European leaders are meeting this week to revamp their system of farm subsidies and supports, changes that officials on both sides of the Atlantic hope will help resuscitate stalled global trade talks.
Agriculture is the most critical component of World Trade Organization negotiations, in which 146 countries are trying to rewrite global trade rules with an eye toward helping developing nations.
Talks have bogged down on every significant topic open to negotiation, but trade officials hope a breakthrough on agriculture will open the way in other areas.
Last month in Brazil, U.S. Trade Representative Robert B. Zoellick told reporters “it really does depend on movement in agriculture, and this does depend on whether the European Union makes some reforms on the common agricultural policy.”
EU officials also hope that reform will lead to some flexibility for their negotiators.
“Not reaching a decision would jeopardize our position in the ongoing WTO round,” Franz Fischler, the EU agriculture commissioner, said before the start of yesterday’s gathering in Luxembourg.
EU leaders are expected to meet for at least three days to work out a compromise on agriculture reform, a difficult and sensitive topic for the bloc’s 15 members. Countries that rely heavily on the supports, especially France, have resisted changes to farm payments.
Mr. Fischler said “an agreement can be reached.”
The European Union spends $46.8 billion, nearly half its annual budget, on its common agricultural policy. Another $4.68 billion earmarked for rural development goes largely to farmers.
The system is designed to ensure food safety, environmental preservation and stable farm income. But it has become problematic, pushing EU officials to seek changes that would lead to a more market-oriented and simpler policy.
The 15-nation European Union next year expects to add 10 members with large rural populations, so officials want policies and budgets in place now that will allow new countries join without running up farm costs.
The proposed reforms change the way funds are spent while leaving overall spending levels alone.
Most important for trade issues, the reforms would de-link farm payments from production levels, instead giving farmers money for meeting environment, food safety, animal welfare, health and occupational safety standards.
De-linking the payments is designed to allow farmers to gauge supply and demand, helping reduce overproduction and limiting the practice of selling on world markets below the cost of production.
Such subsidies depress prices and are especially hard on farmers in developing countries.
The next major WTO meeting is scheduled for September. Trade ministers meet in Cancun, Mexico, to get ready for one last push before the current round of talks is supposed to finish in 2004.
But even with EU agriculture reforms, a wide gap would remain between U.S. and EU agriculture policies.
Mr. Zoellick said the EU reforms are “not necessarily sufficient.”
And the European Union has not been reluctant to criticize U.S. farm policy, especially a six-year, $300 billion farm bill approved last year.
“The … reform as we proposed does give us more room for maneuver, but to suggest that [WTO talks] depend on [common agriculture policy] reform is disingenuous,” said Gerry Kiely, the EU agriculture counselorin Washington. “We have shown clearly over 10 years that we are moving progressively away from trade-distorting support, while the U.S. is moving toward more trade-distorting support.”
During 2002, the level of government support for producers was 18 percent of farm receipts in the United States, and 36 percent in the European Union, according to an Organization for official Economic Cooperation and Development report.
Even with the policy divide, European agriculture reform is expected to help WTO negotiations.
“It will help the politics enormously,” said Sophia Murphy, director for trade at the Institute for Agriculture and Trade Policy, a Minnesota group skeptical of free-trade policies. “Whether it will be enough for Cancun … I’m not sure.”