- The Washington Times - Wednesday, July 23, 2008

The United States offered Tuesday to reduce trade-distorting farm subsidies from $48.2 billion to $15 billion per year, but developing countries criticized the proposal for not going far enough.

U.S. Trade Representative Susan C. Schwab made it clear the offer is conditional upon U.S. trading partners increasing access for U.S. goods and services in their markets.

“This is a major move, taken in good faith with an expectation that others will reciprocate and step forward with improved offers in market access,” Ms. Schwab told reporters.

“My immediate response is it doesn’t pass the ‘laugh test,’” a senior trade negotiator from India told Reuters news agency. Negotiators from Brazil and other developing countries also ridiculed the proposal.

Ms. Schwab made her offer in Geneva on the second day of a weeklong meeting, which World Trade Organization Director-General Pascal Lamy called to resuscitate the moribund Doha round of trade-liberalization negotiations.

On Monday, the European Union offered to reduce its tariffs on farm products by 60 percent, six percentage points more than its earlier pledge. Developing countries reacted skeptically to that proposal, too.

The current U.S. ceiling for trade-distorting farm subsidies is $48.2 billion. Last year, the United States proposed a ceiling of $17 billion. Draft texts, which were prepared by the WTO’s farm-trade mediator and are serving as the basis for this week’s negotiations, established a range of $13 billion to $16.4 billion for U.S. agricultural subsidies.

“Anyone who is suggesting a number outside the range that is in the text is not engaged in a serious effort to conclude the Doha round,” Ms. Schwab said. Nevertheless, developing countries demanded a much lower ceiling.

Last year, the United States spent about $8 billion in trade-distorting farm subsidies. The total was so low because prices for corn, wheat, soybeans and other farm commodities are so high.

If farm prices fall to historical levels, Ms. Schwab argued that a $15 billion ceiling would require the United States to spend significantly less than it has in recent years. For example, trade-distorting subsidies totaled $18.9 billion in 2005 and about $25 billion in both 1999 and 2000, she said. For seven of the previous 10 years, U.S. trade subsidies exceeded the $15 billion ceiling now being proposed, Ms. Schwab noted.

Moreover, the $15 billion ceiling would require Congress to rewrite farm-subsidy legislation that it recently approved over President Bush’s veto.

Developing countries see it differently. To prevent the United States from significantly raising trade-distorting subsidies after prices fall, they want the U.S. ceiling to be much closer to what America is spending today for these subsidies. If the United States is now spending $8 billion per year, then offering to spend as much as $15 billion in the future effectively means America is not cutting anything at all, Bolivia’s trade negotiator argued.

Since launching the Doha round in Qatar in November 2001, negotiators have advertised the trade talks as a “development round” in which farm products and other goods from poor nations would gain access to the markets of the wealthy developed world.

Talks have repeatedly collapsed during more than six years of futile efforts to reach an agreement in which wealthy countries would significantly reduce their trade barriers in agriculture, while fast-growing developing countries, such as India, Brazil and China, would reduce their trade barriers to industrial products and services.

Mr. Lamy has said an agreement could add as much as $100 billion in growth to the world economy.

“This round is not a one-way street. It is a reciprocal trade negotiation to allow the global expansion of trade, which will be of particular benefit to the least developed countries,” said Frank Vargo, vice president for international economic affairs for the National Association of Manufacturers. “That is how trade negotiations contribute to global development - they provide new opportunities for countries to sell their goods and services around the world.”

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