The Canadian government heats up a dispute with the US over American farm subsidies, when it asked the World Trade Organization to form a panel and rule on its accusations that Washington is over and over again violating global trade rules. The suit filed with the WTO may end up discomforting the US government on the international stage once judges start inquiring its farm subsidies. Simultaneously, it could also help free-marketers in US President George Bush’s administration beat back present demands to increase US farm subsidies. Consultations at the WTO in February failed to resolve the issue and Canada’s concerns about US subsidies remained contentious. Interestingly, a dispute over US corn subsidies brought up during the consultations was left out in the latest request for a panel, Canada said in its official statement. No reasons have so far been extended for this move by the Canadian government.

Canada has asked the WTO to resolve a claim that the US is exceeding a $19.1 billion annual restriction on farm subsidies. The Canadian government had filed the complaint to pressurize US policymakers to lessen the subsidies when they rewrite the farm bill, which comprises most of the payouts. Canada and the US, who together make the worlds biggest trade partnership, also involved in dispute in the recent past over Canadian subsidies on lumber exports.

Canada has alleged that the US agricultural subsidies violated WTO rules in every year from 1999 to 2005 except for 2003. It further contended that the US is also inappropriately using ‘export credit guarantees’ to strengthen its international sales. The subsidies covered commodities such as corn, wheat, soybeans, pulses and sugar, the Canadian government said. US farm subsidies have always been a major concern and obstacle during the latest round of global trade talks. The European Union along with India and Brazil pressing the Bush administration to reduce the subsidies before they improve their offers.

The EU has alleged that US farm subsidies force down global prices, discouraging producers. However, the US has been resisting pressure to make deeper reductions in spending on its farmers. The US conceded that it would do so only if the EU and Japan agreed to significant cuts in their duties on agricultural commodities.

Moreover, a legal triumph for Canada at the WTO will not compel the US to abandon or make substantial reduction in its huge farm subsidy program. However the Canadian government seems to have taken the step to put pressure on US legislators. On the other hand, the US Congress seems to be increasingly protectionist after last elections when Republicans were defeated comprehensively and is contemplating a new Farm Bill to determine the size of future US agriculture subsidies. At the same time, reports suggest that Congress is under strain to increase annual farm subsidies by almost 50 percent above WTO limits.