THE US made the first significant move in this week's fraught meeting of trade ministers in Geneva yesterday, cutting its proposed ceiling for farm subsidies to $15 billion (€9.46 billion) a year.
The move would reduce those US farm subsidies deemed to distort international trade by about $2 billion compared with the current offer in the so-called "Doha round" of trade talks, much lower than the present ceiling of about $48 billion.
But it would be above the US's recent actual spending in trade-distorting farm support, estimated at $7 billion-$9 billion a year.
The offer would require substantial rewriting of the "farm bill", the generous five-year programme of agricultural subsidies recently approved by the US Congress, which overcame an attempted White House veto.
Brazil and India, two of the US's main negotiating partners in the struggling World Trade Organisation (WTO) talks, dismissed the offer as inadequate. "This is a nice try but it is not enough," said a spokesman for Brazilian foreign minister Celso Amorim. "It is not the final offer they can do."
The EU, under pressure to reduce its subsidies if the US offers bigger cuts, was more supportive, saying it was a "reasonable offer at this stage, which will definitely have constraining effects".
The offer is within the range of $13 billion-$16.4 billion suggested by a draft text produced by the chair of the agricultural talks within Doha, but not at the bottom of that range as many emerging market countries have demanded.
Some of the US's negotiating partners, such as India, have called in the past for the US to agree a ceiling that would cut its actual spending. Susan Schwab, US trade representative, said the $15 billion limit would have meant real cuts in spending in seven of the past 10 years. Soaring commodity prices, which have reduced price-linked subsidy payments, could not be relied upon to remain high indefinitely, she said.
"Anyone suggesting a number outside the ranges in the [ negotiating] text is not serious about achieving an agreement in the Doha round," she said. "Prices go up and prices go down."
Ms Schwab said the offer was conditional on other countries opening their markets to US farm exports and agreeing not to launch litigation against US farm payments at the WTO, as has happened repeatedly in recent years.
Ms Schwab said that she had consulted Congress, which was comfortable with "the direction" in which the trade round was going. Chairman of the US senate agriculture committee Tom Harkin welcomed the offer but said it was dependent on other states granting US farmers more market access.
US agricultural subsidies are blamed by many developing country farmers for pushing down commodity prices and undercutting them, although the US points to World Bank research showing farm import tariffs, not subsidies, have the biggest impact in hurting producers in poor countries.
The US offer did not alter its existing proposal to limit the most trade-distorting form of subsidies, to an annual $7.6 billion a year, nor did it introduce new limits on the amount of money spent on any specific crop. - (Financial Times service)
