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Farm bill might violate trade rules: U.S. business groups

By Charles Abbott

WASHINGTON (Reuters) - The new U.S. farm bill might violate World Trade Organization rules against trade-distorting subsidies, major U.S. business groups said on Monday in an appeal to lawmakers to revamp the bill, which is already facing slim odds of passage.

An adverse decision by the WTO could expose U.S. exports to retaliatory tariffs if there is a challenge. It would be an ironic turn, since the farm bill was intended in part to resolve a WTO ruling against U.S. cotton subsidies.

Leaders of the Senate and House Agriculture committees had no immediate response on Monday to the assertion by the U.S. Chamber of Commerce, National Association of Manufacturers and National Foreign Trade Council.

"We think meeting our international obligations is an important element of maintaining an open trading system, from which the United States benefits," said Bill Reinsch, head of the trade council.

In a letter, the groups said the farm bills pending in the House and Senate carried some of the same provisions that WTO ruled against in the cotton case. They said the bills each "run a substantial risk" of violating WTO rules on farm subsidies.

A House provision that ties crop payments to actual plantings of the crop could "quickly invite other nations to initiate dispute settlement against the United States - and do so with good chances of success," they said.

Brazil won the right to impose $830 million in retaliatory tariffs on U.S. goods when it won a WTO challenge of U.S. cotton subsidies after a long-running case. It has delayed action while awaiting U.S. reforms. Officials warned in August that their patience was not endless.

An analysis by the international law firm White & Case said "potential complainants include Brazil, China and Argentina." It said the House provision was the most likely trigger for a WTO case and highly likely to be ruled a violation.

A somewhat similar Senate provision would link price supports to historical plantings, an approach less likely to draw a challenge, said the analysis, but its high support prices could trigger payments that exceed WTO parameters.

The Republican-controlled House is expected to vote later this week on a bill to cut food stamps for the poor by $40 billion over 10 years. The vote could open the door to House-Senate negotiations on a compromise farm bill.

Analysts say that, ultimately, Congress is likely to extend the 2008 farm law for a second time. The ability to pass a new bill has stalled because of disagreements over food stamps and farm subsidies.

(Reporting by Charles Abbott. Editing by Andre Grenon)

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