in a nominal
sense there.
So currencies definitely, to the extent that governments
move around in currencies, they are certainly moving these
markets around significantly.
Mr. David Scott of Georgia. And in each of your opinions,
where do you feel the court of decision needs to be? Do you
feel that, in this currency manipulation, that the WTO is that
entity with which to deal with this problem? It is clearly one
that has severe repercussions for our producers, and I am
wondering, do you feel that it is the WTO that is the entity
with which to best solve this issue of currency manipulation?
Mr. Thorn. In my opinion, these issues are best dealt with
in the multi-lateral financial institutions, like the IMF, not
the WTO. I think the WTO has a specific focus, and it would be
very difficult to negotiate disciplines on exchange rates in
WTO.
Mr. David Scott of Georgia. And are you satisfied that the
IMF is moving forward on this issue of currency manipulation
aggressively enough?
Mr. Thorn. I think it requires more effort.
Mr. David Scott of Georgia. Dr. Hudson?
Dr. Hudson. I would completely agree with that. That is a
good statement.
Mr. David Scott of Georgia. Thank you, Mr. Chairman.
The Chairman. Mr. King, for 5 minutes.
Mr. King. Thank you, Mr. Chairman. I thank the witnesses
for your testimony. I would like to just gather first just a
couple of big-picture things here and ask this question this
way. Of all the subsidies going on with egg commodities and
globally, if we got our way, which in my view would be
everybody on exactly the level playing field. Let's just say
all those subsidies disappeared overnight, and now we have an
open global market that would make an adjustment, that would be
abrupt, but it would stabilize. If it stabilized, once you get
to that point, what then, first Dr. Hudson, would you predict
happens to our commodity process? They go up or down?
Generally, is food more expensive or cheaper if we don't have
the subsidies distorting their production?
Dr. Hudson. Overall, if you look at the way that subsidies
operate, the end result is higher prices overall for everybody
involved. But there is a demand adjustment, too, once prices
happen. So it is very hard to predict where the subtle point
would be, but certainly you would anticipate supply shocks to
result at least in persistent long-term, higher prices, until
demand adjusted to that.
Mr. King. When demand adjusts to that, then do we have more
production or less production?
Dr. Hudson. I think that depends on where in the world you
are talking about but----
Mr. King. The whole world on average.
Dr. Hudson.--overall, you are going to have whatever
production is supported by the income of people to buy the
products. So as long as you didn't see dramatic shifts in
income, you would probably see a slight reduction in overall
global production. But in the long run, it has to stabilize
where people buy food. It would just be a higher share of our
income at that point.
Mr. King. I would like to hear from Mr. Thorn. What is your
response to that?
Mr. Thorn. In general, I would agree. I do believe that if
we were able to get rid of all of these policies, you would see
production fall, especially in countries like China and India.
I think the reduction would be substantial, especially in
China. And then in the long run, you would see higher and more
stable world prices which would benefit you as producers.
Mr. King. Which was going to be my follow-up question on
that. If we could actually get to where we would like to go,
idealistically here, it benefits you as producers because we
can compete in that marketplace.
Mr. Thorn. Absolutely.
Mr. King. And when you do the analysis of the subsidies,
does crop insurance figure into this, into that equation, Dr.
Hudson?
Dr. Hudson. No, in terms of the numbers that we are looking
at, no. We have not included crop insurance. We have tried to
document it where globally, those kinds of products are
provided, but I don't calculate the aggregate measure of
support. So that would be his field. So I do not include it,
but I do try to document it where it exists.
Mr. King. Okay. I would turn to Mr. Thorn on that.
Mr. Thorn. Okay. In WTO, crop insurance is counted as a
part of the aggregate measure of support calculation. That is
the subsidies to crop insurance premiums. And the United States
reports those subsidies as product-specific support, even
counting those subsidies, our level of support is significantly
below the level that we have calculated for these other
countries.
Mr. King. But if you calculate the U.S. subsidies, there is
a distinction in commodity to commodity on how much subsidy
exists because of crop insurance?
Mr. Thorn. Yes.
Mr. King. What would then be the commodity that is the most
highly subsidized by crop insurance in the United States?
Mr. Thorn. I am sorry. I don't know that.
Mr. King. Do you calculate this separate by commodity or--
--
Mr. Thorn. Yes. As a matter of fact, the United States just
submitted a new notification to WTO covering the 2012 marketing
year, and in that notification they broke out on a commodity-
by-commodity basis crop insurance subsidies. So if I had that
in front of me, I could answer your question.
Mr. King. I want to ask you if you could produce that
document for our review. I would appreciate it, and it would
help our understanding of this. And in the perfect world or let
me just say that we are where we are with this.
[The information referred to is located on p. 43.]
Mr. King. Then what do you advocate we do to bring this
thing towards a solution? Are you advocating that we file a
case with WTO? And having just experienced this with COOL, we
came out second on that which I am fine with because it was
trade protectionism on the part of the COOL litigation. But
what would you predict would happen down the litigation side
with WTO?
Mr. Thorn. Well, yes. As your question implies, we are
dealing with two separate issues here. The issues that we raise
in our paper mostly have to do with enforcement of current
commitments. And that is going to require some work, getting
countries to live up to their current commitments. And it may
take a settlement case. If we do take a case, I am absolutely
confident that we have a very strong one and that we would win.
And the United States, by the way, has very good record in
cases that we have taken to WTO. The other question is what do
you do for the long run? How do we tighten disciplines further?
That is an issue for a new round of negotiations if those
negotiations ever get started again. And in that case, what we
need to do, as Congressman Peterson implied, throw away the
text that is currently on the table, get a new start, focus on
distortions that we see in the current market.
Mr. King. Thank you, Mr. Thorn. I thank the witnesses, and
I yield back.
The Chairman. The gentleman's time has expired. Mr.
Aguilar, 5 minutes. No questions? Mrs. Kirkpatrick, 5 minutes.
Mrs. Kirkpatrick. Thank you, Mr. Chairman. Mr. Thorn, I am
intrigued with your statement on page 3 of your written
testimony. When you talk about how China really has disregarded
their agreement, you mentioned that they have increased rice
subsidies by 100 percent since 2007. That is disturbing, and is
it just because we are not paying attention or we don't have
the resources to bring a case to the WTO? I would like to drill
down a little bit more on why that has happened. We obviously
know that it happened, but it seems like we are not doing
anything about it.
Mr. Thorn. Yes. I do think it is true. It is accurate to
say that we have the data now. We do know what is going on. It
is not a secret. And it is clear that they are well-beyond
their de minimis threshold and therefore in violation of their
obligations.
The question at this point in my mind is just what you do
about it. And----
Mrs. Kirkpatrick. I agree. That is my question, too.
Mr. Thorn. Right. Exactly. Well, this issue is getting a
lot of attention at USTR, and I don't know when they are going
to come to a decision about where to handle it. They are
raising it bilaterally. I know that is the case. They are also
raising these issues in forms like the Agriculture Committee in
Geneva that oversees the implementation of the Agriculture
Agreement. They raised just yesterday Indian subsidies in the
trade policy review that was going on, the review of Indian
Trade Policy in Geneva. This issue was given prominent
attention. Those can be seen maybe as precursors to the filing
of a dispute settlement complaint. But I don't know how close
they are to making the decision to file such a complaint.
Mrs. Kirkpatrick. And how long does it take to process such
a complaint?
Mr. Thorn. It varies. It can take a long time. In my
opinion, this case is not particularly technically complex. We
have the data. We know what the methodology is. So my guess is
that from beginning to end, if it were to run the full course,
you are talking about a couple of years.
Mrs. Kirkpatrick. What is your thought about some automatic
consequences? So for instance, we know this data, and it seems
like there is no consequence unless there is a case that is
prosecuted. What is your thought about some immediate fines or
sanctions or something that would be an immediate consequence
once the information was found out?
Mr. Thorn. Well, when you get to the end of the dispute
settlement process, there is a ruling from the dispute
settlement panel and then normally also the appellate body. If
the judgment is against the defending country, they will order
them to come into compliance with their obligations. And if
they don't, then the ultimate sanction is withdrawal of
concessions by the complaining party which would mean if the
defendant, for example, were China, that the United States
would be allowed to raise import duties against Chinese
products. And since this is a big case involving real money,
that would probably be a pretty substantial threat.
And so that is the ultimate leverage you have at the end of
the end. It puts a lot of pressure on countries to make the
adjustments that they need in order to come into conformity
with their obligations.
Mrs. Kirkpatrick. Well, just looking at the increases that
China has put in place makes me think that it may be just the
cost of doing business. I do share Mr. Peterson's thought that
we may need to just throw out the old and come up with
something new and would welcome that conversation.
I have about 1 minute left. Dr. Hudson, I really was
intrigued with your comment when you said that a lot of these
countries use agriculture as a strategic asset. And we don't
seem to do that. What would it look like if we did?
Dr. Hudson. The comment is intended to sort of draw
attention to the fact that a lot of countries will essentially
think of food security as a matter of national security. So
when you start to think of it in terms of national security,
you start to justify a lot of things that you probably wouldn't
do in an ordinary commercial transaction, trade restrictions,
subsidies, that sort of thing.
And so my point was that if these countries are going to do
that, it probably behooves us to look at the implications of
their treatment of it as a security asset in the way that we
handle it, whether it is in a dispute resolution process or the
way we handle our own internal policy, that sort of thing. The
statement is not really to advocate one particular direction or
another. It is just that if we don't do that, we put our
producers at a competitive disadvantage because they are facing
those subsidies. They are going to do it for whatever reason
they are going to do it, and we just have to address that in
our own policy.
Mrs. Kirkpatrick. Thank you. Thank you, Mr. Chairman, for
indulging in my extension of time.
The Chairman. The gentlelady's time has expired. Mr. Gibbs,
for 5 minutes.
Mr. Gibbs. Thank you, Mr. Chairman, and also Mr. Chairman,
thank you for holding this hearing. I think this is good. It
brings out in the public view what is happening, how it affects
American agriculture, and what other countries are doing with
their producers.
I want to talk about corn a little bit because I am from
Ohio and I notice we were talking about cotton, but looking at
Dr. Hudson's chart here at the $1 a bushel equivalent, about
$10 compared to the United States. Well, first I want to say
when Mr. King's discussion of subsidies ended, you are
absolutely right in your answers because subsidies, these high
subsidy rates like corn as the example, they are subsidizing
inefficiency. And so the inefficient producers are going to be
chased out of the market, and you hit that on the nail.
My question going into this is if we are looking at tariffs
and trade and all that. How does this, like China for example,
and corn with that high subsidy level and I assume the tariffs
are having on our corn coming into that country. How does that
inter-react with the tariffs with their subsidy? I don't know
who wants to jump in.
Mr. Thorn. Do you want me to grab that one?
Dr. Hudson. Go ahead.
Mr. Thorn. Well, it is a good question because it is true
that China could probably not support that sort of high,
internal domestic price if they didn't have border
restrictions. We have China coming out of the WTO accession
negotiations implemented a tariff rate quota for corn. All
right? Forget the quantity, but it is fairly small in terms of
domestic production and imports beyond that tariff rate quota
quantity face a prohibitive import tariff.
In addition, China has actually messed around a bit with
the way they administer that tariff quota. So it has been--and
also they have given us problems on biotechnology, so for
various reasons it has been difficult to export corn to that
market.
And so they have been able to implement this support price
policy. They are finally now reaching the point where it's
getting away from them. Last year they had to purchase over 60
million tons of corn to maintain the domestic price of the
support level. And so they are actually considering changes in
policy because even with their high import protection, they are
having a difficult time maintaining that support price.
Mr. Gibbs. Where is China on the corn exports, do you know?
Mr. Thorn. They haven't exported corn for the last few
years. You don't have to go back very far, though, to see some
fairly substantial subsidized corn exports. They were exporting
at that time mainly to Korea.
Mr. Gibbs. Okay.
Mr. Thorn. That was affecting U.S. access to that market.
Mr. Gibbs. Okay. Mr. Thorn, this is a question that is not
in your testimony but I want to see if you have any knowledge.
I know South Africa, currently, has a de facto ban on U.S. pork
exports, and the Administration is working with South Africa to
open up their market. Are you familiar with this?
Mr. Thorn. Yes.
Mr. Gibbs. And are you sharing with the Committee what the
status is, do you know?
Mr. Thorn. I don't know if I can give you all the details,
but I do know that the restrictions they have, typical of some
of the bogus SPS restrictions that you see in markets around
the world. The two restrictions that I am familiar with in
South Africa have to do with Trichinae and PERS.
Mr. Gibbs. Okay.
Mr. Thorn. And in both cases, South Africa has restrictions
in place that can't be justified on the basis of science.
Trichinae is----
Mr. Gibbs. Yes, help eradicate the United States,
especially with----
Mr. Thorn. And I know that there are ongoing negotiations
to get the South African Government to adopt more science-based
import policies. And these are policies that have been adopted
by our trading partners around the world. Trichinae ceased to
be an issue of food safety concern in the U.S. at this point.
Mr. Gibbs. Yes. Well, typically you have seen the past
countries--you put barriers up at the sanitary--with the
barriers.
Mr. Thorn. Right.
Mr. Gibbs. It is kind of de facto tariff.
Mr. Thorn. Exactly.
Mr. Gibbs. Mr. Chairman, thanks for holding this. I think
this is very interesting and also the discussion on the
currency exchange rates. I think it has an impact on trade and
how we move forward. So thank you. I yield back.
The Chairman. The gentleman yields back. Mr. Vela, 5
minutes? No questions? Mr. Crawford, 5 minutes.
Mr. Crawford. Thank you, Mr. Chairman. I appreciate you
gentlemen being here today. And I will start with you, Mr.
Thorn. You indicated in your written testimony that extremely
high support levels for long-grain rice in China and as the
gentlelady from Arizona referenced 100 percent that she talked
about in her questioning, and it has come to my attention
recently that China is actually taking an interest in U.S.
rice, in purchasing some long- and medium-grain rice and which
obviously I appreciate, coming from a rice district, a rice
state. Still, a few SPS concerns with that, but in light of the
fact that the extreme subsidization for rice and China's
position on their own domestic rice production and their
political interests, should we be skeptical about that? What do
you think about that interest in U.S. long-grain and medium
rice?
Mr. Thorn. Well, I think that on a certain level the
interest is genuine. But, we should be very skeptical, too.
China, for years now, has had a stated policy of maintaining
self-sufficiency for rice, corn and wheat. And they have done
their best to do that by using subsidies and by using import
restrictions. I think that we are in the position of sort of
taking crumbs from the table in cases where domestic production
doesn't meet domestic demand. Then they will be happy to
import, and because of the size of the market, those imports
might, in some years, be quite substantial. But I don't see any
indication that they have changed their policy. They continue
to work to maintain self-sufficiency. And until they change
that policy, I don't think we are going to have the access to
that market that we are rightfully entitled to under WTO rules.
Mr. Crawford. So despite their interest, we still see some
pretty significant impediments to access in that market.
Mr. Thorn. Absolutely, and you can list them. I mentioned
earlier that problems that we have had with the way that they
administer their tariff rate quota, and I won't get into the
details of that. They also--and this is something I mentioned
in my oral testimony--they have recently, just in the last 6
months, implemented requirements for rice, corn, and wheat that
importers make purchases. If you are importing a ton of rice,
you have to purchase a ton from domestic stocks. And that makes
import significantly less competitive. That is a blatant
violation of WTO rules, and they are--
Mr. Crawford. That almost harkens back to our Step 2
program in cotton to a certain degree, doesn't it, that we had
to dismantle for similar reasons. I appreciate you bringing
that point up.
Let me get to another issue and to both of you. Both of you
made reference to this in your testimonies. Illegal subsidies
are very difficult to enforce, the WTO, either that or as a
nation, we are just simply not willing to bring those cases to
WTO for whatever political reasons might be. It doesn't seem
like that is changing in this environment right now. We are
seeing countries that are figuring out ways to try and cheat
the system.
