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U.S. Waits for Substantial Agriculture Offers

U.S. Waits for Substantial Agriculture Offers from Others at WTO

USTR Portman says U.S. proposal could re-start long stalled negotiations

By Bruce Odessey
Washington File Staff Writer

Washington -- U.S. Trade Representative Rob Portman says the U.S. proposal to World Trade Organization (WTO) agricultural negotiations would require the United States to make substantial real cuts in subsidies to its farmers and other countries to make substantial real improvements in market access for U.S. exports.

In an October 11 briefing at WTO headquarters in Geneva, Portman said agriculture proposals to be made over the next few days by U.S. trading partners would determine whether the Hong Kong WTO ministerial meeting in December can advance the long-stalled negotiations, which formally are called the Doha Development Agenda.

"I'm hopeful that what we began yesterday with a new proposal and with new momentum will result in the next 48 hours in additional and more specific offers on the market access side," Portman said, "so that we have the hope of pulling together an agreement that we can take into Hong Kong at the end of the year."

Portman was scheduled to meet later in the day on the agricultural negotiations in a group of key participants called the Five Interested Parties, or FIPS, comprising the United States, the European Union (EU), Brazil, India and Australia. He said he would meet with negotiators from still more countries the following day.

The U.S. proposal, released October 10 at a meeting in Zurich, Switzerland, would reduce overall U.S. trade-distorting support to agriculture by 53 percent. It would require a 60 percent reduction in the most trade-distorting subsidies -- those in WTO's so-called amber box, most of which encourage higher levels of agricultural production.

It would cap at 2.5 percent of the value of agricultural production the level of less-trade-distorting subsidies that fall into WTO's blue box. In the blue box are subsidies such as those for conservation that require farmers to limit production.

The U.S. proposal also would require overall cuts of trade-distorting support of 75 percent for the EU and 53 percent for Japan. That would mean the EU and Japan would each have to cut its amber box spending by 83 percent.

The proposal would require elimination of agricultural export subsidies by 2010, a step that would apply almost entirely to the United States and the EU.

On the market access side, the proposal would require developed countries to reduce agricultural tariffs sharply over five years, by at least 55 percent for the lowest tariffs to 90 percent for the highest. It would require developing countries to make somewhat smaller cuts.

"Without the market access being offered by other countries being more specific, without other countries being more forthcoming, it will be difficult to put the Doha compromise together," Portman said.

Under existing WTO obligations, the EU is allowed to spend about 4.5 times as much on trade-distorting domestic support as the United States is allowed. The EU actually spends about three times the U.S. level.

Portman said he expects the United States to spend more than $14 billion on amber box domestic support to farmers in 2005, less than the $19.1 billion allowed by the WTO. He said the proposal would cut allowed U.S. spending to about $7.6 billion, still leaving the EU with a 2-1 advantage.

"These are real cuts," Portman said. "The United States thinks this is a very ambitious and bold proposal. If others can't come along, then the Doha round is in danger."


U.S. Agriculture Secretary Mike Johanns, who was with Portman in Geneva, rebutted accusations that the proposal would not affect actual U.S. spending much because its countercyclical program for paying farmers when commodity prices fall was to be shifted from the amber box category to the blue box.

"The current program just simply could not be shifted over," he said, citing the proposed cuts in blue box spending.

Reaction to the U.S. proposal from U.S. farmers was mixed, Portman said, indicating farmers' concern about losing domestic support without getting adequate market access from the EU and other developed-country markets.

In fact, the EU subsequently released its own proposal offering to reduce tariffs by only 50 percent and reduce amber box spending by only 70 percent. And Japanese negotiators were reported as rejecting the U.S. proposal as "not a basis for negotiation."

Almost since WTO negotiations were launched in September 2001, they have been stalled over agriculture issues, except for a July 2004 agreement on a negotiating framework.

However, the Bush administration still aims for completing the Doha round by the end of 2006, in time for an agreement to be presented to Congress before trade promotion authority expires in mid-2007.

Under Trade Promotion Authority (TPA), otherwise known as fast track, Congress restricts itself only to approve or reject a negotiated trade agreement, within strict time limits and without amendments.

A transcript of Portman's and Johanns' briefing can be accessed at the Web site of the U.S. mission in Geneva. A fact sheet and a Portman op-ed from the Financial Times are available on the USTR Web site.

In a related development, the Organization for Economic Cooperation and Development (OECD) released a report October 11 that nearly all developing countries, all but a small number mostly in sub-Saharan Africa, would gain from a successful Doha round. A press release on the report can be accessed at the OECD Web site.

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