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Why the WTO Needs a “Hypocrisy Clause”

From Triple Crisis by Timothy Wise:

I ended a recent article on the US government’s objections to the food security proposal of India and other developing countries at the World Trade Organization meetings in Bali with the provocative statement that what the WTO needs is not a “Peace Clause” – a four-year cease fire on WTO suits – but a “Hypocrisy Clause” – an agreement to reduce or eliminate the trade-distorting hypocrisy that is preventing a Bali agreement. I called for immediate reductions by the “most developed hypocrites.”

In a subsequent talk, I was asked to elaborate. I offered my “top ten” examples of the US government’s most trade-distorting hypocrisy:

 

  1. India’s food security and stockholding program uses precisely the same policies that the United States used in its early farm policy coming out of the Great Depression. Exactly the same: price supports, food reserves, administered markets, subsidies. We used them because they work. India and other countries should be allowed to use them too. Because they work.
  2. The WTO’s “Green Box,” which is meant to hold non-trade-distorting subsidies, is now home to about $120 billion of the US’s $130 billion in nutrition programs and farm supports. This dwarfs India’s commitments.
  3. The allowed levels of trade-distorting support – the Aggregate Measure of Support (AMS) – for the US is about $19 billion. Why so high? Because the level was set back in 1994,based on the prevailing high levels of US support, and it was reduced only 20% since then. India? Like 61 of 71 developing country WTO members at the time, India’s AMS is zero. Like most developing countries, it couldn’t afford such expensive policies. Now such countries are punished for their past good behavior.
  4. The United States has been unfairly notifying the WTO of its trade-distorting subsidies for years. A WTO dispute panel ruled that insurance subsidies and direct payments should count as trade-distorting subsidies because they go to producers of a defined set of crops. If one counted such payments correctly, US AMS notifications for 2010 would rise from $4 billion to $15 billion.
  5. India’s procurement program and stockholding is for domestic producers and for domestic consumption. Where is the trade distortion? Meanwhile, US subsidies – AMS and Green Box – go to crops like corn, soybeans, wheat, and cotton that are heavily exported.
  6. Not only are those crops exported, corn and soybeans serve as inputs for livestock feed, and corn is the main input for ethanol. Input subsidies should be notified as trade-distorting, yet these are treated as non-trade-distorting subsidies. The US exports both meat and ethanol. 

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