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There are competing demands for fresh water. Farms look to it as an irrigation source, cities rely on it for drinking water, and fisheries (and fishermen) depend on it for instream flow. When the United States Bureau of Reclamation (“Reclamation”) subsidizes the costs of providing fresh water for irrigation in agricultural production, such subsidization can result in tiered water pricing. With tiered pricing, farms pay the government less per unit than other water users. This tiered pricing can distort the water marketplace in a manner that encourages wasteful irrigation practices and leaves insufficient water instream for fisheries. The dispute over Reclamation irrigation subsidies may now be moving from the domestic to the international arena. The 1994 World Trade Organization Agreement on Subsidies and Countervailing Measures (“WTO Subsidies Agreement”) provides that one WTO member country may impose countervailing measures against another WTO member country that makes a “financial contribution” that is specific to “certain enterprises.” The WTO Subsidies Agreement further provides that “government revenue . . . otherwise due [that] is forgone” can qualify as a “financial contribution” and that governments must be paid “adequate remuneration” for goods provided.

This article assesses the potential applicability of the WTO Subsidies Agreement’s foregone revenue and adequate remuneration provisions to Reclamation irrigation subsidies, with an initial focus on such applicability to Reclamation’s Central Valley Project (“CVP”) in California.


Posted with permission.

A shorter version of the article (titled 'World Trade Rules as a Check on Water Subsidies') will run in the October, 2014, ABA Water Resources Newsletter (published by the Water Resources Subsection of the ABA Section on Environment, Energy and Resources).

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