But my question is this to both of you. What do you think
is our best option? Do you think we need to pressure the
Executive Branch a little more or do you think that Congress
needs to weigh in legislatively and create some vehicle to
pursue some stronger enforcement remedies that the industries
then can utilize to advocate for themselves? And Dr. Hudson, if
you would, I will start with you on that.
Dr. Hudson. Well, the danger in acting sort of unilaterally
is that you potentially set up a situation where incentives are
skewed to file cases when you don't have good cases, things
like that.
There was a time, in the past perhaps, that the U.S.
Administration was fairly aggressive about pursuing trade
enforcement. That has lapsed quite a bit.
The difficulty in enforcement mechanisms in my mind to the
WTO, as my colleague had mentioned a moment ago, was that the
only mechanism or the hammer that we have is an import duty.
But the difficulty with an import duty is it harms American
consumers because they are now having to pay more for what we
were buying previously.
So there is a real disincentive to try to do that, plus
there are a number of aspects. Really, the course that we need
to follow is more aggressive pursuit of enforcement of the
rules that we have in place through the Executive Branch. We
have good trade deals, but the process of enforcing them has
fallen by the wayside.
Mr. Thorn. I only add that I don't think we need to assume
at this point that the decision has been made not to take a
case. I do believe that USTR is seriously considering the
possibility of taking a case. They are looking at trying to
address the issues without having to go to dispute settlement,
but they haven't dismissed that as a possibility. There may
come a time when we decide that it is necessary to give them a
bit of a shove. Congress is always effective in doing that.
Mr. Crawford. Thank you. I yield back.
The Chairman. The gentleman's time has expired. Mr. Davis,
for 5 minutes.
Mr. Davis. Thank you, Mr. Chairman. Thank you to both
witnesses. I would like to start with Mr. Thorn. Mr. Thorn, it
is rumored that Brazil is collecting evidence and planning to
bring the WTO case against U.S. farm support programs.
Obviously from your previous comments and the many questions my
colleagues have brought forth, and they claim that U.S. farm
subsidies are increasing which they think is going to further
depress their markets. In considering this claim, it is
important to address Brazil's use of domestic and export
subsidies. And can you explain what types of support programs
Brazil's farmers receive and what incentives are used to
subsidize their exports?
Mr. Thorn. Yes, I will do that, and I will try to make it
simple because they have a lot of programs, and some of them
are quite complicated. But the principal method of support for
especially producers of rice, corn, and wheat in Brazil, there
are two programs, one called PEP (Program for Product Flow
(Premio para Escoamento do Produto)) and the other called PEPRO
(Equalizing Premium Paid to Growers (Premio Equalizador Pago ao
Produtor, PEPRO)). And they are basically export subsidies. In
years where Brazil has surplus production in the main producing
regions and prices threaten to fall below the support level,
the Brazilian Government opens a tender normally under one of
these programs. And then companies bid under that tender for
specific amounts, and then they take possession of the
commodity and export the commodity. When they present proof of
export, then they receive a payment, and that payment is the
difference between the price that they received and the support
price. And so as we have discussed previously, that program
meets the definition of an export subsidy under the WTO
agreement. I am confident of that. It resembles in a lot of
ways the Step 2 Program that was a problem in the cotton case,
and Brazil also uses credit subsidies and does direct
government purchases in some cases. But it is really the PEP
and PEPRO programs that are the most vulnerable the WTO
challenge.
Mr. Davis. All right. Thank you very much. Dr. Hudson,
thank you for being here today. When my colleague, Mr.
Neugebauer, said go Raiders being an Oakland Raiders fan, I
thought he was talking about them. Then I realized that you are
with Texas Tech, a fine university, albeit not the University
of Illinois, the greatest university, but maybe someday you
could go there. That would be great.
The database of crop subsidies by foreign governments is
quite impressive that you put together, and among the multitude
of the foreign subsidies that our U.S. farmers have to compete
with and many in my State of Illinois, especially are those who
are growing corn and soybeans in central Illinois.
Can you point to a few of the country and crop
combinations? Maybe focus on those two for my sake if you
could, which foreign subsidies have the greatest potential to
impact markets?
Dr. Hudson. Well, okay. So I will begin by saying the Texas
Tech is the university in Texas.
Mr. Davis. Go Raiders.
Dr. Hudson. Yes, go Raiders. No, so if I was to isolate a
country or set of countries, I would define it as China, China,
and China, and then throw in India and Brazil. China is so
large relative to everybody else, both in just total production
but also in total volume of subsidies that anything they do to
distort the market, even marginally, has a large impact on
global markets.
India and Brazil, Brazil being sort of a little more at the
margin in terms of their subsidization overall. But, corn is
definitely, as we illustrated in the testimony, both of us, at
$10 per bushel in China, it is a huge distortionary impact on
the market.
China is so pervasive in terms of both its use of subsidies
and then its use of trade barriers to manipulate internal
prices that it distorts markets terribly. And a previous
question was interesting in the standpoint that they asked
about corn and tariffs, and we talked about the tariff rate
quota. But their GMO restrictions, their SPS restrictions,
there is an interesting case here because they refuse to import
some corn, and then imported sorghum which grain sorghum sold
at a discount to corn for years, has always sold at a discount
and now sells at a premium to corn because China has moved into
that market and has bought everything off the market.
So there is a real question about the strategy that they
are using there. But certainly I would say, if I was going to
focus on a couple of things, China and India and cotton, corn
or grains in general, rice and wheat. And then I would throw in
Brazil as a fairly important player at the margin.
Mr. Davis. Thank you both very much.
The Chairman. The gentleman's time has expired. Ms. Kuster,
for 5 minutes.
Ms. Kuster. Thank you very much, Mr. Chairman, and thank
you for appearing before us today. My question is maybe in a
small corner of the world, but it is important to my State of
New Hampshire. I have heard concerns from American dairy
farmers including those in the Northeast about the potential
for increased imports into our country of New Zealand dairy
products and about a potential unfair advantage posed by New
Zealand's largest dairy cooperative which controls over 90
percent of that country's dairy market. And I am interested in
your opinion about the impact that this anti-competitive market
structure could have on America's small and family-owned
dairies and again, I said particularly in the Northeast but
maybe in other parts of the country.
Mr. Thorn. Yes. I think the concern springs from the TPP
negotiations that we are engaged in right now, and it is true
that there is a possibility that those negotiations could
result in a significant reduction in U.S. import restrictions
on dairy products and that could lead to an increase in imports
from countries like New Zealand and Australia, by the way.
At the same time, though, there are a couple of countries
that are also involved in the negotiations that are potentially
significant export markets. I am talking about Japan and
Canada. I think the judgment of a lot of people in the dairy
industry is that if we get a TPP agreement, that substantially
opens up the market for dairy products in those countries. It
will take away a lot of the sting from the lowering of U.S.
import barriers. The situation would be pretty difficult if the
U.S. lowered its barriers and didn't get a good market access
agreement from the other two countries. I think in the context
of a big market access agreement that involves all of the main
participants, we can probably survive pretty easily, the
liberalization of U.S. market access.
Ms. Kuster. And what in particular, with Canada, what would
that look like? How would you anticipate that playing out? What
would the actions that would happen--
Mr. Thorn. Yes.
Ms. Kuster.--in Canada with those markets and Japan as well
if you would like to comment.
Mr. Thorn. That is very hard to predict because we are at a
stage in the negotiations where they are holding very closely
the information on the market access offers. I don't know. I am
not privy to that, to the offers that have been made. I think
it is still the case that Canada has offered nothing. They are
holding back for I don't know what. The negotiations with Japan
are in their latter stages, although they are still talking
about improvements in market access for dairy. Canada has not
yet offered anything at all. That is probably going to be an
end-of-the-day issue for them. But what I expect the final
agreement might involve is some sort of tariff rate quota with
the substantial quantity of access for the U.S. and other TPP
members. But it is hard to characterize what it might be
because we just haven't seen anything from them, ma'am.
Ms. Kuster. Sure, and you can appreciate the concern from
Members of Congress trying to make these decisions. I will end
here, but just to comment, it is becoming more and more
difficult to even be in the business of dairy in small family
farms which are critical for us in the Northeast. I have talked
to dairy farmers. We are in a very, very brief drought. It
doesn't hardly happen in New England and it is particularly
unusual this time of year. And they just have said to me
recently, this is too hard. We can't be giving it away. So you
can imagine the impact of these types of decisions. So thank
you so much. I appreciate your testimony. Mr. Chairman, I yield
back.
The Chairman. The gentlelady yields back. Mr. Thompson, 5
minutes.
Mr. Thompson. Mr. Chairman, Ranking Member, thank you for
this hearing. I think it is very timely as we really get kind
of an overview of some of the dynamics that are going on in
terms of trade, especially when you prepare for a couple of
trade agreements that have been a primary--consuming a lot of
oxygen in our discussions right now and our thoughts, and I
wanted to thank you both, gentlemen, for your testimony. As I
read through your testimony and I heard your verbal testimony,
compliance was an issue that came up. The compliance has been a
discussion as we prepare for this next round of trade
agreements. And it seemed like we have an opportunity to maybe
put some measures in place, exercise the will of Congress
within the trade promotional authority. Dr. Hudson, you had
mentioned a very specific example in your written testimony of
a lack of timely compliance when you talked about a key issue
and specific analysis of subsidies that while notification of
subsidy payments to WTO is required, requirements are rarely
enforced. And you give an example where China just notified now
its 2010 subsidy payment. So it is not real time, 5 year delay.
The harm has already been imposed.
And so my question is more of a broader question looking
forward as we have opportunities with the trade promotion
authority or perhaps the customs bill that is out there as
well. Do you have recommendations based on what we have learned
and when it comes to compliance that we should be articulating
as kind of ground rules? How do we get better enforcement of
compliance? And what should we be asking for?
Mr. Thorn. Okay. Very good question. That is the way we
should be thinking right now because clearly what we are doing
has not had an effect yet. So we need to figure out what we can
do to improve the situation. One of the things that we have
been doing that we shouldn't do in the future in my opinion is
wait for countries to submit their data. Countries do have that
obligation, but the obligation doesn't really have teeth. We
can only shame them into making the submissions. That has
worked a little bit in recent months. I have seen some
updating. But as I said before, even when we get those
notifications, often the methodology that is used for
calculating the subsidy level is not the proper methodology. So
we don't really learn much in the end of the day anyway.
I think that what we need to do--there is no reason why we
can't for example make a counter notification ourselves. It is
not hard to get the data. We didn't have trouble getting the
data that we needed to make the calculations in our paper. We
found most of it as a matter of fact out of USDA reports from
FAS Office in the embassies around the world. And the reporting
was very good. We didn't have to dig much further than that.
There's no reason in the world why the U.S. has to wait for
countries to make their submissions before we have the
discussion in Geneva. And then eventually if we put the data on
the table and countries still aren't willing to acknowledge the
facts, then you might have to take the next step and take them
to dispute settlement.
Dr. Hudson. The only thing I would add to that is going
into any trade negotiation, being armed with the data that we
are talking about here, to come back and say don't wait on the
notification process. We can go ahead and calculate the best
estimates of what these are because if we start back as if we
haven't done anything since 2010, we are going to miss most of
what these developing countries have done in terms of
subsidization if we are going to pose disciplines in a multi-
lateral setting.
Mr. Thompson. I thank the gentleman, Mr. Chairman, and I
yield back the balance of my time.
The Chairman. The gentleman yields back. Ms. Plaskett, for
5 minutes?
Ms. Plaskett. Yes. Good morning. Thank you Mr. Chairman.
Good morning, gentlemen. I first wanted to thank Mr. Thompson
for his questions because that really goes to the heart of what
I was really interested in is an overall notion about what is
being done properly and not.
One of the questions I had for each one of you was if we
were to in fact enforce the compliance measures that are
already in the agreements, do you think we would be at a level
playing field or do we need to go beyond those?
Dr. Hudson. I will start that just by saying if you do look
at a lot of the disciplines that are in place for a lot of the
countries that we are talking about, they have zero limits. So
they shouldn't technically have any of these subsidies to begin
with. They agreed to that in the Uruguay Round. And so if we
were enforcing it, we would see a much different marketplace in
the world today than the fact that we are not.
Now that doesn't answer your second question which is
should we go one step further? I do think there are some things
that we can make progress on in terms of domestic subsidies and
border policies that could greatly benefit American agriculture
but also benefit global agriculture in reality. The first step
is understanding what we are not getting out of the process
that we already are engaged in before we spend too much time
worrying about what the next process is going to look like.
Ms. Plaskett. Mr. Thorn, would you agree with that?
Mr. Thorn. I would agree, yes. I said in my testimony that
I do believe that U.S. agriculture would benefit from a new
agreement that contained additional disciplines because, as the
largest exporter in the world, the less distorted the market,
the world market, the better for us.
I am not sure it is possible to get that sort of an
agreement. WTO is really the only place you can negotiate
disciplines on subsidies, and the WTO negotiating function just
isn't working very well right now. I hope that we find a way to
make it work. When we do and we need it, it would be good to
get negotiation that really focuses on the current distortions
we are seeing in the marketplace, and I do think we could make
some improvements that lower subsidy levels and reduce
distortions still further.
Ms. Plaskett. Do our transparencies in the American market
distort that as well because there are going to be
transparencies that we have that the other countries don't?
Mr. Thorn. Well, it is true that our system is more open
than most. And so in some ways it is easier to enforce
disciplines against the United States.
Ms. Plaskett. They get to see our cards, right?
Mr. Thorn. Yes, except we have found out in doing our
research that it isn't difficult to get a look at the cards
that other countries have as well, that the data are available.
But to answer the first part of your question, I do believe
that if we were effectively enforcing current disciplines that
would have something resembling a level playing field.
Ms. Plaskett. Okay. I had a second question which is a
little more technical one. Dr. Hudson, in your foreign crop
subsidy database, you point out that non-biotech soybean meal
receives a 13 percent premium over normal soybean meal prices.
Is that difference due to customer preference or legal
uncertainty, both, or something completely different than
either of those? And what effect does that have on planting and
decision-making that farmers engage in?
Dr. Hudson. That is an excellent question. I think the
short answer to it is governments will justify it as consumer
preference, but it is really a non-tariff barrier masked as
some sort of preference given or expressed by domestic
consumers. As an economist, obviously, if people prefer
something, they are going to buy it and they will pay more for
it anyway. You don't need a government intervention to do that
for you.
The answer to that question is it really hasn't impacted
the planting decisions on U.S. producers, but European
restrictions and other restrictions on genetically modified
products has altered the adoption rates at which things have
occurred around the world. So it has had an impact on
production. It has had an impact on profitability and even
incomes in especially developing countries.
Ms. Plaskett. Do you see that in any other crops other than
soybean meal?
Dr. Hudson. Well, we mentioned corn a moment ago, not
necessarily a premium but the restrictions on, well, we are not
going to import or we are not going to take this shipment
because it tested positive for genetic modification. It has
been a pretty heavy hammer that a lot of countries have used to
regulate inflows of products.
Ms. Plaskett. Okay. Thank you. Thank you, Mr. Chairman.
The Chairman. The gentlelady's time has expired. Mr.
Newhouse, for 5 minutes.
Mr. Newhouse. Thank you, Mr. Chairman, and thanks for
having this hearing. I appreciate you guys being here today.
This is timely as you know we are talking about trade
agreements and so forth, and these are very important aspects
of those.
I come from Washington State. We don't raise a lot of
soybeans or cotton, certainly have wheat and corn. I used to
have sugar. But we have a lot of specialty crops in our state,
tree fruits, grapes, wines, certainly a lot of meat products
come from our state as well.
