Paul Stanton Kibel, Golden Gate University, School of Law, pkibel@ggu.edu
ABSTRACT
There are many competing demands for surface freshwater. Farms look to it as an irrigation source, cities rely on it for municipal drinking water, and fisheries depend on its for instream flow. When governments subsidize the costs of diverting and delivering surface freshwater for irrigation in domestic agricultural production, such subsidization often results in tiered pricing for water delivery. With tiered pricing, agricultural producers pay the government a lower price for water while water agencies (who provide drinking water) and fishery agencies (that secure instream flow) must pay a higher price. The tiered pricing that often results from farm water subsidies has been subject to criticism on economic and environmental grounds, for distorting the water marketplace in a manner that encourages wasteful irrigation and leaves insufficient instream flow to sustain fisheries. In 1994, the World Trade Organization Agreement on Subsidies and Countervailing Measures (WTO Subsidies Agreement) was signed. Among other things, the WTO Subsidies Agreement provides that one WTO member country may be entitled to impose countervailing measures (e.g. tariffs) against another WTO member country if it can be established that a country made a “financial contribution” which confers a “benefit” that is “specific to certain enterprises.” The WTO Subsidies Agreement further provides that “government revenue otherwise due that is forgone or not collected” (foregone revenue) can qualify as a “financial contribution.” This article assesses the potential applicability of the WTO Subsidies Agreement's “foregone revenue” provisions to farm irrigation pricing under the Central Valley Project (CVP) operated in California by the federal government of the United States of America (United States). The CVP is largest federal water project in the country, and the vast majority of CVP water is sold by the United States government to large agricultural operations in California's San Joaquin Valley and Sacramento Valley (often to grow water intensive crops such as alfalfa, cotton and rice). The likely WTO member countries to bring such a claim against the United States for CVP farm irrigation subsidies would be countries that grow/export the same crops that benefit from the CVP (such as Brasil who is a major producer/exporter of cotton).
Key words: subsidy; irrigation; WTO (World Trade Organization)