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July 27, 2008

US offers $15 billion cut in farm subsidies at WTO talks, developing countries scoff

The United States offered on July 22 to cut its ceiling on trade-distorting farm subsidies to $15-billion in a bid to close world trade talks this year, but leading developing countries said it was not enough.

"This is a major move, taken in good faith with the expectation that others will reciprocate and step forward with improved offers in market access," US Trade RepresentativeSusan Schwab said.

The move came on the second day of a meeting aimed at reaching a long-awaited breakthrough on farm and manufacturing trade issues at the centre of the nearly seven-year-old Doha round of world trade talks.

Because of high international farm prices, current US spending on trade-distorting farm programmes is about $7-billion, or well below the $48,2-billion ceiling the United States is allowed under World Trade Organisation rules.

But Schwab said the offer - which is dependent on other countries opening their markets to more foreign farm and manufactured goods - would require Congress to rewrite recently passed farm legislation.

President Bush vetoed the 2008 farm law which boosted subsidies, but was overridden by Congress.

The offer would dramatically reduce the amount of government assistance US farmers would receive when farm prices are low, Schwab said, noting that the United States spent $18,9-billion on trade-distorting support in 2005 and close to $25-billion in both 1999 and 2000.

"My immediate response is it doesn't pass the 'laugh test'," a senior Indian official said, speaking on condition that he not be named.

European Union Agriculture Commissioner Mariann Fischer Boel said the offer would take the negotiations forward but declined to comment further.

A Brazilian diplomat said developing countries would press the United States to offer deeper cuts. "This is only the second day of the talks here, so we imagine there is room for manoeuvre to reduce them further," the diplomat said.

A third developing country official called the US offer "unacceptable," but others said they had expected the United States to announce an even higher initial number with several days of negotiation still to come.

Ahead of last week's meeting, a draft text put together by the WTO's farm trade mediator proposed capping US spending on trade-distorting farm subsidies in a range between $13-billion to $16,4-billion. But India, Brazil and many other developing countries have called for even deeper cuts that would prevent US outlays from rising sharply when crop prices fall.

"Anyone who is suggesting a number outside the range that is in the text is not engaged in a serious effort to conclude the Doha round," Schwab said.

US farm groups complain that current proposals for cutting tariffs on both developed and developing countries would offer them few new export opportunities.

At a meeting in Hong Kong in 2005, the United States agreed to make deeper and faster cuts in payments to US cotton farmers than to other US farmers under a Doha deal.

A proposal made by West African cotton producers, who say they have been badly hurt by the US cotton programme, would require a 25 percent cut in the first year, to about $600-million, and then a subsequent cut to about $143-million.

US officials said they stood by commitments made in Hong Kong, but how deeply the United States agrees to cut cotton payments depends on how much much major cotton importer China and other countries agree to cut their tariffs.

"China has very high tariffs on their cotton imports. So, it's important that we obtain very significant access to our markets [there] for American cotton. That will have a big factor on what we're able to negotiate for the specifics on cotton," US Agriculture Under SecretaryMark Keenum said.

Reuters

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