Trade protection can take many, many forms, certainly
subsidies are one but phytosanitary issues are another,
tariffs, different kinds of things, inputs. So I guess the
focus of my question is just generally, do you see other
countries focusing on specialty crops more so than some of the
other commodities? And is that a trend that you are seeing more
of? And either one of you, both of you, please.
Mr. Thorn. Well, I would say that specialty crops are
certainly becoming a more important component of U.S.
agricultural exports. When I began my career, I worked on
European issues. It was all about soybeans. We were exporting--
it was soybeans and then a big gap and then a few other
products that we were exporting to Europe. Now the largest
export crop for the U.S. to Europe is almonds. And we have seen
maybe not such a dramatic shift in other markets, but specialty
crops are important export crops for the United States.
And trade agreements are important for market access for
specialty crops. We still have to deal with tariffs in a number
of important markets for different specialty crops. And in some
cases, the tariffs for those products are higher than the
tariffs for basic commodities. And also, sanitary and
phytosanitary barriers are--or I should say phytosanitary
barriers are prominent import restrictions.
For me, one of the best illustrations of the value of trade
agreements is the WTO agreement on sanitary and phytosanitary
measures because that agreement, first of all, as international
agreements go, it is pretty clear. It sets a pretty clear
standard and it is a standard that has proved pretty durable.
And it has been extremely valuable to have that standard in
bilateral negotiations with our trading partners, and then when
we have hit an intractable problem, it has been an agreement
that is enforceable through dispute settlement. And I think
that we ought to look in the future to improving on that
agreement in our trade agreements.
Mr. Newhouse. Thank you.
Dr. Hudson. Yes, the only thing I would add is that the
interesting thing about specialty crops in terms of the way
markets function is they tend to be market window kinds of
crops. There are bilateral flows. There are exports and imports
coming. We export tomatoes, then import tomatoes. And it is
based on a market window. So it is a much more difficult thing
to administer. But a lot of people will sort of think that
specialty crops aren't necessarily subsidized globally but they
are. They tend to be subsidized in a different way, as you
point out, either through trade restrictions like that or R&D
input, subsidies on fertilizer, seeds, that sort of thing. It
is an interesting high-value industry that really has a lot of
impact on regions of the United States.
Mr. Newhouse. Yes, and I guess I bring it up just so we
don't forget about the--
Mr. Thorn. Right.
Mr. Newhouse.--surrounding the specialty crops. And you
already answered in your first answer my second question that
had to do with trade agreements and how that can help, and
certainly that puts us in a better position, negotiating those
and having a process to deal with the issues. So I appreciate
very much again your testimony, and Mr. Chairman, thank you,
and I yield back my time.
The Chairman. The gentleman yields back. Mr. LaMalfa, 5
minutes.
Mr. LaMalfa. Thank you, Mr. Chairman. With the recently-
passed farm bill, the effect on U.S. growers and commodities
was pretty dramatic with wiping away virtually if not all the
direct payments, for good reason, were moving in a poor market
direction. But with that becomes what we have seen last year or
this current year is that with the insurance program in place,
it does a pretty good job on ensuring against yield loss but
not so great on upholding a price, especially a lot of it
wasn't available in 2015 for many growers. And so what we are
looking at is an even greater emphasis on price worldwide and
maintaining that. And so earlier testimony--was it you, Dr.
Hudson--that five percent of U.S. farm income is derived
through subsidies. Were you the one that said that? Okay.
And so when we are looking at numbers that were mentioned
earlier, like in China, when rice basically went 100 percent,
71 percent on wheat, 50 percent on corn, those are pretty big,
distorting numbers. What percentage of income are you seeing is
actually derived outside of those subsidies on Chinese crops or
for Brazil for that matter? What percent of farm income is from
those subsidies?
Dr. Hudson. I don't have a direct estimate sitting in front
of me, but in terms of, for example, let's just use Chinese
cotton. You know, 50 or 60 percent of the revenue that they
derive in that--the people that receive that subsidy in
Xinjiang which is about \2/3\ of the cotton production in China
is not from the market. It is from a direct check from the
government.
Mr. LaMalfa. Versus the United States' round number five
percent?
Dr. Hudson. Five, yes.
Mr. LaMalfa. And is that even reflecting current farm bill
policy, that five percent?
Dr. Hudson. No. We don't know yet exactly how that is going
to play out, and we would suspect that the percentage of income
is going to decline. But some of that has to do with prices as
well. So, as prices get higher, the share gets smaller. But
certainly it is not going to be ten percent if it goes up at
all, but it is probably going to go down for the United States.
Mr. LaMalfa. A number less than five percent compared to
say 60 percent----
Dr. Hudson. Yes, say----
Mr. LaMalfa.--as one example.
Dr. Hudson.--a rough estimate of 60.
Mr. LaMalfa. Yes. All right.
Dr. Hudson. On that one crop.
Mr. LaMalfa. Anything on that, Mr. Thorn?
Mr. Thorn. Well, yes. Let me just give you an example. I am
looking at China's AMS, aggregate measure of support, for corn
and aggregate measure of support is the WTO methodology for
determining how much support is offered on a commodity-by-
commodity basis. I am just eyeballing the figures here. It
looks like our calculation for China puts support at about 80
percent of value production.
Mr. LaMalfa. There you go. Wow. Okay. A couple Members here
spoke about rice a little more today as well, and bringing back
some of yesterday's testimony on bringing up TPP for example,
we are not seeing a whole lot of hope for rice or some of our
dairy concerns as well in TPP with having the type of level of
trade. For example, I gave the example on rice yesterday. If it
is going to be 50,000 tons, you could grow that amongst
probably six or seven farmers in California to meet that little
tiny new window of TPP for rice. And so we are not going to see
a lot of help perhaps unless there are some really good last-
minute negotiations to come along on that.
So what are our really good, effective remedies besides
complaining at WTO or something? What can we take a little
further on dealing with people that are so heavily subsidizing
in China, for example, or maybe Brazil or the others that are
being pretty hostile towards what we are trying to do? You
talked about consumer choice. At what point does consumer
choice actually hurt the consumer with less available high-
quality crops grown in this country? What do you see as a
little stronger hammer? And then please touch on that idea of
consumer choice real quickly.
Mr. Thorn. Okay. Well, I am a big fan of the TPP
negotiations. Of course, we will have to decide at the end of
the--I think it is a good idea, a good concept. I hope that we
get an adequate market access outcome so that everybody can
support it. I am a little bit worried about what we are hearing
about that the Japanese offer on rice and other exceptions the
countries are demanding.
So for market access, bilateral and plurilateral trade
negotiations are a good way to go. When you are talking about
subsidy disciplines, really the only game in town is WTO. And
so what we have to do is use the instruments that we already
have in WTO and make sure that the current commitments are
enforced and then maybe get in a position down the road a
little bit that we can negotiate a new agreement that will have
still tighter disciplines.
The Chairman. The gentleman's time has expired.
Mr. LaMalfa. Thank you, Mr. Chairman.
The Chairman. Mr. Moolenaar, 5 minutes.
Mr. Moolenaar. Thank you, Mr. Chairman. Gentlemen, thank
you for being here with us today. Just so I understand, did you
look at the issue of dairy at all or was that outside of the
scope of your report?
Dr. Hudson. Well, in ours what we do, we are not analyzing
it. We are presenting any data that are available, and there
are elements in the dairy programs where we have data on them.
Mr. Moolenaar. Just in the area of the United States and
Canada, I know there is an issue involving dairy and maybe the
structure of the dairy. Have you looked at that at all?
Dr. Hudson. Well, I have not looked at the dairy-specific
issues in Canada. Of course, Canada has a number of supply
management that they have had in a number of crops that all
operate very similarly. And so the level of support if you will
for Canadian dairy is very high, and as my colleague alluded to
a minute ago, that is likely to be an issue in the TPP
negotiations as to how Canada is going to allow for market
access inside of its supply management framework. Now, you may
have some insight on that.
Mr. Thorn. We have done a little bit of looking at dairy
subsidies. The report that was the subject of my testimony here
focuses primarily on wheat, corn, and rye so we didn't do a lot
of digging on dairy. For a previous report we looked at dairy
subsidies in some markets, and they exist. There is no question
about it, and a more common form of support for dairy producers
is import restrictions. Those are common throughout the world.
But the subsidy disciplines are definitely relevant. And I am
sure that there are some important enforcement issues for dairy
subsidies.
Dr. Hudson. And I would say that from a historical
perspective if we look back at most of the major trade
agreements we have been engaged in CAFTA and now TPP, a lot of
dairy was a singular issue because most of these countries
protect their dairy through trade restrictions. So historically
speaking, this has been an issue, and it will continue to be an
issue. But yes, it is going to have to be one addressed because
Canada is part of that.
Mr. Moolenaar. And just from a structural standpoint in
terms of our policy here in the United States it strikes me;
you have different agencies kind of working in this sphere with
respect to other nations and different organizations who are
negotiating different agreements. You mentioned that some of
those are difficult to enforce and sometimes it is cumbersome
to work in that arena. Do you have any recommendations on
either structural improvements that would help facilitate a
policy by our country that would be more effective perhaps than
we are doing now?
Mr. Thorn. Actually, I think that our trade policy
structure in the United States is a very good one. And some
countries have taken it for their model when they reorganize
the way they handle trade issues. USTR is a very good agency. A
lot of talented people. They are very efficient, probably
under-resourced, but they are effective. And the interagency
process for the most part works well. USDA on agricultural
issues is an active participant in that interagency process and
helps to set priorities, helps to gather data. There is always
room for improvement, but I don't think structural changes are
necessary.
Dr. Hudson. Yes, he has a lot of inside experience coming
from FAS. The only thing I would add as an outside observer is
probably our trade negotiating apparatus, if you will, might be
one of the best examples of inter-agency cooperation in the
government. So there is a lot of cross-pollination of experts
in different areas that they are called or borrowed to work on
that process. So it does work fairly well.
Mr. Thorn. Can I add one thing on that? That one potential
improvement is one that already has a legislative basis that it
was the previous farm bill that mandated the creation of an
Under Secretary for Trade in USDA. Once you finally get that
Under Secretary for Trade, that will be an improvement because
they will get good focus on trade issues at the sub-cabinet
level.
Mr. Moolenaar. Thank you very much. Thank you, Mr.
Chairman.
The Chairman. Thank you. The gentleman's time has expired.
I want to thank our witnesses for being here today. Terrific
information highlighting an issue of great importance. All the
new trade deals that are being negotiated, all the drama
associated with those sometimes causes us to lose sight of the
previous agreements. It is my sense that those previous
agreements were full of compromises and negotiations made on
behalf of American farmers where they gave up concessions,
where they gave into some things with the anticipation that the
agreement would give them certain other things. If we don't
enforce those other things, then they have been schnitzled, to
borrow a West, Texas phrase.
Highlighting the importance of holding our trading partners
to their agreements, there is nothing mean-spirited about that.
Those agreements were negotiated in good faith, and they simply
need to live up to their share of the deal just as we are going
to live up to our side of the COOL issue. The WTO ruled against
us, and we are going to take the steps necessary to fix that
and come into compliance. We need to be holding our trading
partners to their commitments across the board.
I know those decisions aren't necessarily made in a vacuum,
but having you highlight the impact that has and the facts
available allows us to be able to then highlight that with the
bully pulpits each of us have. It will be helpful as we look at
new trade deals, because if you are not going to enforce the
current ones, then the folks who had to take a haircut under
those current deals will not be too excited about future
concessions that they might be asked to make in order to get to
a broader deal.
So gentlemen, thank you very much for being here this
morning. I appreciate both of you and your testimony. I
appreciate my colleagues as well.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional materials as supplementary written responses from
the witnesses to any questions posed by a Member. This hearing
of the Committee on Agriculture is adjourned. Thank you.
[Whereupon, at 11:41 a.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Supplementary Material Submitted by Craig A. Thorn, Partner, DTB
Associates, LLP
Insert
Mr. Thorn. Yes. As a matter of fact, the United States just
submitted a new notification to WTO covering the 2012 marketing
year, and in that notification they broke out on a commodity-
by-commodity basis crop insurance subsidies. So if I had that
in front of me, I could answer your question.
Mr. King. I want to ask you if you could produce that
document for our review. I would appreciate it, and it would
help our understanding of this. And in the perfect world or let
me just say that we are where we are with this. . . .
Congressman King requested a copy of the latest U.S. domestic
support notification to the WTO. I've attached it to this message.
Could you please pass it on to him?
Note that crop insurance premium subsidies are broken out beginning
on page 53.
attachment
World Trade Organization G/AG/N/USA/100
8 December 2104
14-7139
Notification
The following submission, dated 4 December 2014, is being circulated at the request of the Delegation of the United States. The revised notification
concerns domestic support commitments (Table DS:1 and the relevant Supporting Tables) for the marketing year 2012.
Offset PP 3-23
Table DS:1
Domestic Support: United States
Reporting Period: Marketing Year 2012
Current Total Aggregate Measurement of Support
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total AMS commitment level for period in question Currency (from Section 1 of Part IV of the Current Total AMS (from attached Supporting
(from Section 1 of Part IV of the Schedule) Schedule) Tables)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2 3
19,103.29 Millions of U.S. dollars 6,863.273
--------------------------------------------------------------------------------------------------------------------------------------------------------
Supporting Table DS:1
Domestic Support: United States
Reporting Period: Fiscal Year 2012 (except as noted)
Measures Exempt from the Reduction Commitment--``Green Box''
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Outlays (million
Agency and program, by measure and type (some agency names have changed) dollars) \1\ Description of program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(a) General services: 10,252
Agricultural Research Service (ARS) Research and advisory function. Acquires, maintains, and disseminates information.
Agricultural Research 1,095 Includes National Agricultural Library functions.
Buildings & Facilities 58 Conducts research on a wide variety of topics, including soil and water conservation,
Misc. Contributed Funds 23 plant and animal sciences, human nutrition, and integrated agricultural systems.
National Institute for Food and Agriculture (NIFA) Formerly Cooperative State Research, Extension, and Education Service (CSREES).
Renamed National Institute for Food and Agriculture (NIFA) beginning FY 2009 by 2008
Farm [Bill] (P.L. 110-246).
Research and Education Activities 729 Research function. Provides grants to state agricultural researchestablishments.
Participates in cooperative planning with state research institutions.
Integrated Activities 100 Funds integrated research, education, and extension grants programs.
Extension Activities 527 Advisory function. Participates with state cooperative extension system on applied
education, information, and technology transfer.
Biomass Research and Development 20 Funds research and development projects leading to the production of biobased
industrial products.
Jointly managed by USDA and the Department of Energy. Authorized by the Biomass
Research and
Development Act of 2000 (Title III, P.L. 106-224); extended under the 2008 Farm
[Bill] (P.L. 110-246). (Previously administered by Rural Cooperative--Business
Service.)
Rural Bus. and Coop. Development Ser. (RBCD)
Rural Cooperative Development Grants 27 Provides grants to nonprofit corporations and institutions of higher learning to fund
centers for development of new cooperatives and improve operations of existing
cooperatives (P.L. 104-127); also provides grants for value-added marketing for
cooperatives reauthorized by the 2008 Farm [Bill] (P.L. 110-246).
Animal & Plant Health Inspection Service (APHIS)
Salaries & Expenses \2\ 1,115 Inspection/pest and disease control function.
Buildings & Facilities 7 Protects animal and plant resources from destructive pests and diseases.
Miscellaneous Trust Funds 11
State programs for agriculture
Regular annual outlays by states, net of fees and taxes 2,447 State governments provide a number of generally available services.
Includes extension, marketing, and research.
Amount reported is net of producer fees and taxes paid for various services.
Grain Inspection, Packers and Stockyard Administration (GIPSA) Marketing/inspection functions. Establishes standards.
Salaries & Expenses 37 Provides for official inspection and implementation of the system of standards for
marketing and
Limitation on Inspection and Weighing Services Expenses 3 conducts surveillance and investigatory activities to protect producers and consumers
from unfair trade practices.
