UNITED STATES – SUBSIDIES AND OTHER DOMESTIC SUPPORT FOR CORN AND OTHER AGRICULTURAL PRODUCTS
Document: Request for Consultations by Canada
Date: 11 January 2007
Document codes: WT/DS357/1; G/L/812; G/SCM/D73/1; G/AG/GEN/74
Complainant: Canada
Respondent: U.S.
Third parties: Argentina, Australia, Chile, EU, India, Japan, Mexico, New Zealand, Nicaragua, South Africa, Taiwan, Thailand, Turkey, Uruguay
Dispute stage: Panel
Agreements cited: Art. 10.1, 8  AgricultureArt. 3.1(a), 3.2  Subsidies and Countervailing Measures (SCM)Art. 3.2  Agriculture

UNITED STATES – SUBSIDIES AND OTHER DOMESTIC SUPPORT
FOR CORN AND OTHER AGRICULTURAL PRODUCTS

Request for Consultations by Canada

 The following communication, dated 8 January 2007, from the delegation of Canada to the
delegation of the United States and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

My authorities have asked me to request consultations with the Government of the
United States pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU), Article XXII of the General Agreement on Tariffs and Trade 1994
(GATT 1994 ), Articles 4, 7 and 30 of the Agreement on Subsidies and Countervailing Measures
(SCM Agreement) and Article 19 of the Agreement on Agriculture.

 There are three parts to this request. For each of the measures referred to in this request, the
request also covers any amendments, replacements, extensions or other related measures.

I. The measures at issue in the first part of this request are subsidies and domestic support
provided to US producers and/or exporters of corn (the "US corn industry") as well as the programs,
legislation, regulations and statutory instrume nts providing these subsidies and support. The
measures include the following subsidies and domestic support provided to the US corn industry from
marketing year
1 1996 onward:

 – Subsidies and domestic support provided under the Farm Security and Rural
Investment Act of 2002 (2002 Farm Bill) and programs under the 2002 Farm Bill,
relating to marketing loan payments (including marketing assistance loans, marketing
loan gains, loan deficiency payments, commodity certificates, commodity certificate
exchange gains and commodity loan interest subsidies), direct payments, counter-
cyclical payments, and any ot her provisions of the 2002 Farm Bill that provide direct
or indirect support to the US corn industry;

 – Subsidies and domestic support provided under the Federal Agriculture Improvement
and Reform Act of 1996 (FAIR Act) and programs under the FAIR Act, relating to
marketing loan payments (including mark eting assistance loans, marketing loan
gains, loan deficiency payments, commod ity certificates, commodity loan interest
subsidies, commodity certificate exchange gains), production flexibility contract

1 The "marketing" year for corn runs from 1 September through 31 August. For example, marketing
year 2005 began on 1 September 2005 and ended on 31 August 2006.
WT/DS357/1, G/L/812,
G/SCM/D73/1, G/AG/GEN/74

payments and any other provisions of the FA IR Act that provide direct or indirect
support to the US corn industry;

 – Market loss assistance (MLA) payments to the US corn industry provided under the
Agriculture, Rural Development, Food and Drug Administration and Related
Agencies Appropriation Act of 1998; Agriculture, Rural Development, Food and
Drug Administration and Related Agencies Appropriation Act of 1999 ; the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999 ; the
Agriculture, Rural Development, Food and Drug Administration, and Related
Agencies Appropriation Act of 2000; the Agriculture Risk Protection Act of 2000; and
the Crop Year 2001 Agricultural Economic Assistance Act;

 – Export credit guarantees to facilitate the export of corn, provided under the
Agricultural Trade Act of 1978 , and other measures such as the General Sales
Manager (GSM-102) program and Supplier Credit Guarantee Program (SCGP).

Canada considers that the measures at issu e are inconsistent with the United States'
obligations under Articles 5(c) and 6.3 (c) of the SCM Agreement.

Under the measures at issue, the United States pr ovides subsidies to the US corn industry.
These subsidies take the form of financial contributio ns by the US government or an income or price
support in the sense of Article XVI of GATT 1994 , within the meaning of Article 1.1(a) of the
SCM Agreement and a benefit is thereby conferred within the meaning of Article 1.1(b) of the
SCM Agreement. These subsidies are specific to US producers of primary agricultural products
and/or to the US corn industry within the meaning of Articles 2.1 and 2.3 of the SCM Agreement.

