US seeks “get-out clause” for illegal farm payments

Published: 29 June 2006

The US is maneuvering at world trade talks in Geneva this week to insert a special clause in trade negotiations that would make its illegal use of farm subsidies immune from prosecution, international agency Oxfam said today.

The euphemistically named “Peace Clause” is better described as a “get-out clause” or a “license to dump” heavily subsidized farm goods, because it prevents other WTO member countries from challenging the farm subsidies through the WTO dispute settlement process.

Celine Charveriat, head of Oxfam’s Make Trade Fair Campaign, said: “A new Peace Clause would be scandalous. Giving immunity from legal challenges gives the green light to the US and EU to break the rules, leading to market distortions that hurt poor farmers. This is another nail in coffin for development in this Round.

“A new Peace Clause will be a step back for development. The US and EU currently pay at least $13bn (Oxfam’s Truth or Consequence Briefing Paper, 2005) worth of illegal subsidies for agriculture. If the Peace Clause were reintroduced, no poor country would be able to take them to the WTO court for this, for possibly up to 10 years.”

Pascal Lamy, director general of the WTO, admitted yesterday that even though the Peace Clause was not part of the Doha Mandate, and isn’t in the framework agreement (or modalities), it is still likely to be included in the final deal. It’s expected that the EU would not oppose any such move and some EU members have already said that they need it in a Doha agreement.

“Members of the WTO, including the EU, should recognize this outrageous goalpost-shifting and stand against the peace clause effort,’ said Charveriat. “The Doha Mandate laid out what was, and was not, going to be included in this round of trade talks. You can’t just put something on the table at the last minute that totally undermines what has already been agreed,” said Charveriat.

The US said last week that it needs the Peace Clause to be renewed to protect itself from litigation while it is in the process of reducing its trade-distorting subsidies. But instead of cutting subsidies, its current Doha proposal would actually allow the US to increase its farm support from $19.7bn (2005 level) to $22.7bn. Similarly the EU offer would allow it to increase its farm subsidies from $22.9bn (post CAP estimate) to $33.1bn.

Oxfam International analysis shows that 38 developing countries are suffering from unfair competition as a result of trade distorting subsidies by the EU and US, including larger countries such as Mexico and Brazil as well as poor countries like Malawi, Mozambique and West African cotton growing countries.

A new “Peace Clause” would protect US cotton subsidies from further challenges and negotiations on a big reduction in US cotton subsidies are stalled.

“This would mean West African countries could be worse off after a Doha Round than they are now. This is just unbelievable. The EU and US have already shown their willingness to sacrifice this trade round by refusing to address key issues of market access and real subsidy reform,” added Charveriat.

The Peace Clause was introduced at the eleventh hour during the Uruguay Round as a “take-it-or-leave-it” condition for signing a deal. After protecting illegal subsidies for nine years, that Peace Clause elapsed in 2003. While the details of a new Peace Clause are not known it is almost certain that it would block developing countries from taking a raft of new cases to the WTO.

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