Food Safety Inspection Service (FSIS) Safety/inspection function.
Salaries & Expenses 986 Provides in-plant inspection to assure quality of meat and poultry and the accuracy
of labeling.
Inspec. & Grading of Farm Products 10
Agricultural Marketing Service (AMS) Marketing function.
Marketing Services 89 Develops marketing standards and provides news and inspection services.
Payments to States & Possessions 47 Grants to states for projects, such as improving marketing information, and
developing grading standards.
Perishable Agricultural Commodity Act Fund 10 Uses license fees to take legal actions against unfair buyer trade practices.
Expenses and Refunds, Inspection and Grading of Farm Products (formerly called 154 Grading and certification services are provided on a fee-for-service basis.
Miscellaneous Trust Funds)
Risk Management Agency (RMA)
Agency administrative and operating expenses 77 Funds for management of the Federal Crop Insurance Program.
Administrative & operating reimbursements to insurers 1,411 Reimbursements for certain administrative and operating expenses of insurance
companies delivering Federal crop insurance.
Underwriting gains to insurers 0 Underwriting gains provided to insurance companies under the Standard Reinsurance
Agreement.
Office of the Chief Economist
World Agricultural Outlook Board (WAOB) 5 Research and advisory function. Provides economic information about current outlook
and situation for commodity supply and price.
Economic Research Service (ERS)
Economic Research Service 80 Research and advisory function. Performs economic research and analysis for the
public, Congress, and the Executive Branch.
National Agricultural Statistics Service (NASS)
National Agricultural Statistics Service 164 Research and advisory function. Provides official estimates of resource utilization,
production, and prices of agricultural products.
Farm Service Agency (FSA) \3\
Conservation Reserve Program Technical Assistance 144 Extension, advisory, and training service functions. USDA agencies provide various
technical services to help producers participate in Conservation Reserve Program
(CRP)
Natural Resource Conservation Service (NRCS)
Conservation Operations \3\ 835 Extension, advisory, and training service functions.
To promote conservation of soil and water, NRCS provides technical assistance,
conducts soil surveys, and assesses erosion factors (formerly activity of ``SCS'').
Resource Conservation and Development 0 Assists individuals and localities to develop area-wide plans for resource
conservation and development.
Foreign Agriculture Service (FAS)
Trade Adjustment Assistance for Farmers (TAA for Farmers) 41 The American Recovery and Reinvestment Act (ARRA) of 2009 reauthorized and modified
the TAA for Farmers program. Producers of groups of commodities certified as
suffering losses from import competition during the period Oct. 1, 2008 through
December 31, 2010, could apply to receive free information, technical assistance,
and support to develop and implement Business Adjustment Plans.
(b) Public Stockholding for Food Security: 0
(c) Domestic food aid: 106,781
Food & Consumer Services (FCS)
Nutrition Programs Administration (formerly Food Program Administration) 138 For administration of food programs providing access to more nutritious diets for low
income people and children.
Supplemental Nutrition Assistance Program (SNAP) (formerly Food Stamp Program) 80,401 Low income people receive financial assistance to help purchase nutritious food.
(Renamed Supplemental Nutrition Assistance Program (SNAP) beginning FY 2009 by the
2008 Farm [Bill] (P.L. 110-246)).
Child Nutrition Programs 18,309 Cash and commodities to assist children to attain adequate diets. Includes special
milk, school lunch and breakfast, homeless children, and other programs.
Special Supplemental Nutrition program for Women, Infants, and Children (WIC) 6,837 Food supplements to improve health of low income mothers, infants, and young
children.
Commodity Assistance Program (CAP) 259 CAP include previously separate programs: Commodity Supplemental Food, Emergency
Food, assistance to Indian Reservations and to Pacific Islands and Nutrition for the
Elderly.
Agricultural Marketing Service (AMS) Section 32 837 Funds purchases of commodities distributed to low-income, children, and elderly
people through the FNS food programs described above.
(d) Decoupled income support: 4,790
Farm Service Agency (FSA)
Direct Payments 3,837 Payments made to producers and landowners based on acreage and production in a prior
base period, as specified in the 2002 Farm [Bill] (P.L. 107-171) and reauthorized in
the 2008 Farm [Bill] (P.L. 110-246).
Tobacco quota buyout 953 Buyout of marketing quota under tobacco price support program, terminated under
provisions of the Fair and Equitable Tobacco Reform Act of 2004 (Title VI, P.L. 108-
357).
Payments are funded through assessments on tobacco product manufacturers and
importers.
The legislation also terminated the tobacco price and income support program at the
end of the 2004 marketing year.
(e) Income insurance and safety-net programs: 0 Note: All revenue and income insurance program support to producers is included in
Supporting
Tables DS:7 and DS:9, under the entry for USDA Crop Insurance programs.
(f) Payments for relief from natural disasters: 344
Farm Service Agency (FSA)
Noninsured Crop Disaster Assistance Program (NAP, crop year) 342 Under the 1994 Federal Crop Insurance Reform Act (P.L. 103-354), producers of crops
not currently insurable under other programs received benefits if it was determined
by the USDA that there had been yield losses greater than 35 percent for the area,
and greater than 50 percent for the individual farm. The area loss requirement was
eliminated per Section 109 of the Agricultural Risk Protection Act of 2000 (P.L. 106-
224). The 50 percent loss requirement for each producer has been continued.
Emergency loans \5\ 2 Emergency loans provides emergency funding and technical assistance for farmers and
ranchers to rehabilitate farmland damaged by natural disasters and for carrying out
emergency water conservation measures in periods of severe drought.
(g) Structural adjustment through producer retirement programs: 0
(h) Structural adjustment through resource retirement programs: 0
(i) Structural adjustment through investment aids: 135
Farm Service Agency (FSA)
Farm Credit Programs \4\ 131 Program includes (i) short-term and long-term loans made at preferential interest
rates and (ii) guarantees of private loans. Eligibility (clearly defined in
regulations) determined by status as owner-operator of a family-sized farm in
situations of structural disadvantage (cannot obtain credit elsewhere).
State Mediation Grants 4 Grants provided to states to assist producers having problems meeting credit
obligations. Assistance must be provided through certified agricultural loan
mediation program.
(j) Environmental payments: 5,139
Farm Service Agency (FSA)
Conservation Reserve Program 1,824 Soil erosion reduction and other environmental benefits are addressed through 10 year
rental agreements to establish permanent cover crops on cropland.
Emergency Conservation Program 56 Assists in funding emergency conservation measures necessary to restore farmland
damaged by natural disasters.
Conservation loans 0 Loans are made to cover costs of implementing qualifying conservation projects.
Reported expenditure is interest subsidy for direct and guaranteed loans. Authorized
under the 2008 Farm [Bill] and implemented in 2010.
Voluntary Public Access and Wildlife Habitat Incentives (VPA-WHIP) 0 Provides grants to State and Tribal governments to implement programs to encourage
farmers and ranchers to develop enhanced wildlife habitat and allow public access on
their lands for wildlife dependent recreation.
Authorized under the 2008 Farm [Bill] and first implemented in 2010.
Natural Resource Conservation Service (NRCS)
Agricultural Management Assistance Program 2 Provides cost-share assistance for conservation practices that improve water
management, water quality, and erosion control. Reauthorized under 2008 Farm [Bill]
(P.L. 110-246).
Conservation Stewardship Program \5\ 930 Provides payments for structural and land management practices that address resource
concerns. Authorized by 2008 Farm [Bill] (P.L. 110-246).
Grassland Reserve Program 65 Long-term contracts or easements to restore and conserve grassland. Reauthorized
under 2008 Farm [Bill] (P.L. 110-246).
Wetland Reserve Program 588 Conservation and restoration of wetlands through long-term agreements.
Producers must implement a conservation plan and retire crop acreage base.
Funding transferred to NRCS under 2002 Farm [Bill] (P.L. 107-171).
Wildlife Habitat Incentives Program 47 Provides technical assistance and cost-share assistance to landowners to develop
habitat for upland wildlife, wetlands wildlife, endangered species, fish, and other
wildlife.
Funds come from CCC under 5-10 year contracts (Title III, Public Law 104-127).
Farmland Protection Program 145 Conservation plans are made and easements purchased through State, Tribe, or local
government agencies to protect topsoil by limiting conversion to nonagricultural
uses.
Conservation plans must be carried out over the 30 years or more of the easement
term.
Authorized by the 1996 Farm [Bill] (Public Law 104-127); renamed under 2008 Farm
[Bill] (P.L. 110-246).
Environmental Quality Incentives Program (EQIP) 1,373 Encourages farmers and ranchers to adopt practices that reduce environmental and
resource problems.
Half of the funds are targeted to livestock production practices. Authorized by the
1996 Farm [Bill] (P.L. 104-127) and reauthorized under the 2002 Farm [Bill] (P.L.
107-171) and 2008 Farm [Bill] (P.L. 110-246).
Agricultural Water Enhancement Program 59 The Agricultural Water Enhancement Program (AWEP) is a voluntary conservation
initiative that provides financial and technical assistance to agricultural
producers to implement agricultural water enhancement activities on agricultural
land for the purposes of conserving surface and ground water and improving water
quality.
Authorized by 2008 Farm [Bill] (P.L. 110-246), the program supersedes the Ground and
Surface Water Protection Program.
Chesapeake Bay Watershed Initiative 50 The program assists producers in implementing activities to improve water quality and
quantity, and restore, enhance and preserve soil, air, and related resources in the
Chesapeake Bay Watershed.
Authorized by 2008 Farm [Bill] (P.L. 110-246).
(k) Payments Under Regional Assistance Programs: 0
(l) Other: 0
-------------------
Grand Total 127,441
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes
\1\ Unless otherwise specified, data are outlays for fiscal years. Outlays were excluded from domestic U.S. tables if not related directly to internal support of production agriculture. Wages
and salaries and administrative expenses were excluded except where such outlays reflect the level of services provided to agriculture.
\2\ Includes an estimated $402 million for pest and disease management programs.
\3\ In providing technical assistance, USDA agencies explain and determine eligibility for conservation programs, help develop individual conservation plans, help install approved practices,
provide information and educational assistance, and consult with universities and other government agencies. Beginning in 2002, expenditures for technical assistance under most farm programs
transitioned from FSA to NRCS, leading to a change in accounting for technical assistance that was not immediately reflected in reporting of NRCS technical assistance. Estimates of NRCS
technical assistance have continued to be included under FSA/NRCS CTA, as well as under NRCS Conservation Operations and as part of NRCS program payments under Environmental Payments,
leading to double-counting of NRCS technical assistance. Beginning in 2009, CRP technical assistance is reported separately under FSA, while NRCS general conservation technical assistance
continues to be reported as part of Conservation Operations, and NRCS program payments continue to include some technical assistance expenditures.
\4\ Derived as the difference between FSA farm loans and commercial interest rates times the value of loans made during the year. Data also include budget outlays for recognized losses on FSA
loan guarantees.
\5\ The Conservation Stewardship Program (CStP) superseded the Conservation Security Program (CSP) under the 2008 Farm [Bill]. The total reported for CStP includes expenditures on remaining
CSP contracts.
Public Law References
Public Law 103-354, Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (October 4, 1994).
Public Law 104-127, The Federal Agriculture Improvement and Reform Act of 1996 (April 4, 1996).
Public Law 106-224, Agricultural Risk Protection Act of 2000, Title I, Crop Insurance, Section 109, and Title III, Biomass Research and Development Act (June 22, 2000).
Public Law 107-171, Farm Security and Rural Investment Act of 2002 (May 13, 2002).
Public Law 108-357, American Jobs Creation Act of 2004, Title II, Fair and Equitable Tobacco Reform Act of 2004 (October 22, 2004).
Public Law 110-28, U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 (May 25, 2007).
Public Law 110-246, Food, Conservation, and Energy Act of 2008 (June 18, 2008).
Public Law 111-5, American Recovery and Reinvestment Act of 2009 (February 17, 2009)
Supporting Table DS:4
Domestic Support: United States
Reporting Period: Marketing Year 2012
Calculation of the Current Total Aggregate Measurement of Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Production
Description of basic products including non-product specific (AMS) Calculated AMS ------------------------------------------------------------ Current total AMS Aggregate
Amount \1\ 5 percent of value
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5
Mil. dol. Mil. dol. Mil. dol. Mil. dol.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Product-specific AMS (from Supporting Tables DS:5 to DS:7)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Almonds 32.307 4,816.860 240.843 \2\
Apples 52.385 3,088.915 154.446 \2\
Apricots 1.165 40.879 2.044 \2\
Avocados 9.016 406.047 20.302 \2\
Banana 0.073 11.310 0.566 \2\
Barley 54.488 1,379.172 68.959 \2\
Beans (fresh & processing) 3.201 546.904 27.345 \2\
Blueberries 8.314 850.883 42.544 \2\
Buckwheat 0.312 3.394 0.170 0.312
Cabbage 1.143 388.600 19.430 \2\
Camelina 0.004 1.118 0.056 \2\
Canola 42.454 644.726 32.236 42.454
Carambola 0.014 18.000 0.900 \2\
Cattle 0.627 49,213.753 2,460.688 \2\
Cherries 19.118 893.831 44.692 \2\
Chile peppers 0.070 175.145 8.757 \2\
Coffee 0.175 41.300 2.065 \2\
Corn 2,719.601 74,330.610 3,716.531 \2\
Cotton 636.148 7,748.402 387.420 636.148
Cranberries 0.384 385.506 19.275 \2\
Dairy 3,335.000 37,229.654 1,861.483 3,335.000
Dry beans 57.896 1,121.613 56.081 57.896
Dry Peas (includes chickpeas & lentils) 19.125 228.662 11.433 19.125
Figs 0.123 20.336 1.017 \2\
Flaxseed 4.899 78.699 3.935 4.899
Grapefruit 5.009 279.033 13.952 \2\
Grapes/raisins 39.022 4,911.335 245.567 \2\
Grass seed 0.279 248.639 12.432 \2\
Green peas 4.177 168.658 8.433 \2\
Hay and forage 125.914 19,144.676 957.234 \2\
Hogs and pigs 0.037 21,408.909 1,070.445 \2\
Honey 1.552 289.642 14.482 \2\
Lemons/limes 3.312 448.698 22.435 \2\
Macadamia nuts 0.766 35.200 1.760 \2\
Mango 0.006 2.100 0.105 \2\
Millet 2.848 47.100 2.355 2.848
Mint 0.836 205.463 10.273 \2\
Mustard 0.835 10.718 0.536 0.835
Nectarines 1.265 144.906 7.245 \2\
Nursery 34.808 12,052.222 602.611 \2\
Oats 5.210 253.991 12.700 \2\
Olives 1.995 130.038 6.502 \2\
Onions 17.036 944.029 47.201 \2\
Oranges 34.959 2,621.620 131.081 \2\
Papaya 0.006 9.722 0.486 \2\
Peaches 12.496 631.223 31.561 \2\
Peanuts 65.189 2,029.567 101.478 \2\
Pears 1.154 437.113 21.856 \2\
Pecans 7.824 476.781 23.839 \2\
Peppers 2.301 627.540 31.377 \2\
Pistachios 5.684 1,113.020 55.651 \2\
Plums/prunes 9.286 242.742 12.137 \2\
Popcorn 4.773 125.710 6.285 \2\
Potatoes 64.618 3,993.815 199.691 \2\
Pumpkins 0.196 148.908 7.445 \2\
Rice 45.780 3,060.558 153.028 \2\
Rye 0.238 53.250 2.663 \2\
Safflower 1.760 49.353 2.468 \2\
Sesame 0.141 1.371 0.069 0.141
Sheep and lamb 0.640 641.481 32.074 \2\
Sorghum 142.098 1,600.825 80.041 142.098
Soybeans 1,479.264 43,602.041 2,180.102 \2\
Strawberries 0.126 2,405.478 120.274 \2\
Sugar 1,454.286 3,696.961 184.848 1,454.286
Sunflower 51.281 713.184 35.659 51.281
Sweet corn 5.989 1,195.055 59.753 \2\
Sweet potatoes 1.241 461.861 23.093 \2\
Tangelos/tangerines/mandarins 7.283 363.466 18.173 \2\
Tobacco 41.783 1,577.857 78.893 \2\
Tomatoes 21.314 1,874.527 93.726 \2\
Walnuts 5.192 1,203.200 60.160 \2\
Wheat 1,115.951 17,491.304 874.565 1,115.951
-----------------------------------------------------------------------------------------------------------------------
Total 11,825.799 6,863.273
Non-product-specific AMS (from Supporting Table DS:9 below) 309.304 396,605.969 19,830.298 \2\
=======================================================================================================================
Total: Current total AMS 6,863.273
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Value of production reported by National Agricultural Statistics Service (NASS), in general. Cash receipts from the Economic Research Service Farm Income Data were used for fruits and
nuts, vegetables, horses and mules, other livestock, and ``other crops,'' excluding cash receipts for some specific crops that are available as actual value of production in NASS reports.
