Global Policy Forum

By Gustavo Capdevila

The U.S. practice of dumping agricultural products is hurting the livelihood of 70 percent of the world's poorest people, says a new study by the Institute for Agriculture and Trade Policy (IATP), a U.S.-based think-tank.

This kind of trade -- selling goods at prices below production costs -- reaches levels as high as 40 percent for some commodities in the United States, says IATP.

The United States is placing five primary farm commodities -- maize, soy, cotton, wheat and rice -- on the world market at distorted prices, according to the IATP analysis comparing the production costs with the prices these products fetch in international trade.

The differences are "shocking", says the report by IATP president Mark Ritchie, director Sophia Murphy and agricultural economist Mary Beth Lake, presented in Geneva Tuesday. In the case of wheat, U.S. dumping levels stand at around 40 percent, while for maize it varies between 25 and 30 percent. Price distortions for soy increased over the last four years and now reach 40 percent. In 2001, cotton saw a 57 percent difference between sales price and cost of production, while for rice the difference has stabilized at 20 percent.

This form of competition, which violates World Trade Organization (WTO) rules, is one of the most harmful of all market distortions that are built into the multilateral system, according to the study.

IATP trade director Murphy said that the practice of selling farm commodities at prices below production costs paralyses agriculture in developing countries, where farming is vital for food security, sustaining rural populations, reducing poverty and improving trade.

"Below-cost imports drive developing country farmers out of their local markets, " and is occurring around the world, in places "as far apart as Jamaica, Burkina Faso and the Philippines."

Dumping also hurts farmers who sell their products to exporters and end up finding their participation on the global market is undermined by the lower-cost competition, says IATP.

The report notes that after many years of tolerating dumping of agricultural commodities, some countries are beginning to take action, seeking investigation into whether certain U.S. farm exports are being sold below cost.

Brazil, for example, considering filing a complaint against the United States with the WTO dispute settlement body for its practices in the cotton trade.

"In 2001, Canada briefly imposed both countervailing and anti-dumping duties on U.S. corn imports," states the IATP report.

The release of the study, titled "United States Dumping on World Agricultural Markets: Can Trade Rules Help Farmers?", comes at a crucial time in the WTO negotiations for modifying the Agreement on Agriculture, one of the areas lagging farthest behind in international trade liberalization efforts.

The talks began Jan. 1, 2000, and are slated to wrap up Dec 31, 2004, but have been bogged down by the fact that most of the industrialized countries are unwilling to reduce their protectionist measures for their farm sectors.

The European Union, Japan, South Korea, Norway and Switzerland, are the heaviest subsidisers of their farmers, but the IATP study shows that the United States is also highly interventionist in the agricultural sector through its dumping practices.

A panorama of how the WTO agricultural negotiations are going will be evident in the coming weeks, after the chairman of the special committee on agriculture, Stuart Harbinson, presents a progress report.

The WTO ministerial conference held in Doha, Qatar, in November 2001, established that the committee must approve new trade rules by April 1 of this year for the second phase of the negotiations, when bartering on real liberalization of the agricultural markets will begin.

For the 145 WTO member nations, this is a critical moment, says IATP. "The minimum acceptable outcome for the reform of the Agreement on Agriculture is to provide and enforce rules that outlaw dumping in world agricultural markets."

The study says the United States is a leader in defending trade remedy measures, such as duties to boost prices on imports deemed to be entering the U.S. market at devalued prices.

The new duties imposed on steel imports in 2002 "underline that the current U.S. administration does not intend to change its policy of taxing dumped imports."

But when it comes to farm commodities, Washington shows no interest in addressing the dumping problem, say the IATP experts.

In 1998, says the report, U.S.-based multinational companies sold U.S. wheat abroad at an average price of $ 34 dollars a ton, which represented nearly a billion dollars under production cost for the 28 million tons of wheat sold.

To confront the problem of farm commodities dumping, the IATP urges "the elimination of visible export subsidies as quickly as possible."

The report also calls for a commitment from exporting countries to "keep products priced below the cost of production out of world markets".

To achieve this objective would require strengthening international trade rules, says IATP, ostensibly putting the ball in the WTO's court.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.