[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
                           
                           
                           
                           
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                        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.