\2\ AMS is not subject to reduction or inclusion in the current total AMS because the calculated AMS is less than 5 percent of value of production (de minimis exclusion).
Supporting Table DS:5
Domestic Support: United States
Reporting Period: Marketing Year 2012
Product-specific Aggregate Measure of Support: Market Price Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Applied
Description of product Marketing year Measure type administered External Eligible Associated fees Total market New notes, data
starting-- price reference price production price support sources
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9
Dol./ton Dol./ton Mil. tons Mil. tons ((4^5)*6)^7
Mil. tons
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Butter Oct. 1, 2012 Price support/ 2,314.85 1,279.000 0.844 873.952 \1\
quota
Nonfat dry milk Oct. 1, 2012 Price support/ 1,763.70 1,342.000 0.809 341.178 \1\
quota
Cheddar cheese Oct. 1, 2012 Price support/ 2,491.22 1,283.000 1.413 1,707.512 \1\
quota
-----------------------------------------------------------------------------------------------
Total Dairy 2,922.642
Sugar Oct. 1, 2012 Price support/ 413.367 230.824 7.701 1,405.843 \2\
quota
===============================================================================================
Total all Commodities (before de 4,328.486
minimis)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ External reference price is 1986-88 average price from FAS/USDA reported prices, FOB Northern Europe and other world ports.
\2\ Reference price based on 1986-88 average Caribbean price adjusted to include transportation costs of $28.66/ton (28.66 + 202.164 = 230.824).
Annual Caribbean price is the simple average of 12 monthly prices. Applied administered price is the announced loan rate for cane sugar (18.75 per lb.).
Eligible production for market price support is the smaller of either actual production or the Overall Allotment Quantity (OAQ), as provided for in the 2002 Farm [Bill] (P.L. 107-171) and
continued under the 2008 Farm [Bill] (P.L. 110-246). The OAQ sets the amount of sugar that may be marketed during any year, thereby determining the maximum amount of production eligible for
price support. Eligible production for 2012 is actual sugar production.
Supporting Table DS:6
Domestic Support: United States
Reporting Period: Marketing Year 2012
Product-Specific Aggregate Measure of Support: Non-Exempt Direct Payments \1\ \2\
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Applied External Total price- Other non-
Description of product Marketing year Measure type administered reference Eligible related direct exempt Fees/Levies Total direct Adjustment New notes, data
starting-- price price production payments payments payments factor sources
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 11 12
Dol./ton Dol./ton Mil. tons ((4^5)*6) Mil. tons Mil. tons (7+8^9) Ratio
Mil. tons Mil. tons
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dairy Oct. 1, 2012 Dairy indemnities 0.287
Dairy market loss payment 403.204
(MILC)
Subtotal other payments 403.491 403.491
Dairy Oct. 1, 2012 Subtotal all direct payments ................ .............. .............. ................ ............... ............... 403.491
Lentils Sept. 1, 2012 ACRE program payments 0.800 \3\
Subtotal other payments 0.800 0.800
Lentils Sept. 1, 2012 Subtotal all direct payments ................ .............. .............. ................ ............... ............... 0.800
Soybeans Sept. 1, 2012 ACRE program payments 2.581 \3\
Subtotal other payments 2.581 2.581
Soybeans Sept. 1, 2012 Subtotal all direct payments ................ .............. .............. ................ ............... ............... 2.581
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Commodities (before de 2012 Subtotal all direct payments ................ .............. .............. ................ 406.872 ............... 406.872
minimis)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes
\1\ Marketing loan gains, loan deficiency payments, and forfeitures constitute benefits under the Marketing Assistance Loan Program (certificate exchange gains were discontinued after 2009). Covered commodities include corn,
soybeans, wheat, rice (both medium and long-grain), upland cotton, barley, grain sorghum, oats, peanuts, oilseeds (which include canola, crambe, flaxseed, mustard seed, rapeseed, safflower, sesame seed, and sunflower seed), dry
peas, honey, lentils, mohair, small and large chickpeas, and wool. No benefits were paid under this program during the 2012 marketing year.
\2\ Four supplemental disaster programs, the Livestock Indemnity Program (LIP), the Livestock Forage Disaster Program (LFP), the Emergency Livestock Assistance Program (ELAP), and the Tree Assistance Program (TAP), were authorized
by the 2008 Farm [Bill]. LIP provides payments to eligible producers for livestock death losses in excess of normal mortality due to adverse weather. LFP provides payments to eligible producers of covered livestock for grazing
losses. ELAP provides emergency relief to eligible producers of livestock, honey bees, and farm-raised fish for losses due to disease, adverse weather, or other conditions not covered by other programs under Supplemental
Agricultural Disaster Assistance. TAP provides assistance to eligible orchardists and nursery tree growers to replant or rehabilitate eligible trees, bushes and vines damaged by natural disasters. These programs terminated at the
end of FY 2011 under provisions of the 2008 Farm [Bill]. They were extended through FY 2013 under the American Taxpayer Relief Act of 2012 but were not funded. The programs were restored under the 2014 Farm [Bill] and will cover
eligible losses beginning Oct. 1, 2011.
\3\ The Average Crop Revenue Election (ACRE) program was authorized by the 2008 Farm [Bill]. Producers on a farm with covered commodities and/or peanuts who elect to participate in the ACRE program must enroll for all covered
commodities and peanut acreage on the farm. Producers may elect to enroll in ACRE anytime beginning with the 2009 crop year through the duration of the 2008 Farm [Bill], but once enrolled in ACRE, the farm remains in the program
through 2012. Direct payments are reduced by 20% and marketing assistance loan rates are reduced by 30% on enrolled farms. Covered commodities include corn, soybeans, wheat, rice (both medium and long-grain), upland cotton,
barley, grain sorghum, oats, peanuts, oilseeds (which include canola, crambe, flaxseed, mustard seed, rapeseed, safflower, sesame seed, and sunflower seed), dry peas, lentils, and small and large chickpeas. Only commodities for
which there were payments in the reporting year are included in the notification.
Public Law References
Public Law 110-246, Food, Conservation, and Energy Act of 2008 (2008 Farm [Bill]) (June 18, 2008).
Public Law 112-240, American Taxpayer Relief Act of 2012 (January 2, 2013).
Public Law 113-79, Agricultural Act of 2014 (2014 Farm [Bill]) (February 7, 2014).
Supporting Table DS:7
Domestic Support: United States
Reporting Period: Marketing Year 2012
Product-Specific Aggregate Measure of Support: Other Product-Specific Support and Total Product-Specific Support
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-exempt
Marketing year Other product- Other product- Total other Market price direct New notes, data
Description of product starting-- Measure type specific budget specific Fees/Levies support support (from payments (from Total AMS sources
outlays/ support support ST DS:5) ST DS:6)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 11
Mil. dol. Mil. dol. Mil. dol. (4+5^6) Mil. dol. Mil. dol. (7+8+9)
Mil. dol. Mil. dol.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Almonds to Carambola
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Almonds Aug. 1, 2012 Crop insurance premium subsidy 32.307 \1\
Subtotal other support 32.307 32.307
Almonds Aug. 1, 2012 Total AMS ................ ............... ............... 32.307 ............... ............... 32.307
Apples Aug. 1, 2012 Crop insurance premium subsidy 52.385 \1\
Subtotal other support 52.385 52.385
Apples Aug. 1, 2012 Total AMS ................ ............... ............... 52.385 ............... ............... 52.385
Apricots Jan. 1, 2012 Crop insurance premium subsidy 1.165 \1\
Subtotal other support 1.165 1.165
Apricots Jan. 1, 2012 Total AMS ................ ............... ............... 1.165 ............... ............... 1.165
Avocados June 1, 2012 Crop insurance premium subsidy 9.016 \1\
Subtotal other support 9.016 9.016
Avocados June 1, 2012 Total AMS ................ ............... ............... 9.016 ............... ............... 9.016
Banana Jan. 1, 2012 Crop insurance premium subsidy 0.073 \1\
Subtotal other support 0.073 0.073
Banana Jan. 1, 2012 Total AMS ................ ............... ............... 0.073 ............... ............... 0.073
Barley June 1, 2012 Commodity loan interest subsidy 0.121 \2\
Crop insurance premium subsidy 54.394 \1\
Subtotal other support 54.515 0.027 54.488 \3\
Barley June 1, 2012 Total AMS ................ ............... ............... 54.488 ............... ............... 54.488
Beans (fresh & processing) Jan. 1, 2012 Crop insurance premium subsidy 3.201 \1\
Subtotal other support 3.201 3.201
Beans (fresh & processing) Jan. 1, 2012 Total AMS ................ ............... ............... 3.201 ............... ............... 3.201
Blueberries Jan. 1, 2012 Crop insurance premium subsidy 8.314 \1\
Subtotal other support 8.314 8.314
Blueberries Jan. 1, 2012 Total AMS ................ ............... ............... 8.314 ............... ............... 8.314
Buckwheat Sept. 1, 2012 Crop insurance premium subsidy 0.312 \1\
Subtotal other support 0.312 0.312
Buckwheat Sept. 1, 2012 Total AMS ................ ............... ............... 0.312 ............... ............... 0.312
Cabbage Jan. 1, 2012 Crop insurance premium subsidy 1.143 \1\
Subtotal other support 1.143 1.143
Cabbage Jan. 1, 2012 Total AMS ................ ............... ............... 1.143 ............... ............... 1.143
Camelina July 1, 2012 Crop insurance premium subsidy 0.004 \1\
Subtotal other support 0.004 0.004
Camelina July 1, 2012 Total AMS ................ ............... ............... 0.004 ............... ............... 0.004
Canola July 1, 2012 Commodity loan interest subsidy 0.062 \2\
Crop insurance premium subsidy 42.411 \1\
Subtotal other support 42.473 0.019 42.454 \3\
Canola July 1, 2012 Total AMS ................ ............... ............... 42.454 ............... ............... 42.454
Carambola Jan. 1, 2012 Crop insurance premium subsidy 0.014 \1\
Subtotal other support 0.014 0.014
Carambola Jan. 1, 2012 Total AMS ................ ............... ............... 0.014 ............... ............... 0.014
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle to Flaxseed
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle Jan. 1, 2012 Livestock insu0.627 premium subsidy \1\
Subtotal other support 0.627 0.627
Cattle Jan. 1, 2012 Total AMS ................ ............... ............... 0.627 ............... ............... 0.627
Cherries Jan. 1, 2012 Crop insurance premium subsidy 19.118 \1\
Subtotal other support 19.118 19.118
Cherries Jan. 1, 2012 Total AMS ................ ............... ............... 19.118 ............... ............... 19.118
Chile peppers Jan. 1, 2012 Crop insurance premium subsidy 0.070 \1\
Subtotal other support 0.070 0.070
Chile peppers Jan. 1, 2012 Total AMS ................ ............... ............... 0.070 ............... ............... 0.070
Coffee Sept. 1, 2012 Crop insurance premium subsidy 0.175 \1\
Subtotal other support 0.175 0.175
Coffee Sept. 1, 2012 Total AMS ................ ............... ............... 0.175 ............... ............... 0.175
Corn Sept. 1, 2012 Commodity loan interest subsidy 11.965 \2\
Crop insurance premium subsidy 2,711.011 \1\
Subtotal other support 2,722.976 3.375 2,719.601 \3\
Corn Sept. 1, 2012 Total AMS ................ ............... ............... 2,719.601 ............... ............... 2,719.601
Cotton Aug. 1, 2012 Commodity loan interest subsidy 24.715 \2\
Crop insurance premium subsidy 562.955 \1\
Upland cotton EAA 60.186
Subtotal other support 647.856 11.708 636.148 \3\
Cotton Aug. 1, 2012 Total AMS ................ ............... ............... 636.148 ............... ............... 636.148
Cranberries Jan. 1, 2012 Crop insurance premium subsidy 0.384 \1\
Subtotal other support 0.384 0.384
Cranberries Jan. 1, 2012 Total AMS ................ ............... ............... 0.384 ............... ............... 0.384
Dairy Oct. 1, 2012 Livestock insu8.867 premium subsidy \1\
Subtotal other support 8.867 8.867
Dairy Oct. 1, 2012 Total AMS ................ ............... ............... 8.867 2,922.642 403.491 3,335.000
Dry Beans June 1, 2012 Crop insurance subsidy 57.897 \1\
Subtotal other support 57.897 0.001 57.896
Dry Beans June 1, 2012 Total AMS ................ ............... ............... 57.896 ............... ............... 57.896
Dry Peas July 1, 2012 Commodity loan interest subsidy 0.066 \2\
Crop insurance premium subsidy 19.063 \1\
Subtotal other support 19.129 0.004 19.125 \3\
Dry Peas July 1, 2012 Total AMS ................ ............... ............... 19.125 ............... ............... 19.125
Figs Jan. 1, 2012 Crop insurance premium subsidy 0.123 \1\
Figs Jan. 1, 2012 Total AMS ................ ............... ............... 0.123 ............... ............... 0.123
Flaxseed July 1, 2012 Commodity loan interest subsidy 0.002 \2\
Crop insurance premium subsidy 4.898 \1\
Subtotal other support 4.900 0.001 4.899 \3\
Flaxseed July 1, 2012 Total AMS ................ ............... ............... 4.899 ............... ............... 4.899
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Grapefruit to Oranges
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Grapefruit Sept. 1, 2012 Crop insurance premium subsidy 5.009 \1\
Subtotal other support 5.009 5.009
Grapefruit Sept. 1, 2012 Total AMS ................ ............... ............... 5.009 ............... ............... 5.009
Grapes/raisins May 1, 2012 Crop insurance premium subsidy 39.022 \1\
Subtotal other support 39.022 39.022
Grapes/raisins May 1, 2012 Total AMS ................ ............... ............... 39.022 ............... ............... 39.022
Grass seed June 1, 2012 Crop insurance premium subsidy 0.279 \1\
Subtotal other support 0.279 0.279
Grass seed June 1, 2012 Total AMS ................ ............... ............... 0.279 ............... ............... 0.279
Green peas Jan. 1, 2012 Crop insurance premium subsidy 4.177 \1\
Subtotal other support 4.177 4.177
Green peas Jan. 1, 2012 Total AMS ................ ............... ............... 4.177 ............... ............... 4.177
Hay and forage May 1, 2012 Crop insurance premium subsidy 125.914 \1\
Subtotal other support 125.914 125.914
Hay and forage May 1, 2012 Total AMS ................ ............... ............... 125.914 ............... ............... 125.914
Hogs and pigs Jan. 1, 2012 Livestock insu0.037 premium subsidy \1\
Subtotal other support 0.037 0.037
Hogs and pigs Jan. 1, 2012 Total AMS ................ ............... ............... 0.037 ............... ............... 0.037
Honey Jan. 1, 2012 Commodity loan interest subsidy 0.086 \2\
Crop insurance premium subsidy 1.484 \1\
Subtotal other support 1.570 0.018 1.552 \3\
Honey Jan. 1, 2012 Total AMS ................ ............... ............... 1.552 ............... ............... 1.552
Lemons/limes Aug. 1, 2012 Crop insurance premium subsidy 3.312 \1\