These measures cause adverse effects in the form of serious prejudice and threat of serious
prejudice to the interests of Canada. The operation of the statutory provisions of the 2002 Farm Bill,
the FAIR Act and the other statutes referred to a bove that mandate payments of marketing loans,
counter-cyclical payments and direct payments (inc luding production flexibility contract payments)
and MLA payments to the US corn industry, and the mandatory payments under those provisions, as
well as the export credit guarantees, cause significan t price depression and price suppression for corn
in the Canadian market for marketing years 1996-2006, and threaten to cause significant price
depression and price suppression for corn in the Cana dian market, in violation of Articles 5(c) and
6.3(c) of the SCM Agreement.

II. The measures at issue in the second part of th is request are support in respect of corn and
other agricultural products not scheduled in Section II of Part IV of the Schedule of the United States,
provided to US exporters of those products through export credit guarantee programs under the
Agricultural Trade Act of 1978 and other measures such as the GSM-102 program and SCGP as well
as the programs, legislation, regulations and statutory instruments providing the support.

Canada considers that the measures at issu e are inconsistent with the United States'
obligations under Articles 3.1(a) and 3.2 of the SCM Agreement and Articles 3.3, 8, 9.1 and 10.1 of
the Agreement on Agriculture.

Through these programs, the United States makes available to its exporters premium rates and
other terms more favourable than those which th e market would otherwise provide. The premium
rates under these programs are also inadequate to cover the long-term operating costs and losses of the
programs. These programs therefore provide subsidies con tingent upon export performance contrary
to Article 3.1(a) and 3.2 of the SCM Agreement. These measures also violate Articles 3.3, 8, 9.1 and
10.1 of the Agreement on Agriculture.
WT/DS357/1, G/L/812,
 G/SCM/D73/1, G/AG/GEN/74

III. The measures at issue in the third part of th is request are the domestic support that is properly
subject to the provisions of Article 6 of the Agreement on Agriculture, provided by the United States
in favour of agricultural producers, as well as the programs, legislation, re gulations and statutory
instruments providing this support. Canada cons iders that the United States provides support in
excess of the commitment levels specified in Section I of Part IV of its Schedule. The measures
include the following:

– Production Flexibility Contract (PFC) payments pursuant to the FAIR Act;

– Direct Payments pursuant to the 2002 Farm Bill;

– MLA payments pursuant to the Agriculture, Rural Development, Food and Drug
Administration and Related Agencies Appropriation Act of 1999 ; the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999 ; the
Agriculture, Rural Development, Food and Drug Administration, and Related
Agencies Appropriation Act of 2000; the Agriculture Risk Protection Act of 2000; and
the Crop Year 2001 Agricultural Economic Assistance Act;

– Counter-Cyclical Payments pursuant to the 2002 Farm Bill.

Canada considers that the measures at issu e are inconsistent with the United States'
obligations under Article 3.2 of the Agreement on Agriculture.

PFC payments and Direct Payments do not fully conform with paragraph 6(b) of Annex 2 to
the Agreement on Agriculture . Accordingly, PFC payments should be included in the Aggregate
Measurement of Support (AMS) of the United States for each of wheat, corn, grain sorghum, barley,
oats, upland cotton, and rice, and Direct Payments should be included in the AMS of the United States
for each of wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, and other oilseeds.

In addition, MLA payments should be included in the AMS of the United States for each of
wheat, corn, grain sorghum, barley, oats, upland cotton, and rice, and Counter-Cyclical Payments
should be included in the AMS of the United States for each of wheat, corn, grain sorghum, barley,
oats, upland cotton, rice, soybeans, and other oilseeds.

According to Article 3.2 of the Agreement on Agriculture the United States is allowed to
provide support in favour of domestic agricultural producers not in excess of the levels specified in
Section I of Part IV of its Schedule. These levels are US $19, 899.264 million in 1999 and
US $19,103.294 million in each subsequent year.

When the annual payments under the foregoing programs are included in the AMS of the
United States for the respective products indicated in the preceding paragraphs, the Current Total
AMS of the United States exceeds the levels spec ified in each of 1999, 2000, 2001, 2004, and 2005.
Through the improper exclusion of domestic suppor t, the United States therefore provides support in
favour of domestic producers in excess of the commitme nt levels specified in Section I of Part IV of
its Schedule, contrary to Article 3.2 of the Agreement on Agriculture.

In respect of Parts I and II of this request for consultations, Articles 4.2 and 7.2 of the
SCM Agreement together require that Canada include a stat ement of available evidence with regard to
(a) the existence and nature of the subsidies in question and (b) the serious prejudice caused to the
interests of Canada. The Annex to this request contains Canada's statement of available evidence.
WT/DS357/1, G/L/812,
G/SCM/D73/1, G/AG/GEN/74

Canada reserves the right to raise additional cl aims and legal matters regarding the measures
at issue during the course of consultations.

