- The Washington Times - Tuesday, August 19, 2003

The agreement that the United States and Europe have struck on farm subsidies and tariffs is something like a Rorschach test — it could be interpreted any number of ways. Given the absence of any numbers in the deal and few details, it has not been greeted with much enthusiasm. But there are some elements of the deal that are positive, and U.S. farmers have given it tepid endorsement. Given its brevity, it leaves the United States and its pro-reform allies plenty of room to push for measurable progress at the next global trade round in Cancun, Mexico in September.

Under the agreement, the countries that have the highest farm subsidies must do the most to reduce those payments. This may seem a foregone conclusion, but Europe was pushing for a reduction of the subsidies by a certain percentage. By this approach, those countries that had been the worst trade-distorters would be entitled to continue paying the largest subsidies — a concession the United States and developing countries can’t be expected to make.

The deal would require Europe, the United States and other countries involved in the trade round to keep their most trade-distorting subsidies within a certain range. These would mostly apply to subsidies tied to production, which cause gluts in the global marketplace and depress prices. A cap would be placed on subsidies that are not considered as trade distorting. U.S. farmers especially welcome this detail, since it forces those countries with the highest subsidies to reduce their overall payments in line with other countries.

Negatively, the agreement did not lead to a commitment to eliminate farm export subsidies, as U.S. farmers and developing countries had hoped. Instead, farm export subsidies will be reduced over a period of time on products of particular interest to developing countries. The United States committed to reducing special loans to foreign purchasers of U.S. farm goods to parallel the reductions in export subsidies.

On tariffs, the agreement would require rich countries to eliminate tariffs on a certain percentage of products from developing countries, and establish a cap for some others. U.S. negotiators stressed the importance of setting uniform standards for tariff reductions, even if the details of those reductions have not been set.

The agreement on trade-related farm policies represents a step forward in the most contentious aspect of trade negotiations. Since Europe is difficult to move in this area, U.S. negotiators should be commended for their work. Still, once the deal-making in Cancun starts, U.S. officials must make clear that the agreement represents a consensus, and is not a gauge of how far America is willing to go. If Europe falls short in Mexico, it must fully shoulder the blame.

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