HiltonLambert to Litigate for South Africa against United States Agricultural Subsidies

South Africa announced that it will participate in litigation at the World Trade Organization (WTO) to bring the United States to book for the continued use of agricultural subsidies deemed illegal under international law. South Africa’s participation is significant in that this is the first time ever that South Africa will participate in the proceedings of a WTO case.

The South African government made this announcement at a meeting of the WTO Dispute Settlement Body on 17 December 2007. South Africa will participate in the dispute as a third party, lending support to the action brought by Canada and Brazil as primary complainants, specifically on maize. As a third party South Africa will participate in the case by making written and oral inputs and appearing before the WTO tribunal, called a panel. In terms of the WTO procedures third party rights have to be fully considered in the dispute. As one of the world’s foremost producers, and more importantly exporters of maize, South Africa has a vested economic interest in the case, accentuated by the presence of a significant number of small scale farmers in the South African maize sector.

The basis of the case is premised on the well founded contention that the United States has breached its international obligations by providing agricultural subsidies that exceed the levels allowed under the WTO Agreement on Agriculture. In this vein the establishment of the WTO panel will complement South Africa’s efforts in the Doha negotiations to further discipline and reduce trade distorting agricultural subsidies. South Africa, and many other developing nations, has long contended that there is an uneven playing field for its farmers who have to compete against the large distorting agricultural subsidies provided by the United States and other developed nations.

The specific basis of the claim is that when trade distorting United States domestic support is properly accounted for under the WTO Agreement on Agriculture, the United States exceeded its WTO commitment for providing domestic subsidies to its farmers in the 6 years 1999, 2000, 2001, 2002, 2004 and 2005. While the United States has notified the WTO that it has kept within its spending limits, it is contended by the complaining countries that certain programmes have been incorrectly notified and certain others have been omitted from notification altogether by the United States.

Under its Total Aggregate Measurement of Support (Total AMS) commitments under the WTO Agreement on Agriculture (the so-called ‘amber box’), the United States agreed that its level of trade distorting domestic support would not exceed US$19.9 billion for 1999 and US$19.1 billion for each subsequent year. The United States claims that its WTO subsidy notifications show that its annual levels of trade distorting support have been within this US$19 billion level and thus within its WTO commitment. Based on the precedent of the cotton case that Brazil successfully brought against the United States in 2003, it is evident that when these subsidy programmes are properly accounted for under the WTO Agreement on Agriculture, the level of United States amber box subsidies exceeds the United States WTO commitments in all six years defined in the case claim.

In its official response to the launching of the case, the United States has indicated that it will aggressively defend its agricultural subsidies and engage effectively with the complainants in the case. More telling however than the ‘official’ line taken in Geneva have been recent statements by the United States Secretary for Agriculture (the equivalent of the South African Minister of Agriculture) who has himself expressed serious doubt as to WTO compatibility of United States agricultural subsidy programmes. In this regard Acting United States Agriculture Secretary, Chuck Connor commented on the recent legislative activity to renew United States farm subsidy programmes. Connor commented that the proposed legislation will raise United States trade distorting supports above the already established levels, and as the 2002 bill has already been successfully challenged, he believes that it is destined to bring about problems for American agriculture. He states that the United States legislation is destined to bring about even greater challenges from the international community, and in particular, “challenges where there is already a precedent for foreign nations being able to win successful cases against our current programs, to raise them even higher. We have described this as painting a bull’s eye on the back of the American farmer.”

The South African government will be closely supported by the local agricultural sector in its participation in the dispute, pertinently by the maize value chain through the Maize Trust.

HiltonLambert has a solid agricultural trade law resume, and in particular the company’s senior trade advisor Hilton Zunckel has over a decade of experience in working in the South African grain industry. As such we have been retained by the Maize Trust to support the industry in its collaboration with the government to prepare an effective case to present at the WTO. This is a milestone for the company as no South African law or advisory firm has ever been active in a WTO dispute prior to this case.