I look forward to receiving your reply to this request and to selecting a mutually acceptable
date on which consultations may take place.
WT/DS357/1, G/L/812,
 G/SCM/D73/1, G/AG/GEN/74

ANNEX

Statement of Available Evidence

Canada's request for consultations dated 8 January 2007 identifies the s ubsidies that are part of this
request for consultations. The evidence set out below is evidence presently available to Canada
regarding the existence and nature of those subsidi es, and the serious prejudice caused to the interests
of Canada. Canada reserves the right to supplement or alter this list in the future, as required.

The evidence presently available to Canada includ es, in addition to the relevant legislation,
regulations and statutory instruments, the following:

United States Department of Agriculture (USDA):

USDA Commodity Estimates Book: FY 2007 Mid-Session Review
http://www.fsa.usda.gov/Internet/FSA_File/comm_est_book_2006.pdf

History of Budgetary Expenditures of the Commodity Credit Corporation, Fiscal Year 1990-2000
Actual, April 9, 2001. USDA Farm Service Agency, Budget Division, Book 3.
http://www.fsa.usda.gov/Internet/FSA_File/book3.pdf

History of Budgetary Expenditures of the Comm odity Credit Corporation, Fiscal Years 2001-2003
Actual, January 30, 2004. USDA Farm Service Agency, Budget Division, Book 4.
http://www.fsa.usda.gov/Internet/FSA_File/book4.pdf

Farm and Commodity Policy Briefing Room
http://www.ers.usda.gov/Briefing/FarmPolicy/

The 2002 Farm Bill: Provisions and Economic Implications
http://www.ers.usda.gov/Features/farmbill/

The 2002 Farm Act: Provisions and Implications for Commodity Markets.
USDA ERS Agriculture Information Bulletin Number 778. November 2002.
http://www.ers.usda.gov/Publications/AIB778/

Comparison and Summary of 1996 and 2002 Farm Bills – Title 1: Commodity Programs
http://www.ers.usda.gov/Features/Farmbill/titles/titleIcommodities.htm

Farm and Commodity Policy: 1996-2001 Commodit y Provisions – Emergency and Supplemental
Assistance
http://www.ers.usda.gov/Briefing/FarmPolicy/1996emerge.htm#2

1996 FAIR Act Frames Farm Policy for 7 Years
http://www.ers.usda.gov/publications/agoutlook/aosupp.pdf

Provisions of the Federal Agriculture Improvement and Reform Act of 1996
http://www.ers.usda.gov/publications/aib729/

US Farm Program Benefits: Links to Planting Decisions and Agricultural Markets
http://www.ers.usda.gov/publications/agoutlook/oct2000/ao275e.pdf
WT/DS357/1, G/L/812,
G/SCM/D73/1, G/AG/GEN/74

Fact Sheet: Feed Grains – Summary of 2002-2007 Program. July 2003.

Farm and Commodity Policy: Program Provisions
http://www.ers.usda.gov/Briefing/FarmPolicy/ProgramProvisions.htm

Direct Payments
http://www.ers.usda.gov/Briefing/FarmPolicy/DirectPayments.htm

Counter Cyclical Income Support Payments
http://www.ers.usda.gov/Briefing/FarmPolicy/CounterCyclicalPay.htm

Marketing Assistance Loan and Loan Deficiency Payment Programs
http://www.ers.usda.gov/Briefing/FarmPolicy/2002malp.htm

Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments Fact Sheet, June 2003
http://www.fsa.usda.gov/Internet/FSA_File/nonrec03.pdf

Commodity Certificates Fact Sheet, July 2000
http://www.fsa.usda.gov/FSA/printapp?fileName=pf_20000701_comop_en_certs.html&newsType=pr
factsheet

Commodity Costs and Returns: US and Regional Cost and Return Data
http://www.ers.usda.gov/Data/CostsAndReturns/testpick.htm

Corn Briefing Room
http://www.ers.usda.gov/Briefing/Corn/

Corn: Policy
http://www.ers.usda.gov/Briefing/Corn/policy.htm

Corn: Market Outlook
http://www.ers.usda.gov/Briefing/Corn/marketoutlook.htm

Feed Outlook – Various issues.
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1273

Feed Yearbook – Various issues.
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do;jsessionid=0AB948D9EAA3F1212
F7A4CE0465BFD0B?documentID=1274

Feed Grains Database
http://www.ers.usda.gov/data/feedgrains/

Grain: World Markets and Trade. Foreign Agricultural Service Circular Series. Various issues.
http://www.fas.usda.gov/grain/circular/2006/09-06/grain0906.pdf

