The long-term objective of the World Trade Organization’s (WTO’s) Agreement on Agriculture (AoA) is to establish a fair and market-oriented agricultural trading system. The principal approaches for achieving this goal are, first, to achieve specific binding commitments by all WTO members in each of the three pillars of agricultural trade policy reform—market access, domestic support, and export subsidies—and second, to provide for substantial progressive reductions in domestic agricultural support and border protection from foreign products.
As a signatory member of the WTO agreements, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy as defined in the AoA. Since the WTO was established on January 1, 1995, the United States has generally met its WTO commitments with respect to allowable spending on market-distorting types of farm program outlays.
What Is the Issue?
The U.S. government provided up to $60.4 billion in ad hoc payments to agricultural producers cumulatively in 2018, 2019, and 2020, in addition to existing farm support. These payments have raised concerns among some U.S. trading partners, as well as market watchers and policymakers, that U.S. domestic farm subsidy outlays might exceed its annual WTO spending limit of $19.1 billion in one or more of those three years.
Compliance with WTO commitments is based on the total spending under all U.S. farm support programs for each crop year, but subject to certain exemptions (described below). From 1995 through 2017, the United States has met its WTO commitments; however, this compliance has relied on use of the available exemptions in several years to exclude certain domestic support spending from counting against the spending limit.
The United States notified an average of $15.4 billion in annual domestic farm support (prior to exemptions)—or cumulatively, $46.1 billion—during the recent three-year period from 2015 to 2017. New spending of up to $60.4 billion under U.S. government ad hoc payment programs— that the United States may have to report, and which would be in addition to the traditional farm support programs—could more than double the amount of annual domestic support subject to the spending limit in 2018 through 2020. This new ad hoc spending includes the 2018 Market Facilitation Program (MFP), valued at $8.6 billion; the 2019 MFP, valued at $14.5 billion; the two 2020 Coronavirus Food Assistance Programs(CFAP-1 and CFAP-2), valued at up to $16.0 billion and up to $14.0 billion, respectively; and the 2020 Paycheck Protection Program’s (PPP’s) forgivable loans to agricultural interests, valued at $7.3 billion.
CRS analysis (described in this report and based on available data) indicates that U.S. domestic farm support outlays were likely within the agreed-to WTO spending limit of $19.1 billion in 2018, but could exceed the limit in 2019 depending on the U.S. Department of Agriculture’s (USDA’s) notification strategy. In 2020, U.S. non-exempt domestic support outlays appear likely to surpass the spending limit if a typical notification strategy is used by USDA.
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Randy Schnepf is a Specialist in Agricultural Policy at the Congressional Research Service.