Subtotal other support 3.312 3.312
Lemons/limes Aug. 1, 2012 Total AMS ................ ............... ............... 3.312 ............... ............... 3.312
Macadamia nuts July 1, 2012 Crop insurance premium subsidy 0.766 \1\
Subtotal other support 0.766 0.766
Macadamia nuts July 1, 2012 Total AMS ................ ............... ............... 0.766 ............... ............... 0.766
Mango Jan. 1, 2012 Crop insurance premium subsidy 0.006 \1\
Subtotal other support 0.006 0.006
Mango Jan. 1, 2012 Total AMS ................ ............... ............... 0.006 ............... ............... 0.006
Millet Oct. 1, 2012 Crop insurance premium subsidy 2.848 \1\
Subtotal other support 2.848 2.848
Millet Oct. 1, 2012 Total AMS ................ ............... ............... 2.848 ............... ............... 2.848
Mint June 1, 2012 Crop insurance premium subsidy 0.836 \1\
Subtotal other support 0.836 0.836
Mint June 1, 2012 Total AMS ................ ............... ............... 0.836 ............... ............... 0.836
Mustard June 1, 2012 Crop insurance premium subsidy 0.835 \1\
Subtotal other support 0.835 0.835
Mustard June 1, 2012 Total AMS ................ ............... ............... 0.835 ............... ............... 0.835
Nectarines Jan. 1, 2012 Crop insurance premium subsidy 1.265 \1\
Subtotal other support 1.265 1.265
Nectarines Jan. 1, 2012 Total AMS ................ ............... ............... 1.265 ............... ............... 1.265
Nursery Jan. 1, 2012 Crop insurance premium subsidy 34.808 \1\
Subtotal other support 34.808 34.808
Nursery Jan. 1, 2012 Total AMS ................ ............... ............... 34.808 ............... ............... 34.808
Oats June 1, 2012 Commodity loan interest subsidy 0.012 \2\
Crop insurance premium subsidy 5.200 \1\
Subtotal other support 5.212 0.002 5.210 \3\
Oats June 1, 2012 Total AMS ................ ............... ............... 5.210 ............... ............... 5.210
Olives Jan. 1, 2012 Crop insurance premium subsidy 1.995 \1\
Subtotal other support 1.995 1.995
Olives Jan. 1, 2012 Total AMS ................ ............... ............... 1.995 ............... ............... 1.995
Onions Jan. 1, 2012 Crop insurance premium subsidy 17.036 \1\
Subtotal other support 17.036 17.036
Onions Jan. 1, 2012 Total AMS ................ ............... ............... 17.036 ............... ............... 17.036
Oranges Nov. 1, 2012 Crop insurance premium subsidy 34.959 \1\
Subtotal other support 34.959 34.959
Oranges Nov. 1, 2012 Total AMS ................ ............... ............... 34.959 ............... ............... 34.959
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Papaya to Sugar
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Papaya Jan. 1, 2012 Crop insurance premium subsidy 0.006 \1\
Subtotal other support 0.006 0.006
Papaya Jan. 1, 2012 Total AMS ................ ............... ............... 0.006 ............... ............... 0.006
Peaches Jan. 1, 2012 Crop insurance premium subsidy 12.496 \1\
Subtotal other support 12.496 12.496
Peaches Jan. 1, 2012 Total AMS ................ ............... ............... 12.496 ............... ............... 12.496
Peanuts Aug. 1, 2012 Commodity loan interest subsidy 17.911 \2\
Forfeiture benefits 0.020
Crop insurance premium subsidy 52.008 \1\
Subtotal other support 69.939 4.750 65.189 \3\
Peanuts Aug. 1, 2012 Total AMS ................ ............... ............... 65.189 ............... ............... 65.189
Pears July 1, 2012 Crop insurance premium subsidy 1.154 \1\
Subtotal other support 1.154 1.154
Pears July 1, 2012 Total AMS ................ ............... ............... 1.154 ............... ............... 1.154
Pecans Oct. 1, 2012 Crop insurance premium subsidy 7.824 \1\
Subtotal other support 7.824 7.824
Pecans Oct. 1, 2012 Total AMS ................ ............... ............... 7.824 ............... ............... 7.824
Peppers Jan. 1, 2012 Crop insurance premium subsidy 2.301 \1\
Subtotal other support 2.301 2.301
Peppers Jan. 1, 2012 Total AMS ................ ............... ............... 2.301 ............... ............... 2.301
Pistachios Sept. 1, 2012 Crop insurance premium subsidy 5.684 \1\
Subtotal other support 5.684 5.684
Pistachios Sept. 1, 2012 Total AMS ................ ............... ............... 5.684 ............... ............... 5.684
Plums/prunes Jan. 1, 2012 Crop insurance premium subsidy 9.286 \1\
Subtotal other support 9.286 9.286
Plums/prunes Jan. 1, 2012 Total AMS ................ ............... ............... 9.286 ............... ............... 9.286
Popcorn Sept. 1, 2012 Crop insurance premium subsidy 4.773 \1\
Subtotal other support 4.773 4.773
Popcorn Sept. 1, 2012 Total AMS ................ ............... ............... 4.773 ............... ............... 4.773
Potatoes Sept. 1, 2012 Crop insurance premium subsidy 64.618 \1\
Subtotal other support 64.618 64.618
Potatoes Sept. 1, 2012 Total AMS ................ ............... ............... 64.618 ............... ............... 64.618
Pumpkins Jan. 1, 2012 Crop insurance premium subsidy 0.196 \1\
Subtotal other support 0.196 0.196
Pumpkins Jan. 1, 2012 Total AMS ................ ............... ............... 0.196 ............... ............... 0.196
Rice Aug. 1, 2012 Commodity loan interest subsidy 9.151 \2\
Crop insurance premium subsidy 38.724 \1\
Subtotal other support 47.875 2.095 45.780 \3\
Rice Aug. 1, 2012 Total AMS ................ ............... ............... 45.780 ............... ............... 45.780
Rye June 1, 2012 Crop insurance premium subsidy 0.238 \1\
Subtotal other support 0.238 0.238
Rye June 1, 2012 Total AMS ................ ............... ............... 0.238 ............... ............... 0.238
Safflower Sept. 1, 2012 Crop insurance premium subsidy 1.760 \1\
Subtotal other support 1.760 1.760
Safflower Sept. 1, 2012 Total AMS ................ ............... ............... 1.760 ............... ............... 1.760
Sesame Sept. 1, 2012 Crop insurance premium subsidy 0.141 \1\
Subtotal other support 0.141 0.141
Sesame Sept. 1, 2012 Total AMS ................ ............... ............... 0.141 ............... ............... 0.141
Sheep and lamb Jan. 1, 2012 Livestock insu0.640 premium subsidy \1\
Subtotal other support 0.640 0.640
Sheep and lamb Jan. 1, 2012 Total AMS ................ ............... ............... 0.640 ............... ............... 0.640
Sorghum Sept. 1, 2012 Commodity loan interest subsidy 0.011 \2\
Crop insurance premium subsidy 142.090 \1\
Subtotal other support 142.101 0.003 142.098 \3\
Sorghum Sept. 1, 2012 Total AMS ................ ............... ............... 142.098 ............... ............... 142.098
Soybeans Sept. 1, 2012 Commodity loan interest subsidy 4.671 \2\
Crop insurance premium subsidy 1,473.432 \1\
Subtotal other support 1,478.103 1.420 1,476.683 \3\
Soybeans Sept. 1, 2012 Total AMS ................ ............... ............... 1,476.683 ............... 2.581 1,479.264
Strawberries Jan. 1, 2012 Crop insurance premium subsidy 0.126 \1\
Subtotal other support 0.126 0.126
Strawberries Jan. 1, 2012 Total AMS ................ ............... ............... 0.126 ............... ............... 0.126
Sugar Oct. 1, 2012 Commodity loan interest subsidy 16.110 \2\
Crop insurance premium subsidy 38.352 \1\
Subtotal other support 54.462 6.019 48.443 \3\
Sugar Oct. 1, 2012 Total AMS ................ ............... ............... 48.443 1,405.843 ............... 1,454.286
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sunflower to Wheat
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sunflower Sept. 1, 2012 Commodity loan interest subsidy 0.060 \2\
Crop insurance premium subsidy 51.240 \1\
Subtotal other support 51.300 0.019 51.281 \3\
Sunflower Sept. 1, 2012 Total AMS ................ ............... ............... 51.281 ............... ............... 51.281
Sweet corn Jan. 1, 2012 Crop insurance premium subsidy 5.989 \1\
Subtotal other support 5.989 5.989
Sweet corn Jan. 1, 2012 Total AMS ................ ............... ............... 5.989 ............... ............... 5.989
Sweet potatoes July 1, 2012 Crop insurance premium subsidy 1.241 \1\
Subtotal other support 1.241 1.241
Sweet potatoes July 1, 2012 Total AMS ................ ............... ............... 1.241 ............... ............... 1.241
Tangelos/tangerines/mandarins Oct. 1, 2012 Crop insurance premium subsidy 7.283 \1\
Subtotal other support 7.283 7.283
Tangelos/tangerines/mandarins Oct. 1, 2012 Total AMS ................ ............... ............... 7.283 ............... ............... 7.283
Tobacco Oct. 1, 2012 Crop insurance premium subsidy 41.783 \1\
Subtotal other support 41.783 41.783
Tobacco Oct. 1, 2012 Total AMS ................ ............... ............... 41.783 ............... ............... 41.783
Tomatoes Jan. 1, 2012 Crop insurance premium subsidy 21.314 \1\
Subtotal other support 21.314 21.314
Tomatoes Jan. 1, 2012 Total AMS ................ ............... ............... 21.314 ............... ............... 21.314
Walnuts Sept. 1, 2012 Crop insurance premium subsidy 5.192 \1\
Subtotal other support 5.192 5.192
Walnuts Sept. 1, 2012 Total AMS ................ ............... ............... 5.192 ............... ............... 5.192
Wheat June 1, 2012 Commodity loan interest subsidy 1.656 \2\
Crop insurance premium subsidy 1,114.664 \1\
Subtotal other support 1,116.320 0.369 1,115.951 \3\
Wheat June 1, 2012 Total AMS ................ ............... ............... 1,115.951 ............... ............... 1,115.951
-------------------------------------------------------------------------------------------------------------------------
All commodities (before de minimis) 2012 Total AMS 7,121.072 0.000 29.830 7,091.242 4,328.486 406.072 11,825.799
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes
\1\ Producers may choose one of the various types of crop yield or revenue insurance plans made available each year. The contracted-for insurance premiums are subsidized. The chosen guarantee (coverage) level commonly ranges from
50% to 85% of the historical average yield or expected revenue.
\2\ Interest subsidies constitute a benefit under the Marketing Assistance Loan Program. Covered commodities include corn, soybeans, wheat, rice (both medium and long-grain), upland cotton, barley, grain sorghum, oats, peanuts,
oilseeds (which include canola, crambe, flaxseed, mustard seed, rapeseed, safflower, sesame seed, and sunflower seed), dry peas, honey, lentils, mohair, small and large chickpeas, and wool. Only commodities for which there were
benefits in the reporting year are included in the notification, unless the commodity is included on the basis of other support.
\3\ Fees/levies include loan origination and related fees for most loan commodities.
Supporting Table DS:9
Domestic Support: United States
Reporting Period: Fiscal Year 2012 (except as noted)
Non-Product-Specific AMS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non- product- Other non-
specific product- Associated fees/ Total non-prod.
Measure type budgetary specific levies specific Data sources and comments
outlays support support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5
Million dollars
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Irrigation on Bureau of Reclamation Projects 167.314 167.314 Based on a ``debt financing method.'' A long term interest rate is applied to
in 17 Western States the outstanding unpaid balance of capital investment by the Government in
irrigation facilities to obtain the subsidy. Irrigators repay the principal
but not the interest on the project debt.
Net Federal budget outlays for grazing 72.290 18.450 53.840 The data are net budget outlays for livestock grazing on public range land in
livestock on Federal Land 16 Western States operated by the Forest Service (FS) and Bureau of Land
Management (BLM). The net budget outlays include (as negative outlays) the
receipts for fees paid by livestock producers, but do not include other
``non-fee'' costs paid by the producers, such as for building and
maintaining water supplies and fences. Including the other non-fee costs
could reduce the net outlay figure, perhaps to zero.
Adjusted gross revenue insurance (premium 9.251 9.251 Adjusted Gross Revenue (AGR) and AGR-Lite policies insure revenue of the
subsidies) entire farm rather than an individual crop by guaranteeing a percentage of
average gross farm revenue, including a small amount of livestock revenue.
The policies use information from a producer's Schedule F tax forms, and
current year expected farm revenue, to calculate policy revenue guarantee.
Supplemental Crop Revenue Assurance (SURE) 0.000 0.000 SURE payments are made to eligible producers on farms in disaster counties
(crop year) that incurred crop production or crop-quality losses or both during crop
year. Provides payments at 60% of difference between disaster assistance
program guarantee and total farm revenue, where revenue includes all crops
produced on farm plus government payments. Authorized by the 2008 Farm
[Bill] (P.L. 110-246). The SURE program expired after crop year 2011.
Countercyclical payments (crop year) 0.000 0.000 Provides payments when prices of program commodities fall below a target
price. Payments are based on historical acres and yields and do not require
current production of the historically produced commodity. Authorized by the
2002 Farm [Bill] (P.L. 107-171).
Farm storage facility loans 8.435 8.435 Provides low-cost financing for farmers to build or upgrade on-farm grain
storage and handling facilities. The program is authorized under the
Commodity Credit Corporation Charter Act of 1949. It was discontinued in the
early 1980s and reestablished in FY 2000.
Biomass crop assistance program: 0.465 0.465 Provides financial assistance to producers or entities that deliver eligible
biomass material to designated biomass conversion facilities for use as
heat, power, biobased products or biofuels. Assistance is for costs of
collection, harvest, storage and transportation associated with delivery of
eligible materials. Authorized by the 2008 Farm [Bill] (P.L. 110-246).
Rural Energy for American Program (formerly 68.000 68.000 Provides direct loans, loan guarantees, and grants to farmers, ranchers, and
Renewable Energy Program) small rural businesses to purchase renewable energy systems and make energy
efficiency improvements. Reauthorized by the 2008 Farm [Bill] (P.L. 110-
246).
Reimbursement Transportation Cost Payment for 2.000 2.000 Provides payments to reimburse higher costs for transportation of
Geographically Disadvantaged Farmers and agricultural inputs and commodities faced by geographically disadvantaged
Ranchers (RTCP) producers in Hawaii, Alaska, Puerto Rico, Guam, American Samoa, the Northern
Mariana Islands, Micronesia, the Marshall Islands, Palau, and the U.S.
Virgin Islands. Authorized under the 2008 Farm [Bill] (P.L. 110-246) and
first implemented in 2010.
AMS is not subject to reduction because the total is less than 5 percent of
value of production of U.S. agriculture
--------------------------------------------------------------------------------------------------------------------------------------------------
Total non-product specific support 160.440 167.314 18.450 309.304 (.05 * $396,606 mil. = $19,830 mil. in 2012)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Public Law References
Public Law 107-171, Farm Security and Rural Investment Act of 2002 (May 13, 2002).
Public Law 110-246, Food, Conservation, and Energy Act of 2008 (June 18, 2008).
