Foreign Trade Remedy Investigations of U.S. Agricultural Products

Foreign countries appear to be making greater use of punitive measures affecting U.S. agricultural exports. These measures, corresponding to duties the United States has long imposed on imports found to be traded unfairly and injuring U.S. industries, have the potential to reduce the competitiveness of U.S. agricultural exports in some foreign markets. Recent changes in U.S. agricultural policy, including over $23 billion in “trade aid” payments in 2018 and 2019 to farmers affected by higher Chinese tariffs on certain U.S. products, may increase the likelihood of foreign measures that adversely affect U.S. agricultural trade.

The imposition of anti-dumping and countervailing duties is governed by the rules of the World Trade Organization (WTO) and of WTO’s 1995 Agreement on Agriculture (AoA). Under the AoA, member countries agreed to reform their domestic agricultural support policies, increase access to imports, and reduce export subsidies. The AoA spells out the rules to determine whether policies are potentially trade distorting. If a trading partner believes that imported agricultural products are being sold below cost (“dumped”) or benefit from unfair subsidies, it may impose anti-dumping (AD) or countervailing duties (CVD) on those imports to eliminate the unfair price advantage.

In recent years, a number of trading partners have challenged imports of U.S. agricultural products, even initiating repeated or multiple investigations into the same products. Moreover, since 2004, trading partners have expanded the scope of U.S. subsidies that they consider subject to punitive duties. In some cases, programs other than those that the United States reports to the WTO have been the subject of foreign government investigations. These have included subsidies for biodiesel and ethanol, export credit guarantees, farm ownership and operating loans, and export promotion programs. The trade aid in 2018 and 2019 has raised new questions from some WTO members, which may perceive these payments as providing an unfair advantage for the U.S. agricultural sector.

The U.S. government and the affected industries have multiple avenues to challenge these investigations. They may participate in the investigation to present evidence, for example, that certain subsidies are permissible under WTO rules or that the imposition of duties is not justified. U.S. exporters may also challenge an AD or CVD ruling under certain free trade agreements or bring a claim via the WTO dispute settlement process. However, the WTO Appellate Body, which hears appeals of cases from WTO dispute settlement panels, currently lacks a sufficient number of members to adjudicate disputes because the United States has blocked the appointment of members to replace those whose terms have expired.

The United States and other members have indicated an interest in WTO institutional reform that could address dispute settlement, as well as other issues pertinent to agricultural trade. Congress could consider oversight on whether U.S. negotiating objectives adequately balance maintaining multilateral disciplines on agriculture subsidies, a longtime U.S. objective, with protecting U.S. agricultural exports from potentially damaging AD and CVD investigations initiated by U.S. trading partners. Congress might also consider whether the practices in U.S. investigations should be modified to minimize their exposure to analogous challenges in the future.

Additionally, Congress might review whether U.S. farm program spending fully complies with U.S. spending commitments under the AoA. In this regard, options for Congress might include limiting the Administration’s use of its spending authority under the Commodity Credit Corporation Charter Act, which was used to make the trade aid payments during 2018 and 2019 without congressional input or oversight.