Are U.S. farm subsidies illegal?

According to the January 22, 2007 New York Times article "EU joins WTO complaint against U.S. corn subsidies":

DAVOS, Switzerland — The European Union, Australia, Argentina and Brazil have joined Canada in a complaint against the United States over what they claim are illegal government handouts to American corn growers, trade officials said Monday.

The request for consultations, filed by the four trading powers and others at the World Trade Organization in Geneva, threatens a major commercial dispute at a time when global free trade talks remain stalled over agricultural tariffs and subsidies and when the United States is beginning debate on a new multibillion-dollar farm bill.

Under WTO rules, a three-month consultation period is required before a country can ask the trade body to initiate a formal investigation.

A case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.

Canada lodged its complaint Jan. 8, claiming that some $9 billion paid out by the United States annually in export credit guarantees and other subsidies unfairly and illegally deflated international corn prices.

"This is not just about corn," said Clodoaldo Hugueney, Brazilian ambassador to the WTO. "Brazil is the world's largest ethanol exporter, so this is an important issue for us."

Hugueney said any country's large subsidy program concerns Brazil as a major agriculture exporter.

Sean Spicer, a spokesman for the U.S. trade representative, Susan Schwab, declined to comment on the countries joining the complaint. The office, however, was critical of Canada's action earlier this month.

"Corn prices have increased significantly in both the United States and in Canada," Gretchen Hamel, a spokeswoman for the U.S. trade representative, said at the time. "In addition, U.S. corn exports to Canada have declined in the last year. Given the dramatic improvement in the market over the past year, we're surprised that Canada believes that our corn programs are now causing harm in breach of WTO rules."

The WTO, in a case brought by Brazil, already has ruled that some cotton subsidies are illegal, and the administration of President George W. Bush has been coming under pressure to reform a number of its farm support programs.

"Many of the issues in Canada's complaint we have also complained about concerning U.S. cotton programs," said Hugueney by telephone from Geneva.

Canada's complaint over U.S. corn support also challenged whether the billions of dollars in overall farm subsidies paid out by the U.S. government comply with international commerce rules.

It argued that U.S. subsidy levels for a number of years on farm products including wheat, sugar and soybeans were illegal, and urged Washington to address its concerns when drafting the farm bill that would set out American agricultural support programs for the next five years.

The United States said it has offered cuts as part of the WTO's global free trade talks, but others have called the pledges largely artificial, addressing only permitted levels of government subsidies and failing to cut what Washington actually gives to its farmers.

The United States is the world's largest producer and exporter of corn, accounting for more than 40 percent of global production and nearly 60 percent of all exports in 2004 and 2005, according to the U.S. Grains Council.

Argentina, Brazil and Canada are the next largest exporters in the Western Hemisphere, and all rank in the top 10 globally.