______
Submitted Statement by Kimberly Houlding, Executive Director, American
Olive Oil Producers Association
On behalf of the growers, processors and affiliate members of the
American Olive Oil Producers Association (AOOPA), we appreciate the
opportunity to submit comments on agricultural subsidies in foreign
countries.
AOOPA is an organization comprised of growers, processors and state
olive oil associations that develops sound governmental policies to
promote a fair and honest market in order to protect the U.S. olive oil
consumers from fraudulent olive oil.
The domestic olive oil industry in the United States is still in
its early stages of development, but has great potential for growth.
Recent increases in the popularity of olive oil has U.S. consumption at
0.95 kg per capita. Despite this, the U.S. has one of the lowest
consumption rates among the largest producers and importers of olive
oil. Greece is one of the largest consumer, at 15.5 kg per capita,
while Italy's consumption rate is 10.36 kg per capita. Spain, the
largest producer of olive oil, has a consumption rate of 11.22 kg per
capita. As these numbers show, there is a great growth potential for
the U.S. olive oil industry for both importers and domestic producers.
The U.S. currently has approximately 40,000 acres of olive trees
dedicated to producing olive oil. If the domestic industry supplied the
amount of olive oil currently consumed in the U.S. it would take over
425,000 acres of olive orchards and an investment of over $5 billion.
AOOPA believes that the subsidization level of foreign countries
impedes the U.S. olive oil producer's ability to expand due to price
suppression in the U.S.
In September 2012, the Committee on Ways and Means (Committee) of
the House of Representatives requested the United States International
Trade Commission (USITC) to examine and report on the conditions of
competition between U.S. and major foreign olive oil supplier
industries. The report, entitled ``Olive Oil: Conditions of Competition
between U.S. and Major Foreign Supplier Industries,'' gives an in-depth
description of the current challenges facing the U.S. olive oil
industry. The report highlights how foreign agricultural subsidies
retard the growth of the domestic industry.
Europe is the largest producer of olive oil; unfortunately, it
contributes to U.S. price suppression through their numerous government
support programs. These programs provide aid to the olive oil sector in
the EU, offering European producers unfair advantages. European olive
oil producers receive direct support through Europe's system of
agricultural subsidies called the Common Agricultural Policy (CAP). CAP
includes several programs such as basic payment schemes, green
payments, and storage aid. USITC found that ``the income received from
CAP payments enables producers to operate at margins that would be
unsustainable without this source of support.'' \1\ USITC further noted
that ``[b]ecause some of these producers would likely cease production
in the absence of income support from the EU, the CAP has the indirect
effect of increasing total global olive oil supply.'' \2\ An over
production of olive oil causes the olive oil price to drop, thereby
diminishing the already small margin in which U.S. olive oil producers
operate.
---------------------------------------------------------------------------
\1\ U.S. International Trade Commission. (2013). Olive Oil:
Conditions of Competition between U.S. and Major Foreign Supplier
Industries (Investigation No. 332-537, USITC Publication 4419).
Washington, D.C., p. 6-20. Retrieved from http://www.usitc.gov/
publications/332/pub4419.pdf.
\2\ Ibid, at p. 6-2.
---------------------------------------------------------------------------
The European Commission (EC) understands the damaging effects of an
oversupply of olive oil. To balance the supply/demand, the EC has a
program to fund the storage of olive oil when prices drop below a
certain threshold in order to artificially maintain prices. In short,
EC removes olive oil supplies from the market. USITC concluded that
subsidization ``puts U.S. growers at a delivered cost disadvantage
compared to producers abroad who receive government support through
direct payments.'' \3\
---------------------------------------------------------------------------
\3\ Ibid, at p. 5-15.
---------------------------------------------------------------------------
Various changes in the EC's CAP makes it difficult to determine the
current level of subsidization olive oil producers receive. The Spanish
Minister of Agriculture made a statement in 2012 that the EU's CAP
payments to Spanish olive oil producers were approximately $1.38
billion per year.\4\ The USITC report found that ``[t]ypical payments
to olive growers vary significantly . . . Payments may be as high as
=690 ($924) per ha in certain olive-intensive regions, although this
rate is region-wide and not specific to olive farms.'' \5\ A report
from the Directorate-General for Agriculture and Rural Development of
the European Commission stated that from 2006 to 2009, the average
annual direct payment supports represented a large percentage of the
income for the European olive oil industry (growers & processors): 22%
in Spain; 28% in Greece; and a range of 22% to 50% of table olive and
olive oil producers in Italy.\6\
---------------------------------------------------------------------------
\4\ Government of Spain, Ministry of Agriculture, ``Arias Canete
subraya,'' February 22, 2012; Butler, ``Olive Regions Work on Joint
Strategy to Maintain EU Subsidies,'' April 2, 2012.
\5\ USITC 332 Report, at p. 6-20.
\6\ Directorate-General for Agriculture and Rural Development,
``Economic Analysis of the Olive Sector,'' European Commission, July
2012, at p. 10, available at http://ec.europa.eu/agriculture/olive-oil/
economic-analysis_en.pdf.
---------------------------------------------------------------------------
The level of subsidization encourages increases in production and a
decrease in olive oil prices. Subsidies have caused olive oil
production to outpace olive oil consumption, which causes global olive
oil prices to drop. U.S. olive oil producers suffer more than their EU
counterparts when olive oil prices drop, as we do not have support
programs such as direct payments and storage aid.
Europe is not the only producer whose programs support the
production of olive oil. Since 2008 Morocco has provided various
subsidy and support programs to bolster its olive oil industry through
the construct new irrigation projects and direct advertising marketing
expenditures for the sale of olive oil to the U.S. market.\7\ This is
coupled with the monies made available through the Millennium Challenge
Corporation (MCC).\8\ The MCC program which was initiated in August
2007, made available nearly $700 million to stimulate economic growth
in Morocco. Approximately $320 million was used toward a fruit tree
productivity project, with olives being the major recipient. Some $200
million was exclusively for the rehabilitation of existing olive
orchards and also provided for nearly 200,000 new acres of olives.\9\
---------------------------------------------------------------------------
\7\ Ibid, at p. 7-23.
\8\ The Millennium Challenge Corporation is a bilateral United
States foreign aid agency established by the U.S. Congress in 2004,
applying a new philosophy toward foreign aid. Its goal is to provide
foreign aid to help fight against global poverty.
\9\ A provision in U.S. law, the Bumpers Amendment, prohibits U.S.
Government support for agricultural production in a foreign country if
said production would compete with U.S. agricultural exports to third-
country markets. However, the Bumpers Amendment does not apply to
support for foreign agricultural production that may compete with U.S.
producers in the U.S. domestic market (USITC 332 Report, at p. 7-24).
---------------------------------------------------------------------------
U.S. domestic olive oil producer have the potential to become an
important player in the international olive oil community. While
several global industry issues affect its growth potential, such as
mislabeling, fraudulent olive oil and discriminatory grade standards,
AOOPA believes that foreign agricultural subsidies greatly suppresses
the development of the U.S. industry. The collection of these issues
impedes the natural economic development of the domestic industry.
Matters of subsidization are typically addressed in multilateral
discussions. The World Trade Organization's Doha Development Agenda,
however, has languished and will continue to do so for the foreseeable
future. We ask the House Agriculture Committee and Congress to look for
new avenues to reduce and/or eliminate foreign domestic support
programs that distort and suppress the development of the U.S. olive
oil industry.
______
Submitted Statement by American Sugar Alliance
Global Sugar Subsidies on the Rise
Summary
American sugar producers are among the world's most efficient, and
most socially and environmentally responsible, but they cannot compete
in a world sugar market badly distorted by foreign subsidies. So called
``world market'' prices are running barely \1/2\ the world average cost
of producing sugar. Foreign sugar subsidies are expanding as
governments seek to protect their industries against the low world
prices.
American sugar producers support the goal of multilateral
elimination of global sugar subsidies. Absent government intervention,
the world sugar price would rise to reflect the cost of producing
sugar, and American producers could compete well on a level playing
field. We have endorsed a Congressional resolution to eliminate U.S.
sugar policy when foreign countries eliminate theirs.
But unilateral elimination of U.S. sugar policy, as some policy
critics suggest, would sacrifice jobs in an efficient, dynamic American
industry in favor of foreign jobs in countries that are likely less
efficient, but continue to subsidize.
Background
The American Sugar Alliance (ASA) is the national coalition of
sugarbeet and sugarcane growers, processors, and refiners. The U.S.
sugar-producing industry generates 142,000 jobs in 22 states and $20
billion in annual economic activity.\1\
---------------------------------------------------------------------------
\1\ LMC International, ``The Economic Importance of the Sugar
Industry to the U.S. Economy--Jobs and Revenues,'' Oxford, England,
August 2011.
---------------------------------------------------------------------------
The U.S. sugar industry is a major player in the world sugar
market. The United States is the world's fifth largest sugar producer
and is among the most efficient.
The U.S. is the 20th lowest cost among the 95 largest sugar-
producing nations. Most of these are developing countries with far
lower government-imposed costs for worker, consumer, and environmental
protections. U.S. beet sugar producers, mostly in northern-tier states,
are the lowest-cost beet producers in the world; Florida cane sugar
producers are fourth lowest cost of all sugar producers in the
world.\2\
---------------------------------------------------------------------------
\2\ LMC International, ``Sugar & HFCS Production Costs: Global
Benchmarking,'' Oxford, England, August 2011.
---------------------------------------------------------------------------
The United States is also the world's fourth largest sugar consumer
and, year after year, the first, second, or third largest sugar
importer. We provided guaranteed, essentially duty-free access to 41
countries. This makes the U.S. one of the world's most open markets to
foreign sugar.
Justification for U.S. Sugar Policy
Since U.S. sugar producers are among the lowest cost in the world,
one might ask why the industry requires a sugar policy at all. The
answer is in the distorted, dump nature of the world sugar market.
Foreign governments subsidize their producers so egregiously that
many of these countries produce far more sugar than they can consume.
Rather than store these surpluses, or close mills and reduce production
and jobs, which would harm their industry, these countries dump their
sugar on the world market for whatever price it will bring, which
threatens to harm our industry.
As a result of these dumped surpluses, the so-called ``world
price'' for sugar has been rendered essentially meaningless. Rarely in
the past few decades has the world price reflected the actual cost of
producing sugar--a minimal criterion for a meaningful market price.
The world price is so depressed by subsidies and dumping that, over
the past 25 years, the world average cost of producing sugar has
averaged fully 50% higher than the world price.\3\ (See Figure 1.)
---------------------------------------------------------------------------
\3\ LMC International, ``Sugar & HFCS Production Costs: Global
Benchmarking,'' Oxford, England, July 2014.
---------------------------------------------------------------------------
The world sugar price has dropped by more than \1/2\ since 2010/
11--from more than 32 per pound to less than 13 --and is now barely
\1/2\ of the current estimated world average cost of production. One
would expect such low prices to put many producers out of business, and
signal planting reductions to all. Yet, despite the price collapse,
world sugar production has actually risen, up 6% in the past 5
years.\4\
---------------------------------------------------------------------------
\4\ U.S. Department of Agriculture, http://apps.fas.usda.gov/
psdonline/.
---------------------------------------------------------------------------
Sugar producers are responding not to world market signals but
rather to domestic market prices and the government programs that
sustain those prices.
One European market expert summarizes: ``The world market price is
a `dump' price . . . (it) should never be used as a yardstick to
measure what benefits or costs may accrue from free trade in sugar.''
\5\
---------------------------------------------------------------------------
\5\ Patrick Chatenay, ``Government Support and the Brazilian Sugar
Industry,'' Canterbury, England, April 2013.
---------------------------------------------------------------------------
But how can a world sugar industry exist if the price received for
the product is just a fraction of the cost of producing it? The answer
is twofold:
1. Only about 20-25% of the sugar produced each year is actually
traded at the so-called ``world price.''
2. The other 75-80% of sugar is consumed in the countries where it
is produced, at prices considerably higher than the world
price, and higher than production costs.
The International Sugar Organization (ISO) records actual wholesale
prices among the world's largest consuming countries--the price
producers in those countries receive for their sugar. The ISO documents
that actual wholesale refined sugar prices have averaged 45% higher
than the world price over the past dozen years. (See Figure 2.)
This, then, explains how we can have a robust world sugar industry:
Governments shield their producers from the world dump market sugar and
maintain prices high enough--above the dump market and above production
costs--to sustain a domestic industry and generate and defend jobs.
Further, this explains why we require a U.S. sugar policy--even
with American sugar producers among the lowest cost, and most
responsible, in the world.
Zero-for-Zero
U.S. sugar producers recognize that subsidies and other market-
distorting polices must be addressed in order for the world dump market
to recover and better reflect free market principals. Therefore,
American producers have publicly pledged to give up U.S. sugar policy
when foreign producers agree to eliminate their subsidies.
The American Sugar Alliance has endorsed a resolution introduced in
Congress by Representative Ted Yoho of Florida. This ``zero-for-zero''
resolution explicitly calls for the U.S. to surrender its sugar policy
when other major producers have done the same.\6\
---------------------------------------------------------------------------
\6\ https://www.congress.gov/bill/114th-congress/house-concurrent-
resolution/20/text?q=%7B
%22search%22%3A%5B%22%5C%22zero+for+zero%5C%22%22%5D%7D.
---------------------------------------------------------------------------
However, to give up sugar policy without any foreign concessions,
as some critics of U.S. sugar policy have called for, would amount to
foolish unilateral disarmament. We would be sacrificing good American
jobs in a dynamic, efficient industry in favor of foreign jobs in the
countries that continue to subsidize.
The Nature of Foreign Sugar Subsidies
The sugar futures markets, particularly the raw sugar #11 ICE
contract, are mathematically the most volatile of commodity markets.
This is because it is relatively thinly traded and, historically, has
been a dumping ground for surplus sugar. It is also the market to which
consumers turn for residual supplies when weather problems have left
world sugar supplies tight.
Over the past 40 years, monthly average prices have ranged from
less than 3 per pound to more than 57 . Just in the past 4 years,
prices have dropped to less than 13 from a temporary peak above 32 .
(See Figure 3.)
Approximately 120 countries produce sugar, and the governments in
all these countries intervene in their markets in some way, to defend
their producers, or their consumers, or sometimes both. A world market
this volatile necessitates some buffer for domestic sugar sellers and
buyers.
Government interventions among the largest producers and exporters
have the most profoundly distorting effects on the world market. LMC
International, in a 2008 study, examined market-distorting practices
among eleven of the largest players in the world sugar market. LMC
discovered a wide range of trade-distorting practices and categorized
them as ``transparent''--fitting into recognized World Trade
Organization (WTO) categories of intervention; and, ``non-
transparent''--less obvious interventions not specifically subject to
WTO disciplines, but still trade distorting.\7\
---------------------------------------------------------------------------
\7\ LMC International, ``Review of Sugar Policies in Major Sugar
Industries: Transparent and Non-Transparent or Indirect Policies,''
Oxford, England, 2008.
---------------------------------------------------------------------------
Figure 4 provides a snapshot of government interventions in the
world sugar market in 2008. Since that time, the extent of government
intervention has increased considerably.
Countries that have long intervened in their sugar markets have,
for the most part, continued to do so, with many expanding their
programs. Other countries, including advanced developing countries that
are becoming larger players in the world sugar market, have achieved
their expansion largely through government intervention.
Major Exporters, Major Subsidizers
Figure 5 provides examples of some of the elaborate forms of
government intervention that enable major producers to continue to
export sugar, even when world prices are running \1/2\ the world
average cost of production--as they are now.
The following provides some more detail on the trade-distorting
practices of some of the biggest exporters, and subsidizers--Brazil,
Thailand, India, and Mexico. Developing countries are not subject to
the same WTO disciplines as developed countries, and some take
advantage of this special treatment to perpetuate subsidies that
developed countries are committed to reducing or avoiding.