USDA Agricultural Baseline Projection Tables, Released February 2006
http://usda.mannlib.cornell.edu/MannUsda/viewStaticPage.do?url=http://usda.mannlib.cornell.edu/us
da/ers/94005/./2006/index.html

Production, Supply & Distribution online, Custom Query
WT/DS357/1, G/L/812,
 G/SCM/D73/1, G/AG/GEN/74

http://www.fas.usda.gov/psdonline/psdquery.aspx

National Agricultural Statistical Service – Acreage. Various issues.
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1000

National Agricultural Statistical Service – Agricultural Prices. Various issues.
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1002

World Supply and Demand Estimates
http://www.usda.gov/oce/commodity/wasde/

Agricultural Outlook Forum 2005: Grains and Oilseed s Outlook for 2005. Prepared by Members of
the Wheat, Feed Grains, and Oilseeds Interagency Commodity Estimates Committees. USDA.
http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=17007&ftype=.pdf

USDA Export Credit Guarantee Programs
http://www.fas.usda.gov/excredits/ecgp.asp

Eligible Commodities Under the GSM-102 and SCGP Programs
http://www.fas.usda.gov/excredits/gsmcommodities.html

GSM 102 Guarantee Fee Rate Schedule
http://www.fas.usda.gov/excredits/gsm102fees.html

Monthly Summary of Export Credit Guarantee Program Activity
http://www.fas.usda.gov/excredits/Monthly/ecg.html

Other US Government Sources:

Potential Challenges to US Farm Subsidies in the WTO: A Brief Overview. Congressional Research
Service (CRS) Report for Congress. October 25, 2006.
http://fpc.state.gov/documents/organization/76911.pdf

Potential Challenges to US Farm Subsidies in the WTO. CRS Report for Congress. October 25, 2006.
http://www.agweb.com/images/content/CRS1.pdf

Agricultural Trade Liberalization. Congressional Budget Office (CBO). Economic and Budget Issue
Brief. November 20, 2006.
http://www.cbo.gov/ftpdocs/76xx/doc7690/11-20-AgTrade.pdf

Emergency Funding for Agriculture: A Brief History of Supplemental Appropriations, FY1989-
FY2006. CRS Report for Congress. Updated July 3, 2006.
http://ncseonline.org/NLE/CRSreports/06Aug/RL31095.pdf

Budget of the United States Government. Office of Management and Budget.
http://www.whitehouse.gov/omb/budget/fy2007/

Other sources, including analytical studies:

Boxed in: Conflicts between US farm policies and WTO obligations. Daniel A. Sumner. CATO
Institute. December 5, 2005.
http://www.freetrade.org/node/23
WT/DS357/1, G/L/812,
G/SCM/D73/1, G/AG/GEN/74

Statement of Professor Sumner. Canadian International Trade Tribunal. NQ-2005-001. Grain Corn
From the United States. Public Exhibit A-6.

CCP Reply Brief. Effects of US Corn Subsidi es on the Corn Industry in Canada: Responses to
Comments and Analysis, Daniel A. Sumner. Canadi an International Trade Tribunal. NQ-2005-001.
Public Exhibit A-18.

When the Peace Ends: The Vulnerability of EC and US Agricultural Subsidies to WTO Legal
Challenge. Richard H. Steinberg and Timothy E. Josling. Journal of International Economic Law
6(2), 369-417. Oxford University Press.

US Agriculture Without Farm Support. Australia n Bureau of Research and Agricultural Economics
(ABARE) Research Report 06.10. September 2006.
http://www.abare.gov.au/publications_html/trade/trade_06/us_ag.pdf

Truth or Consequences: Why the EU and the USA Mu st Reform Their Subsidies, Or Pay the Price.
Oxfam Briefing Paper. Oxfam International. November 2005.
http://www.oxfam.org/en/files/bp81_truth_or_consequences/download

United States – Subsidies on Upland Cotton , Panel Report (WT/DS267/R) and Report of the
Appellate Body (WT/DS267/AB/R).

Chicago Board of Trade Corn Pricing Data
http://www.cbot.com/

Canada: Grains and Oilseeds Outlook. Agriculture and Agri-Food Canada, Market Analysis Division
http://www.agr.gc.ca/mad-dam/index_e.php?s1=pubs&s2=go-co&page=go-co-hist

Weekly Price Summary. Agriculture and Agri-Food Canada, Market Analysis Division
http://www.agr.gc.ca/mad-dam/index_e.php?s1=pubs&s2=pri&page=intro