On December 17, 2007, the WTO's Dispute Settlement Body (DSB) announced the establishment of a single panel to hear both cases against U.S. farm programs. Then, in late April 2008, Brazil and Canada informally agreed to postpone proceeding with their case pending the U.S. offer to substantially cut domestic agricultural subsidies as part of the Doha Round of WTO trade negotiations. Should a panel be formed, it would then have six months to rule on this case. Finally, the report briefly discusses the implications of the case and the potential role of Congress. In January 2007, Canada requested consultations with the United States to discuss three specific charges against U.S. farm programs: (1) U.S. farm support resulted in serious prejudice against Canadian corn producers, (2) U.S. domestic support exceeded its WTO commitments; and (3) U.S. export credit guarantee programs contained implicit WTO-illegal subsidies. Canada's first allegation in its WTO case built upon previous trade complaints against the United States initiated by Canadian corn producers starting in 2005, while the latter two allegations were based on a previous WTO ruling in a case (WTO case DS267) brought by Brazil against the U.S. cotton program. However, in June 2007, Canada requested that the establishment of a WTO dispute settlement panel to hear its case against U.S. farm programs be included on the agenda of the next meeting of the WTO's Dispute Settlement Body (DSB). Origins of Brazil's WTO Case

Brazil—which has already won a series of WTO dispute settlement rulings against U.S. cotton programs —introduced its new challenge against U.S. farm programs on July 11, 2007, when it requested consultations with the United States to discuss the same two charges against U.S. farm programs as in Canada's case (DS357). In their requests, Brazil and Canada asked for a single panel to be established to consider both cases jointly. The postponement was thought to be provisional and based on success in achieving further disciplines on domestic support measures in the current Doha Round of WTO trade negotiations. It is not clear how long the postponement will persist. If resumed, the first order of business will be the formation of a panel. The claim that the United States has exceeded its total spending limits hinges largely on a previous ruling from the U.S.-Brazil cotton case in which a WTO panel found that U.S. payments made under the Production Flexibility Contract (PFC) and Direct Payment (DP) programs do not qualify for the WTO's green box exemption category because of their prohibition on planting fruits, vegetables, and wild rice on covered program acreage. Furthermore, Canada and Brazil argue that several other U.S. program payments were incorrectly notified as exempt from the U.S. AMS limit. Canada and Brazil charge that, when PFC, DP, and CCP payments for all covered crops—wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, and other oilseeds—as well as the additional program outlays that were excluded from U.S. notifications are included in the U.S.'s amber box, then the total outlays would exceed the spending commitment in each of 1999, 2000, 2001, 2002, 2004, and 2005. Export Credit Guarantees Are WTO-Illegal Export Subsidies

Canada and Brazil argue that the U.S. export credit guarantee program operates as a WTO-illegal export subsidy. In the U.S.-Brazil cotton case (DS267), a WTO panel found that U.S. export credit guarantees effectively function as export subsidies because the financial benefits returned by these programs failed to cover their long-run operating costs. Should any eventual changes in U.S. farm policy be needed to comply with a WTO ruling, Congress likely would be called upon to address this issue (including adjustment, if not full removal, of the planting restriction on base acres receiving direct payments).
In 2007, Brazil and Canada, independently of each other, requested consultations with the United States under the auspices of the World Trade Organization's (WTO's) Dispute Settlement process concerning similar grievances regarding U.S. domestic agricultural support programs and the U.S. export credit guarantee program. After consultations failed to resolve their concerns, both countries (again acting independently) requested the establishment of a WTO panel to rule on their complaints. The WTO's Dispute Settlement Body, on December 17, 2007, established a single panel to consider both cases. In late April 2008, Brazil and Canada informally agreed to postpone proceeding with their joint World Trade Organization (WTO) dispute settlement case challenging certain U.S. agricultural subsidies. At the time of the postponement, the three parties involved in the dispute had been unable to agree on panel membership.
The postponement was thought to be provisional based on success in achieving further disciplines on domestic support in the current Doha Round of WTO trade negotiations. However, the Doha Round negotiations failed to complete an agreement in 2009. As of early 2010 there are no prospects for revival of Doha Round negotiations. Nor have Brazil and Canada given any indication that they will revive their pursuit of their joint case. It is not clear how long the postponement will persist. If resumed, the first order of business will be the formation of a panel.
The joint case combines two separate but similar cases: DS357, brought by Canada, and DS365, brought by Brazil. Both cases make two charges against U.S. farm programs—first, that the United States has exceeded its annual WTO commitment levels for total aggregate measurement of support (AMS) for agriculture in each of the years 1999, 2000, 2001, 2002, 2004, and 2005, and second, that the U.S. export credit guarantee program for agricultural commodities operates as a WTO-illegal export subsidy. Both charges stem, in large part, from a previous negative ruling against U.S. farm programs in a case (DS267) brought by Brazil against the U.S. cotton program. In that case, a WTO panel ruled (the ruling subsequently was upheld by a WTO Appellate Body), first, that direct payments made under U.S. farm programs do not qualify for green box exemption status because of a restriction prohibiting the planting of fruits, vegetables, or wild rice on payment acres; and second, that the U.S. export credit guarantee program operates as a prohibited export subsidy program because the financial benefits returned by these programs failed to cover their long-run operating costs. As a result of the ruling, U.S. export credit guarantees became subject to previously scheduled export subsidy commitments. For more information, see CRS Report RL32571, Brazil's WTO Case Against the U.S. Cotton Program, by [author name scrubbed].
Canada and Brazil claim that, since they fail to qualify for inclusion in the green box, U.S. direct payments should be added to its AMS when calculating total domestic support. In addition, they also charge that the United States has improperly notified several of its farm support programs as exempt from the AMS limit, while several other programs were improperly excluded from U.S. notifications. Canada and Brazil claim that when all of the outlays from these allegedly misnotified programs are included, then the U.S. AMS total exceeds its WTO commitment level.
Should a panel be formed and eventually rule on this case, any changes in U.S. farm policy needed to comply with a WTO ruling against the United States would likely involve action by Congress to produce new legislation.This report provides background and details, as well as the current status of the two WTO dispute settlement cases. In addition, it discusses the role of Congress in responding to developments.