"Prior to its expiration on January 1, 2004, the World Trade Organization's (WTO's) Peace Clause provided protection from trade remedy consideration and WTO dispute settlement for domestic farm subsidies provided they met certain compliance conditions. Absent the Peace Clause, challenges to U.S. farm subsidies now appear to confront a lower threshold for success, that of establishing 'serious prejudice' under Articles 5(c) and 6.3 of the Agreement on Subsidies and Countervailing Measures (SCM). In particular, the criteria for establishing serious prejudice claims include demonstrating the magnitude of a commodity's subsidies either as a share of returns or as an important determinant in covering production costs, the relevance of the subsidized commodity to world markets as a share of either world production or world trade, and a causal relationship between the subsidy and the adverse effect in the relevant market. Evidence of these criteria favors a successful challenge ruling by a WTO panel, as demonstrated by Brazil's successful WTO challenge of the U.S. cotton program. A review of current U.S. farm programs measured against these criteria suggests that all major U.S. program crops are potentially vulnerable to WTO challenges. […] This report provides background regarding the vulnerability of U.S. agricultural support programs to potential WTO dispute settlement challenges. It does not predict which WTO members might challenge U.S. commodity subsidies, nor the likelihood that such challenges will be brought. Instead, this report reviews the general criteria for successfully challenging a farm subsidy program, and then uses available data and published economic analyses to weigh U.S. farm programs against these criteria."
CRS Report for Congress, RL33697