TRADE: U.S. Offers to Slash Agricultural Barriers, Subsidies

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Jul 25 2002 (IPS) - The United States has proposed a broad plan to slash world trade barriers and export and other “trade-distorting” subsidies on food and agricultural products, only weeks after Washington massively boosted farm subsidies at home.

Trade Representative Robert Zoellick announced the proposal Thursday, saying the plan would level the playing field for all countries, bring more equity to the world agricultural trading system and strengthen the rules of trade.

Under the proposal, all World Trade Organisation (WTO) members would be required to reduce tariffs, with larger cuts to higher tariffs than lower ones, resulting in a blanket ceiling of no more than 25 percent per country.

The United States says this will lower the global tariff average from its current rate of 62 percent to an average of only 15 percent.

The average tariffs for food and agricultural products in Japan are 59 percent; in the Cairns Group of the 15 major agricultural exporters, which includes Brazil, 30 percent and in the European Union (EU), 30 percent. The United States says its rate is only 12 percent.

“The U.S. package addresses the disparities that exist under current WTO commitments and increases the market orientation of world agricultural trade,” said Zoellick.

“The average U.S. agricultural tariff is 12 percent, while the average worldwide tariff is 62 percent, with many tariffs in excess of 100 percent. Our approach to reducing these tariffs goes beyond the incremental formula of the Uruguay Round and creates a more equitable result at far lower levels,” he said.

The United States said it would lower tariffs even further if other nations agreed to take similar steps. The United States and the EU have long butted heads over subsidies, accusing one another of unfairly supporting their agriculture producers.

Subsidies and protections among the world’s economic heavyweights often lead to price depressions and hefty losses for producers in poor nations, who cannot compete when the prices are extremely low.

“What we are willing to try to do is say ‘look, we are already at 12. But we’ll come down to five with a formula, if others also come down. Let’s bring everybody down’,” Zoellick said.

On the other contentious trade issue – subsidies – the United States proposed that trade distorting subsidies, which include market price support, direct payments such as marketing loans, storage payments and support for irrigation programmes and crop insurance, be capped at five percent of the value of agricultural production.

If applied, the UNITED STATES says, this would result in a global reduction of more than 100 billion dollars worth of trade distorting support.

Under current WTO rules, the EU, which produces roughly the same value of agricultural goods as the United States, can provide 60 billion in subsidies a year, while the United States is limited to 19 billion dollars.

The rules say the EU can support its farmers at a rate that equals about 25 percent of the value of its agricultural production, Japan can provide support equal to 40 percent of the worth of its production, but the United States is limited to less than 10 percent of the value of its production.

The proposal says that WTO members would be expected to abolish export subsidies altogether within five years.

The United States says that it is the only country not engaged in heavy export subsidies. According to the U.S. Trade Representative Office, the EU is responsible for 90 percent of all the export subsidies in the world today – 25 times more than the United States.

Zoellick accused the EU of not being serious about commitments to free trade and to ending subsidies.

“If you really want to tackle agriculture in a serious way, then everybody has to lower and we will be part of that,” he said. “But those with the highest subsides and the highest protections need to come down more. That’s a totally fair approach to be pushing on the table.”

But the United States uses wider tactics of “export support” rather than the more limited “export subsides”, said Sophia Murphy, director of the trade programme at the U.S.-based Institute for Agriculture and Trade Policy (IATP).

For example, she said, the United States accounts for 97 percent of “trade-distorting” export credits and payments, according to the Organisation of Economic Cooperation and Development (OECD).

The United States is also a big user of food aid, she said, which hurts producers in developing countries by introducing food at much less than production cost into local markets, where it battles with local farmers.

U.S. President George W. Bush recently approved farm subsidies legislation that represented an 80-percent increase in certain subsidies, prompting concerns from many of the world’s agricultural exporters, including Washington allies like Australia, Japan, Canada and the EU.

Experts and trade activists voiced concerns that the subsidies would lower the prices of agricultural products worldwide and risk forcing producers in developing countries out of business.

U.S. officials said they expected the opposition, particularly from countries with high free-trade distortions but said the move would eventually benefit those opponents by giving them access to markets in rich nations.

“What we want to do is make clear that this is a package,” said Allen Johnson, USTR chief agriculture negotiator.

“I think that a lot of countries are going to be very positive that we are taking a comprehensive approach. Uruguay round isn’t good enough. Those with the highest distortions will oppose (the) U.S.”

The proposal will be formally presented to the WTO next week in Geneva, Switzerland and on Friday at an international meeting on farm trade in Naru, Japan.