Think Big and Ignore the Law: U.S. Corn and Ethanol Subsidies and WTO Law

By Cai, Phoenix X. F. | Georgetown Journal of International Law, Spring 2009 | Go to article overview

Think Big and Ignore the Law: U.S. Corn and Ethanol Subsidies and WTO Law


Cai, Phoenix X. F., Georgetown Journal of International Law


INTRODUCTION

Everyone should care about what happens at the World Trade Organization (WTO) in Geneva. It affects our lives in large and small ways. Decisions made in Geneva affect the price of food on our tables, gas at the pump, and the prices and availability of most of what we buy.

This Article argues that new challenges to U.S. corn and ethanol subsidies are highly likely. Even though at first glance this Article deals with the specialized and esoteric field of international trade law, its sweep is much broader. The subject of this Article is also both timely and salient. The agricultural subsidies debate is highly salient in the current political context of high food costs, high fuel prices and Doha development round sensitivities. The year 2008 saw rocketing food and fuel prices, food rationing in many countries, and the controversial passage of the 2007 Farm Bill over a presidential veto, all of which focused the spotlight on agricultural policies. At the same time, Doha Round ministerial negotiations, which seek to significantly reform the agricultural subsidies regime, resumed in July of 2008. A primary goal in Doha is to ensure that the world trading system more fully benefits developing countries.

This Article explores in depth Brazil's successful challenge of U.S. cotton subsidies in the Upland Cotton case. The case is significant in a number of ways discussed in detail in this article in Part IV. Moreover, the arguments Brazil raised in the case apply to corn and ethanol subsidies as well. In fact, the Upland Cotton case provides developing nations greater incentive to broadly attack U.S. subsidies by opening the door to a broader range of remedies. Challengers may use the stronger remedies of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) as well as the Agreement on Agriculture. As Doha talks continue to stall, challenges by developing or middle-income nations to U.S. corn and other subsidies becomes more likely.

Beyond the exploration of the doctrinal and practical implications of the Upland Cotton case, this Article also makes a number of broad theoretical and policy points. First, the case provides a useful lens through which to view the role of developing nations and their access to the WTO's dispute settlement process. Developing nations are very interested in broadening market access for their agricultural products. There are primarily two methods of achieving this goal in the WTO: negotiation or litigation. Developing nations are actively pursuing the negotiation route in Doha, but many are also considering litigation. The Upland Cotton case will be a linchpin in any litigation strategy. Agricultural subsidies litigation may open the floodgates to greater activism by developing nations in WTO dispute settlement proceedings.

Second, this Article examines the concept of relative judicial power: the idea that the WTO's Appellate Body is powerful relative to other international adjudicative bodies only because the political branch (the WTO General Council consisting of all member-states) has failed to exhibit political leadership. It argues that the General Council has a chance in Doha to reassert itself. Agriculture provides a unique opportunity for the members of the WTO to reverse the trend of political capitulation.

A third and related point is that Doha represents an opportunity for not just the usual players (the United States, the European Union, China, Japan, India, and Russia) but also emerging blocs of developing nations to play a leadership role in agriculture. Both developing and developed nations must yield for a consensus to emerge from future Doha talks. Failure of Doha to achieve meaningful reform Would be a devastating blow to the legitimacy and continued viability of the WTO as an institution. However imperfect the WTO may be, it would be a shame to abandon it now to fragmented bilateralism and opportunistic protectionism. …

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