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Dumping of U.S. ag commodities hurting farmers in USA and around the world

(Tuesday, Feb. 11, 2003 -- CropChoice news) -- From an Institute for Agriculture and Trade Policy news release

Contact: Sophia Murphy, 541-485-9871, cell, 612-203-5648, smurphy@iatp.org
Ben Lilliston, 301-270-4787

Minneapolis - Five primary farm commodities are being dumped onto international global markets by the United States in violation of World Trade Organization (WTO) agriculture rules, according to a new report released today by the Institute for Agriculture and Trade Policy.

This report is being released prior to WTO Agriculture Chair Stuart Harbinson's next draft of new agriculture trade rules - expected to go to government delegates on February 12. On February 14, a small number of countries are invited to send negotiators to Tokyo to debate Harbinson's draft as well as discuss progress on other WTO negotiations.

The report , U.S. Dumping on World Agricultural Markets: Can Trade Rules Help Farmers?, by Mark Ritchie, Sophia Murphy and Mary Beth Lake, looks at the cost of production of corn, soybeans, cotton, wheat and rice, and compares the cost to the price at which these commodities are sold on international markets. In all cases, the commodities were sold below the cost of production a practice known as export dumping. Moreover, the document details how the dumping begins right here at home, at the farmgate, where farmers are selling their crops for prices up to 40% below their cost of production.

"The dumping of commodities on international markets hurts farmers all over the world, including U.S. farmers, by driving down the marketplace price," said Mark Ritchie, IATP President. "There are international trade rules to address this problem. They need to be enforced."

The report analyzed costs for five U.S. grown commodities using data from the U.S. Department of Agriculture (USDA) and the Organization for Economic Cooperation and Development (OECD) to compare the cost of production with farmgate and export price.

The results were shocking. Levels of dumping hover around 40% for wheat, between 25% and 30% for corn (maize) and levels have risen steadily over the past four years for soybeans, to nearly 30%. These percentages means that wheat, for example, is selling for 40% less than it costs to produce. For cotton, the level of dumping for 2001 rose to a remarkable 57%, and for rice it has stabilized at around 20%.

The report found that the structural price depression caused by agricultural dumping has two major effects on developing countries whose farmers produce competing products. First, below-cost imports drive developing country farmers out of their local markets. This is happening around the world, in places as far apart as Jamaica, Burkina Faso and the Philippines. Secondly, farmers who sell their products to exporters find their global market share undermined by the lower-cost competition.

The damage of dumping is not confined to other countries, according to the report. The nearly $1 billion discount documented in this report for exported wheat, for example, comes out of the pockets of U.S. producers. The steady erosion of independent family farms, the near-necessity of off-farm income to ensure a farm family can stay on the land, and the decline in net farm income, all point to the cost of policies that facilitate the sale of commodities at less than cost of production prices.

The report found that after many years of accepting agricultural dumping, a few countries have begun to respond with investigations into whether some U.S. agricultural exports are dumped. Brazil is considering a case against U.S. cotton before the WTO. In 2001, Canada briefly imposed both countervailing and anti-dumping duties on U.S. corn imports.

As this report is released, member states of the WTO are meeting to review and reform existing multilateral trade rules on agriculture. Several new proposals to further restrict dumping have been introduced within the WTO agriculture negotiations, most recently in late 2002. A recent WTO appellate decision on a case against Canadian dairy policies has affirmed the idea, described in Article VI of the original General Agreement on Traiffs and Trade (GATT), that it is legitimate to use production costs to determine whether export prices are fair.

This report recommends three immediate steps to address the problem of agriculture dumping:

1) The elimination of visible export subsidies as quickly as possible.

2) A commitment from exporting countries to keep products priced below the cost of production out of world markets through the strengthening of international trade rules.

3) The publication of annual full-cost of production estimates for OECD countries.

"If market distortions are going to be eliminated, then prohibiting all causes of dumping must head the list of reforms," said IATP Trade Director Sophia Murphy. "Dumping is a gross distortion of commodity markets. It undermines the livelihoods of 70% of the world’s poorest people. Trade rules provide the tools needed to address agricultural dumping. Now is the time for governments to act."

The full report can be viewed at: http://www.tradeobservatory.org