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TRADE: Subsidies Reform Still a Game of "You First"

David Cronin

BRUSSELS, Dec 3 2007 (IPS) - Back in 2001, the European Union committed itself to phasing out all forms of subsidies that help its farmers sell food abroad.

New figures suggest that despite recognising how its policies can harm small-scale farmers in developing countries, who are unable to compete with lavishly-supported imports from the richer world, the EU spent 2.5 billion euros (3.7 billion dollars) on export subsidies during 2006.

That represents a sharp reduction from the almost 10 billion euros allocated to export subsidies in 1988. Yet Mariann Fischer Boel, the EU&#39s agriculture commissioner, says that scrapping them entirely will depend on whether other rich countries – in particular the United States – take similar steps.

"Although there is no international obligation to eliminate them, the EU has committed itself in the framework of the ongoing Doha round negotiations to phase them out by 2013, provided that our trading partners are doing the same with their trade-distorting export support measures," she said.

Some anti-poverty campaigners suggest that the EU must lead by example, regardless of what happens with the Doha round, which has so far failed to deliver an international trading system more sensitive to poor countries.

"If the Doha round doesn&#39t succeed, does that mean that export subsidies won&#39t be eliminated by 2013?" asked Sara Rogge from Debt AIDS Trade Africa (DATA), an organisation set up by the rock star Bono. "That&#39s an important question."

"People are reluctant to reform their agricultural support systems, until they see others doing so," she told IPS. "When is the reform in the EU, the U.S., Japan really going to take place? We thought for years that the Doha round would be a vehicle for that. But if the Doha round lowers a gear or doesn&#39t go anywhere at all, is the reform going to continue?"

Export subsidies are, however, just one type of support that is considered inimical to the interest of poor countries.

The Organisation for Economic Cooperation and Development in Paris calculated that farmers in rich countries received 279 billion dollars in subsidies. That sum is the equivalent of 60 percent of the combined gross domestic product of all countries in Sub-Saharan Africa.

For next year, the European Commission has proposed that 42 billion euros (62 billion dollars) should be spent on agriculture out of a total budget of 129 billion euros (190 billion dollars).

Just four of the EU&#39s 27 countries – France, Germany, Italy and Spain – receive 58 percent of its agricultural subsidies.

That high level of expenditure is likely to be unaffected by the "health check" on the Union&#39s agriculture policy announced by Fischer Boel earlier this month. The health check proposes that a ceiling of 100,000 euros (147,000 dollars) should be placed on the amount that large landowners can draw in subsidies but does not recommend a root-and-branch reform of the EU&#39s farm support system.

In a new study, DATA cites estimates that tomatoes exported in cans and as paste and sauce benefit from a subsidy rate of 65 percent in the EU. "These subsidies enable processors to purchase tomatoes cheaply and export the processed product to Africa at low prices, undercutting domestic producers and making it difficult for a value-added tomato industry to develop," says the report. "Eliminating the EU tomato subsidy would increase the world price of tomato paste by approximately 5 percent and create greater opportunities for African tomato producers to compete in domestic, regional and global markets."

In Ghana, imports of tomato paste – largely from a coterie of European countries – rose from 3,269 tonnes in 1998 to almost 25,000 tonnes in 2003. Over the same period, domestic production stagnated and in some cases fell. Similar problems have been reported in Burkina Faso.

Jack Thurston, an agricultural reform advocate who runs the website farmsubsidy.org, says that the EU appears to be on target to eliminate its export subsidies. "There is definitely a downward trend," he told IPS. "And on the rate of decline we have seen, they are going to go down further."

Yet progress is not as impressive in dealing with other forms of support – such as the EU&#39s "single farm payment" – that have a bearing on developing countries.

Changes to agriculture policy approved by EU governments in 2003 pivoted to a considerable degree around a concept known as "decoupling". This meant that the amount of payments a farmer received is no longer linked to the amount of food produced.

Despite this innovation, the EU is still "shoveling a lot of money into the farm sector", Thurston argued. He predicts that the number of challenges mounted by developing countries in the World Trade Organisation against EU farm policies could climb.

"Countries like Brazil are having a hard look at the EU&#39s single farm payment to see if it is really decoupled," he said. "There may well be cases brought against the EU."