on imports that might undercut domestic support programs.18 Without recourse to Section 22, the United States has found it more difficult to limit wheat imports from Canada—the main source of bilateral agricul- ture friction.
In 1991, Canada enacted the Farm Income Protection Act, which provided subsidies for grains and oilseeds through a voluntary insurance program organized and partly financed by the federal and provincial governments (table 5.2).19 While subsidized exports from the United States and Mexico to world agricultural markets have increased recently, Canadian subsi- dized exports to world markets declined from 37 percent in 1995 to zero percent in 1998 (OECD 2000, 2003; Qualman and Wiebe 2002). In other words, so far as Canada is concerned, overt agricultural export subsidies are largely a thing of the past. 20
According to the Organization for Economic Cooperation and Devel- opment (OECD), Canada’s aggregate measure of support (AMS) has de- clined because of several policy reforms, including the elimination of in- ternal transportation subsidies for western grains provided under the Western Grain Stabilization Act and phaseout of the Gross Revenue In-
18. Section 22 authority is based on the Agricultural Adjustment Act (1933), which allows the US government to impose fees or quotas on agricultural imports that threaten any USDA commodity stabilization program. After the Uruguay Round Agreement on Agriculture (1995), the United States agreed that Section 22 restrictions could be imposed only on im- ports from non-WTO countries. As a result, the United States can levy quantitative trade re- strictions only on a WTO member as part of a Section 201 safeguard measure.
19. The Farm Income Protection Act provides crop loss protection through a production guarantee and reinsurance agreement. The production guarantee is based on a producer’s probable yield: If current production falls below the farmer’s production history, he will be eligible for an indemnity. The reinsurance agreement allows the federal government to pro- vide additional funding to provinces when indemnities exceed accumulated premium re- serves due to severe crop losses. See Alston, Gray, and Sumner (2000) and AAFC (2003b).
20. Only a fraction of US government export credits ($5.5 billion under the Export Credit Guarantee Program) can be classified as export subsidies. Nevertheless, by comparison with recent Canadian government funding for agricultural exports (totaling $33 million), the US government provides very substantial assistance. See BNA (2003a). However, the WTO Ap- pellate Body Dairy ruling, in December 2002, determined that the Canadian Commercial Ex- port Milk Program was in fact an export subsidy that violated WTO obligations. Both Canada and the European Union worry that the Appellate Body Dairy decision creates a new and higher standard, based on a comparison between export prices and the average cost of production, which makes it difficult for countries to prove that agricultural exports are not subsidized. Similarly, the recent WTO ruling in Subsidies on Upland Cotton characterized US export credit guarantee programs that benefit agricultural commodities as export subsidies in part. The exact measurement of export subsidies is being negotiated within the current WTO Doha Round talks. For a detailed analysis of US export credit guarantee programs, see Hanrahan (2004) and WTO (2004a).