Canada Says U.S. Payouts To Farmers Are Illegal

Canada questions whether U.S. government subsidies comply with international commerce rules.

GENEVA (AP) - Canada has lodged a complaint against the United States over what it claims are illegal government handouts to American corn growers, and is challenging whether the billions of dollars in overall farm subsidies paid out by the U.S. government comply with international commerce rules, officials said Tuesday.

The request for consultations, filed Monday by Ottawa at the Geneva-based World Trade Organization, could open a new trade dispute between the North American neighbors, which only recently resolved a long and at times bitter confrontation over softwood lumber.

Under WTO rules, a three-month consultation period is required before a country can ask the trade body to launch a formal investigation. A WTO case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.

''The United States has been providing subsidies to its agricultural producers that create unfair market advantages,'' Trade Minister David Emerson said in a statement. ''We hope to see the U.S. live up to its WTO obligations, particularly given that it has the opportunity to do so when it rewrites its Farm Bill this year.''

U.S. officials in Geneva were unable to immediately comment.

Canada argues that the U.S. has exceeded the permitted level of trade-distorting subsidies for a number of years on farm products including wheat, sugar and soybeans. It urged Washington to address its concerns when it soon begins to draft a new Farm Bill, which will set out American agricultural support programs for the next five years.

The U.S. says it has offered cuts as part of the WTO's global free trade talks, but others have called the pledges largely artificial, addressing only maximum levels of government subsidies and not those actually distributed to U.S. farmers.

With the so-called Doha round of talks currently suspended _ following an acrimonious collapse in July over agricultural trade _ it is unclear whether the U.S. Congress will honor its previous offers in the new Farm Bill.

The specific complaint on corn concerns some $9 billion paid out by the U.S. annually in export credit guarantees and other subsidies that Ottawa says unfairly and illegally deflate prices.

''These U.S. subsidies continue to cause economic harm to our corn farmers,'' said Canadian Agriculture Minister Chuck Strahl. ''That's why we took the action we did, in order to provide the best possible support for our producers by pushing for a level playing field so that they can compete.''

The United States is the world's largest producer and exporter of corn, accounting for 41 percent of the global production and 68 percent of all exports in the past two years.

Canada has been a net importer of U.S. corn for more than a decade, with most of the corn coming from the United States.

The Conservative Party, which returned to power in February for the first time in more than 12 years, based part of its federal election platform on fostering better relations with Washington.

In September, the two countries signed an agreement on softwood lumber, a key component in home-building, ending a decades-long dispute that once fueled talk of an outright trade war.