- The Washington Times - Thursday, June 26, 2003

The European Union yesterday said it would overhaul its system of farm subsidies, opening a window for trans-Atlantic compromise on a divisive issue that has stalled global trade talks.

Agriculture ministers from the 15-nation European Union took away incentives for farmers to produce more food than consumers want. Surpluses created under the old system are dumped on the world market, lowering prices, angering foreign competitors and hurting producers in poor countries.

“We are saying goodbye to the old subsidy system which significantly distorts international trade and harms developing countries,” EU Farm Commissioner Franz Fischler said in a statement announcing the reform.

Negotiations at the World Trade Organization have been stalled as major trading powers — especially the United States and European Union — have been unable to compromise on formulas to lower trade barriers and boost development in poor countries.

Agriculture is the centerpiece of negotiations and a key to lifting many nations out of poverty.

U.S., Australian and other officials have criticized EU farm policy and blamed the European Union for holding up talks at the WTO.

“Today’s decision by the EU to reform its common agricultural policy is a necessary step forward that we hope will provide a useful impetus to the WTO negotiations,” Robert B. Zoellick, the U.S. trade representative, and Ann M. Veneman, agriculture secretary, said in a joint statement.

But U.S. and EU trade officials cautioned that the European farm reform offers hope for an agreement, not a guarantee.

Mr. Zoellick said that the European Union still must translate its farm reform decision into meaningful proposals that would write reduced subsidies and lower tariffs into global trade rules.

“Without new EU agricultural proposals in the WTO, the world cannot fully assess the impact of [EU agricultural] reform,” he said.

Others remained skeptical that the announcement would translate into meaningful change.

“I look forward to examining further what is being presented by the EU as a major restructuring of its agricultural policies. But the devil can be in the details,” said Sen. Charles E. Grassley, chairman of the Finance Committee, which has jurisdiction over trade. The Iowa Republican is a leading Senate voice on farm issues.

European Union officials said they are ready to deal at the WTO but expect the United States and other countries to offer their own compromises, such as a reduction in price supports the U.S. government pays to farmers.

“Unilateral disarmament is not on. The ball is now in the camp of other countries, such as the U.S., whose agricultural policies continue to be highly trade-distorting and have even become increasingly so,” Mr. Fischler said, referring to a six-year, $300 billion U.S. farm bill approved last year.

Pascal Lamy, the EU trade commissioner, yesterday in Washington said that “the farm bill cannot remain untouched in this process.”

The United States last year paid out support equal to 18 percent of farm receipts, about half the European level, according to an Organization for Economic Cooperation and Development report.

Under the reform, EU agriculture and rural development subsidies remain the same at more than $50 billion, almost half of the bloc’s annual budget.

But starting in 2005 farmers will be paid a lump sum to meet environmental, food safety and animal welfare standards.

De-linking the payments from production is designed to allow farmers to gauge supply and demand, helping reduce overproduction and limit the practice of selling on world markets below the cost of production.

WTO agriculture negotiators formally meet again Tuesday.

The next major WTO meeting is scheduled for September. Trade ministers gather in Cancun, Mexico, to get ready for one last push before the current round of talks is supposed to end in 2004.

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