Empirically Analyzing the Impacts of U.S. Export Credit Programs on U.S. Agricultural Export Competitiveness

on the framework to continue with the “multilateral” trade negotiations under the Doha
Development Agenda (DDA). The framework refers to the “July Package”. Its key
components concerning agricultural trade include: (i) the future elimination of all forms
of export subsidies and better disciplines on export credits, state trading enterprises, and
food aid, (ii) introducing new commitments to discipline trade distorting domestic farm
subsidies and promoting deeper cuts in countries with higher domestic farm subsidies,
and (iii) committing WTO member countries to pursue “progressity” in tariff reductions
with a view to achieving substantial improvements in market access while allowing for
flexibility in treatment of sensitive products (WTO, 2004).

Surprisingly without final agreements regarding agricultural trade, in April 2004,
the Dispute Settlement Body of the WTO ruled in favor of Brazil, and the Appellate
Body upheld the finding by the WTO Panel that:

“the United States export credit guarantee programmes at issue—GSM 102, GSM 103,
and SCGP—constitute a per se export subsidies within the meaning of item (j) of the
Illustrative List of Export Subsidies in Annex I of the SMC Agreement,” (WTO, 2005).

However, the introduction of the Article 3 of the GATT 1994 legal text states that,
“Except as provided in the Agreement on Agriculture, within the measuring of the Article
1 the Sub-Articles 3.1 (a) and 3.1 (b) list the subsidies that are subjected to be
prohibited.” This seems to indicate that agricultural products are exempt from item (j) of
the Illustrative List of Export Subsidies in Annex I of the Subsidies and Countervailing
Measures (SCM) Agreement. Item (j) states that export credit facilities provided by
governments or other institutions on their behalf should be at premium rates adequate to
cover long-term operating costs and losses such as sunk costs (WTO, 1994). This
agreement was reached by integrating the principle guidelines, which were originally

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