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NZ Trade Minister must refuse US snake oil

Tuesday 11 October, 2005

NZ Trade Minister must refuse US snake oil at crucial Zurich WTO meeting

The United States will not have to cut the subsidies it pays to farmers and could actually increase payments by more than US$8 billion, despite a supposed breakthrough offer on agricultural reform at the WTO, international agency Oxfam said today.

The US said it would cut the limit on allowable trade distorting support to its farmers by 60 per cent but Oxfam said that this would leave actual spending untouched and poor farmers in developing countries would not benefit.

The US is also demanding that developing countries cut their tariffs more than rich countries at the WTO, in direct violation of the agreed principle of special and differential treatment, under which rich countries must do more than poor ones.

“It’s a case of smoke and mirrors. If this offer goes ahead, trade distorting domestic subsidies will remain untouched and dumping will continue. Meanwhile harsh concessions on market access will be wrung from developing country members in exchange for illusory progress,” said Barry Coates, Executive Director of Oxfam New Zealand.

“Oxfam warned back in July that both the EU and the US were manoeuvring to ensure that their gargantuan subsidies would remain untouched despite rhetoric to the contrary. It is past time that New Zealand’s trade negotiators woke up to the reality that the Doha Development Agenda is in serious danger of being derailed by this hypocrisy.

“Oxfam is growing increasingly concerned that New Zealand’s representatives are not doing nearly enough to challenge the tactics of the US in the agriculture negotiations, while at the same time actively supporting the US and other wealthy countries in their demands that poor countries make damaging concessions in other areas of the negotiations, particularly services and industrial goods,” said Coates.

The US proposal was set out in an article in yesterday’s Financial Times written by the US Trade Representative, Robert Portman. The proposal is being discussed in Zurich this week at meetings with a small group of WTO member countries, attended by New Zealand Trade Minister Jim Sutton.

The US proposes an end date of 2010 for export subsidies, but hardly any of its payments are classified in this way. The US says it will discipline food aid, which acts as a hidden export subsidy, but gives no detail of how it will do this.

Coates: “On the surface the US offer looks like a genuine attempt to move the talks forward, but in fact it is nothing but a very clever piece of manoeuvring by the US. This proposal would allow them to get away with doing nothing in return for some very painful concessions from developing countries. The devil is in the details, and these details are very devilish indeed.”
Details of proposal:

• The US is offering to cut the ceiling on so-called AMS or ‘amber box’ agricultural support – the most trade distorting – by 60%. However, Oxfam’s calculations reveal that because of the space between the ceiling on payments and the actual level of payments – known as ‘water’ – and other payment options available to them, the US will not have to cut the amount they pay and could even increase it.

• The US is also offering cuts of 50% to the ceiling on ‘blue box’ payments – these are considered less trade distorting. However, as the US currently has no payments in the blue box, this actually leaves them with room to increase payments. They will be able to put up to 2.5% of overall agricultural support in this box – equivalent to $4.95bn. Crucially, unless the criteria defining blue box payments are changed, this will allow them to include harmful ‘counter cyclical’ payments in the blue box. These have been proven to facilitate overproduction and dumping.

• On Market Access the US proposal foresees the same four bands for developed and developing countries, namely: tariffs from 0 to 20%, from 20 to 40%, from 40 to 60% and greater than 60. For developed countries, the US proposes a progressive tariff reduction from 55 to 65%, from 65 to 75%, from 75 to 85% and from 85 to 90%, respectively in each band. The US proposal includes a maximum tariff of 75% for developed countries and 100% for developing countries.

Keeping the same tariff bands for developed and developing countries means that the formula does not take into consideration differences in tariff structures in different countries. Since developing countries in average have greater tariffs than developed countries, establishing the same tariff bands means that developing countries will be forced to greater average cuts than developed countries. This violates the objective of proportionality (Special and Differential Treatment for developing countries).

The cap proposed by the US is far lower than the G20 and the EU proposal, which included 150% cap for developed countries. The US proposal does not mention the provision for Special Products (products that are crucial for food security and fragile economies, exempted from tariff reduction requirements) in developing countries.

The proposed cap of 100% for developing countries would force: 19 developing countries to reduced their current bound tariffs for sugar (including Pakistan (current bound is 150) and, Guatemala (current bound is 160)); 14 developing countries to reduced their current bound tariffs for poultry; 13 developing countries to reduced their current bound tariffs for wheat (including Pakistan (current bound is 150) and, Guatemala (current bound is 109)); 11 developing countries to reduced their current bound tariffs for vegetable oils and rice; 10 developing countries to reduced their current bound tariffs for oil seeds.

Background note: The US and EU subsidy-and-tariff regimes enable them to dump surplus produce in poor countries, ruining the livelihoods of small farmers. This year, the US will pay its 25,000 cotton farmers around US$4bn in subsidies, more than the entire GDP of the West African cotton-producing country of Burkina Faso. The EU does similar damage with its massively subsidised sugar exports.


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