Brazil. Brazil is a prime example of a ``developing'' country with
an advanced, modern, and, in this case, massive agricultural industry.
Brazil is the largest sugar exporter by a huge margin, dominating with
nearly \1/2\ of all sugar exports. But the Brazilian sugar industry
would be a fraction of that size were it not for a Brazilian Government
decision in the early 1970s to fund a huge sugarcane ethanol industry.
With subsidies to plant more sugarcane and build mill/distilleries
that could convert the cane to sugar or ethanol, with ethanol
consumption mandates and ethanol and gasoline price controls, the
Brazilian cane industry exploded. Brazil came to be the world's largest
cane ethanol producer, and sugar exporter, by far.
After its ``Pro-Alcool'' program was unleashed in 1975, Brazilian
cane ethanol production soared from small amounts to 28 billion liters,
sugar production from 6 million tons to 38 million, and sugar exports
from 1 million tons to 28 million. Cane planting decisions have been
driven primarily by government ethanol policies, with more than \1/2\
of cane going to ethanol, and the remainder to sugar.
With the cane industry propped up by ethanol subsidies, Brazil
could continue its reckless sugar export expansion, even as world sugar
prices dipped as low as 3 per pound in 1985.
The value of this indirect subsidy of the Brazilian cane sugar
industry, by way of the subsidy of the cane ethanol industry, along
with related government benefits, has been placed at $2.5-$3.0 billion
per year. Unfortunately, since these subsidies do not fit neatly into
WTO subsidy categories--direct supports, import tariffs and direct
export subsidies--they are largely immune to WTO disciplines.
Sugar market expert Patrick Chatenay has noted that, in addition to
direct payments, the government aids Brazil's cane industry with low-
interest loans, debt forgiveness, ethanol usage mandates and reduced
tax rates. He estimates the value of these subsidies alone at $2.5
billion per year, and notes that unreported debt restructuring probably
puts the actual total much higher.\8\
---------------------------------------------------------------------------
\8\ Patrick Chatenay, op. cit.
---------------------------------------------------------------------------
Since Chatenay published his $2.5 billion per year Brazilian sugar
subsidy estimate in 2013, the government has provided an additional
$450 million in tax relief and made available $3 billion in soft
loans.\9\
---------------------------------------------------------------------------
\9\ http://www.sugaralliance.org/brazils-sugar-subsidies-expand-as-
global-prices-fall-4399/.
---------------------------------------------------------------------------
Unfortunately, because most of Brazil's sugar subsidies are
considered indirect, they are not subject to the WTO disciplines to
which most developed countries adhere.
Thailand. Thailand is the world's second largest sugar exporter. It
surged into that position by quadrupling its exports within the past
decade--from 2 million metric tons in 2006/07 to 8 million tons this
year.
Thailand is not a particularly efficient sugar producer. But
government programs enabled its stunning expansion, oblivious to
remarkably low world prices.
In a newly released study, Antoine Meriot estimates the value of
government subsidies to the Thai industry at no less than $1.3 billion
per year. The $1.3 billion includes direct payments and indirect export
subsidies, but does not include Thai sugar producers' substantial
benefit from soft loans and input subsidies the Thai Government makes
available to all its farmers.\10\
---------------------------------------------------------------------------
\10\ Antoine Meriot, Sugar Expertise, ``Thailand's sugar policy:
Government drives production and export expansion,'' Bethesda,
Maryland, June 2015.
---------------------------------------------------------------------------
Meriot points out that world sugar prices dropped by 40% from 2010
to 2014, yet Thai sugar exports rose by 70% during that same period. He
explains that Thai sugar producers were cushioned from the world price
drop by much higher guaranteed prices for sugar sold within Thailand.
This is the type of indirect export subsidy that the WTO found to be
illegal in a 2005 ruling against European Union sugar exports.
Meriot reveals a number of other ways the Thai Government assists
its sugar industry, including: Direct payments and input subsidies to
cane growers; soft loans, at a fraction of market interest rates;
guaranteed prices for growers and millers; sales limits; import
tariffs; and cane ethanol subsidies.
Even with low world sugar prices, the Thai Government is showing no
signs of letting up. It is switching from encouraging rice production
to encouraging sugar production. Its goal: a 50% increase in sugarcane
production in just the next 5 years.
Meanwhile, Brazil and Australia, which had successfully challenged
the European Union's similar indirect export subsidy scheme, are
questioning the WTO on Thailand's similar scheme.
India. In 2010, world sugar prices were approaching a 30 year high
and India was one of the world's largest sugar importers, with net
imports of 2.2 million metric tons. Since that time, world prices have
dropped in \1/2\, but India has become a significant net exporter.
How has India achieved the transformation from sugar importer to
exporter, though world sugar prices were declining? Government
decisions to encourage production and to flaunt WTO rules with blatant
export subsidies.
India has blatantly ignored complaints from other WTO members that
these export subsidies violate their WTO obligations and, in the face
of such criticism, has actually increased them. Generous Federal, and
even state, subsidies have enabled India to export an estimated 2
million tons of sugar last year and this year--contributing to the
global surplus and the sharp decline in world sugar prices.
A recent article summarized the most recent Indian Federal and
state government support for its sugar industry with these points:
$90 million in WTO-illegal export subsidies from the Federal
Government;
$22 million in WTO-illegal export subsidies from a state
government;
$320 million in additional interest free loans to sugar
mills and $140 million in tax debt forgiveness from a state
government;
A doubling of import taxes to block foreign sugar;
Elimination of an excise tax on ethanol to promote sugar-
based fuels.\11\
---------------------------------------------------------------------------
\11\ http://www.sugaralliance.org/living-off-subsidies-and-still-3-
billion-in-the-hole-5293/.
Thailand, though currently under WTO scrutiny for its own sugar
subsidies, is questioning the WTO about the legality of India's export
subsidy programs.
Mexico. When the NAFTA went into effect in 1994, Mexico was an
occasional exporter of small volumes of sugar. Since that time, Mexican
sugarcane area has exploded by 66%; the government expropriated \1/2\
of all Mexican sugar mills, rather than allowing them to go out of
business; and, Mexico became one of the world's largest sugar
exporters. Virtually all those exports have been aimed at the U.S.
market--fully open to Mexican sugar since 2008 under NAFTA rules.
The Mexican Government is still Mexico's largest sugar producer and
exporter, accounting for \1/5\ of production and mills. In addition to
government ownership, Mexican producers benefit from Federal and state
cash infusions, debt restructuring and forgiveness, and government
grant programs to finance inventory, exports, and inputs.\12\
---------------------------------------------------------------------------
\12\ http://www.sugaralliance.org/mexican-export-subsidies-
injuring-u-s-sugar-producers-4990/.
---------------------------------------------------------------------------
In 2012/13, Mexican sugar production soared to an all-time high, a
stunning 38% higher than the previous year's production. Yet, despite
the huge domestic market surplus, Mexico was able to sustain sugar
prices higher than in the U.S. How did they manage to balance their
market? By dumping their subsidized surplus on the U.S.
The subsidized and dumped Mexican surpluses collapsed the U.S.
sugar market and caused the first government cost for U.S. sugar policy
in a dozen years, as USDA took steps to remove the excess Mexican sugar
from our market.
The U.S. sugar industry last year filed unfair trade petitions. In
response, the U.S. Department of Commerce imposed countervailing and
antidumping duties on Mexican sugar averaging 56% in 2014. Late last
year the U.S. and Mexican Governments negotiated suspension agreements
to eliminate the injury caused by dumped and subsidized Mexican sugar.
The U.S. International Trade Commission is now proceeding with its
final injury investigation, and a final decision is expected in October
of this year.
Conclusion
In a world awash in subsidized foreign sugar, the U.S. is one of
the world's leading importers. We are obligated to import sugar from 41
countries under WTO and free-trade agreement concessions. All of these
countries subsidize their producers in some way, but there are limits
on how much sugar we must take from all except one--Mexico. When Mexico
used its subsidies to damage the market, the U.S. Government responded,
and we are hopeful the reasonable solution the U.S. and Mexican
Governments negotiated will stay in place.
Meanwhile, the rest of the world continues to subsidize its sugar
producers, and at growing volumes. The U.S. sugar industry supports
elimination of all these direct and indirect subsidies, multilaterally.
We are among the lowest cost producers and could compete in a world
free of subsidies, where the world price for sugar reflects the cost of
producing it.
We cannot, however, endorse efforts to modify U.S. sugar policy
without any foreign concessions. This would amount to unilateral
disarmament and the sacrifice of American jobs in favor of foreign
countries where governments continue to subsidize.
charts
Figure 1
World Raw Sugar Dump Market Price: Historically Does Not Reflect Actual
Cost of Producing Sugar
Cents per Pound
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Sources: World Price: USDA, #11 raw contract, Caribbean
ports. monthly average prices, 1970-2015.
Cost of Production: ``Sugar Production Cost, Global
Benchmarking Report,'' LMC International, Oxford, England, July
2014.
Figure 2
Actual Wholesale Sugar Prices in Major Consuming Countries Much Greater
than World Dump Market Price
Cents per pound of refined sugar, 2003-2015
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Data Sources: International Sugar Organization, U.S.
Department of Agriculture. Monthly average prices through
January 2015; except the EU through November 2014.
* Brazil, China, European Union, India, Mexico, Russia,
United States--represent approximately \1/2\ of world sugar
consumption.
Figure 3
World Sugar Dump Market Price, 1970-2015: World's Most Volatile
Commodity Market
Cents per Pound
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: USDA, #11 raw contract, Caribbean ports. Monthly
Average prices, 1970-2015.
Figure 4
Table SUM. 1: Summary of Support for Sugar Industry in Selected Countries, 2008
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Australia Brazil China Colombia EU Guatemala India Indonesia Mexico S. Africa Thailand
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Transparent Support
Domestic Market Controls
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Guaranteed
Support Prices
Supply
Management/
Controls
Market Sharing/
Sales Quotas
Domestic/Export
Revenue
Equalization
Measures
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Import Controls
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Import Quota/TRQ
Import Tariff
Import Licenses
Quality
Restrictions
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Export Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Export Subsidies
Single Desk
Selling
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Transparent Support
Direct Financial Aid
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Ownership
Income Support
Debt Financing
Input Subsidies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Indirect Long Term Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Programs to
Improve
Efficiency
Ethanol Programs
(mandates/tax
breaks)
Consumer Demand
Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
LMC International, 2008.
Figure 5
World's Largest Sugar Exporters: All Subsidize
2010/11-2014/15 Average
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Sources: Export data--USDA, FAS May 2015; Subsidies--FAS
attache reports, press reports, country studies.
______
Submitted Questions
Response from Darren Hudson, Ph.D., Professor and Larry Combest Chair
for Agricultural Competitiveness, Department of Agricultural
and Applied Economics, Texas Tech University
Questions Submitted by Hon. Alma S. Adams, a Representative in Congress
from North Carolina
Question 1. Many Americans do not have the knowledge of programs
like the Price Loss Coverage program that you all possess and often
assume that PLC and other USDA safety net programs are the same as what
is done by our foreign competitors. Can you explain how the Price Loss
Coverage program works and why it is less distorting to the market than
foreign price support regimes?
Answer. The Price Loss Coverage (PLC) program is a price-centered
safety net program designed to provide a minimum price for producers
should market prices fall below pre-defined, legislated levels.
Specifically, if the marketing year average (MYA) price as determined
by USDA falls below the pre-determined price (``reference price''),
producers receive a payment equal to the difference between the MYA and
reference price multiplied by their base acres and yield (times the 85%
base adjustment factor).
What makes the PLC program less distorting than programs used by
many of our competitors is that these payments are ``decoupled.'' That
is, the base acres and yield are determined by historical plantings and
yields, not current production. Thus, the potential for a PLC payment
is not tied to current production decisions and, therefore, should not
affect current planting decisions. By contrast, target prices used in,
for example, China, are designed specifically to stimulate current
production and, therefore, influence current production and trade. The
lack of influence over current production is what makes the PLC less
distorting than these other policies, both from a practical, economic
point of view as well as the legal, World Trade Organization (WTO)
point of view.
Question 2. If countries that compete with the U.S. are often late
in reporting their domestic support regime to the World Trade
Organization, what is the enforcement mechanism at the WTO for
notification requirements?
Answer. There is little to no ``teeth'' in any enforcement
mechanism for failure to report or being late on notification. Some
will point to a ``shame factor'' or other moral suasion techniques, but
for all practical purposes there is no real way for the WTO to force
notification.
Question 3. In your Foreign Crop Subsidy Database, you point out
that non-biotech soybean meal receives a 13% premium over normal
soybean meal prices. What has been the effect on planting decisions?
Answer. In some countries/regions, the market does offer some
premiums for non-biotech soybean meal (Europe, for example). This has
generated interest in planting of non-biotech soybeans in some areas
(including limited acreage in the U.S.), but the economic advantages of
the biotech soybeans often outweigh the 13% premium, leading to little
or no additional plantings of those varieties. In some cases, Brazil
for example, the government has in the past certified the entire crop
as non-biotech thereby making it eligible for import into Europe when,
in fact, significant acreage of biotech soybeans were planted. Overall,
however, the premiums offered have not induced much acreage change
globally or the U.S.
Response from Craig A. Thorn, Partner, DTB Associates, LLP
Question 1. Many Americans do not have the knowledge of programs
like the Price Loss Coverage program that you all possess and often
assume that PLC and other USDA safety net programs are the same as what
is done by our foreign competitors. Can you explain how the Price Loss
Coverage program works and why it is less distorting to the market than
foreign price support regimes?
Answer. Price support programs of the type we examined in our study
are among the most production- and trade-distorting forms of
subsidization. Governments using such programs ensure that returns to
producers do not fall below the support price level--either by making
government purchases to prop up domestic prices, or by making payments
to producers that make up the difference between the market price and
the support price. In either case, the support price acts as the
incentive price to producers and has a direct effect on planting
decisions. Such programs insulate producers from price signals from the
world market.
The U.S. PLC and ARC programs are comparatively less production-
and trade-distorting for two reasons. First, the U.S. reference price
is significantly lower than most of the support prices in the countries
we examined (see table below). Second, the U.S. programs incorporate
significant elements of decoupling. The payment a producer receives is
linked to a fixed acreage base rather than to current year plantings.
Producers eligible to receive a payment for corn, for example, receive
the same payment whether they plant corn, wheat, or nothing at all.
Producers cannot increase the amount of support they receive by
increasing production. These policy features make U.S. producers more
responsive to world price signals and reduce the effects of U.S.
programs on trade.
Support Prices
(2013/14, unless otherwise noted)
----------------------------------------------------------------------------------------------------------------
Country Wheat Corn Long-grain Rice
----------------------------------------------------------------------------------------------------------------
China * $384 $361 $438
India $232 $217 $332
Brazil * $231 $128 $224
Turkey $351 $310 $648
Thailand N/A N/A $450
United States $201 $146 $308
----------------------------------------------------------------------------------------------------------------
* 2014/15 support price levels.
Question 2. If countries that compete with the U.S. are often late
in reporting their domestic support regime to the World Trade
Organization, what is the enforcement mechanism at the WTO for
notification requirements?
Answer. The notification requirements under the WTO Agreement on
Agriculture are not enforceable through the dispute settlement process.
However, the lack of notifications does not affect the ability of the
U.S., or any other WTO member, to enforce the disciplines on subsidies
under the Agreement. Information on foreign subsidy programs is readily
available, and WTO Members are free to draw information from any
credible source in support of a dispute settlement challenge. In fact,
waiting for notifications is foolish, since in most cases those
notifications are incomplete or inaccurate.
Question 3. In your Foreign Crop Subsidy Database, you point out
that non-biotech soybean meal receives a 13% premium over normal
soybean meal prices. What has been the effect on planting decisions?
Answer. I think this question is better directed to Dr. Hudson. His
university maintains that database.