Getting the Real Price: are the American Incentives to Corn Ethanol Illegal under the WTO?

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The purpose of this paper is to examine whether the incentives to the American production of corn ethanol could be considered illegal or not under the World Trade Organization (WTO) rules. This paper tried to reconstruct the idea that were only given direct subsidies to blenders and report briefly the large number of programs and incentives for producers and farmers alike, even excluding the State level ones. The WTO, which has rules that characterize an incentive as illegal or not, within its Agreement on Subsidies, but also within the Agreement on Agriculture is particularly relevant in this context. Regulation of agricultural subsidies has specific rules, which were partially repealed with the end of the Peace Clause. In the U.S. case, the paper concluded that whether ethanol is an agricultural product or not is irrelevant when applying the Agreement on Subsidies. Finally, it appears that the incentives for ethanol production in the United States can generally be regarded as illegal subsidies under the WTO, because they meet the criteria, which constitute specific financial contributions that provide financial benefit. The few exceptions for this general rule are the import tax and the incentive programs for research into new technologies.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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