- The Washington Times - Saturday, May 15, 2004

The European Union (EU) is lumbering its way toward slimmer farm subsidies. Last week, EU Trade Commissioner Pascal Lamy said the organization would end its farm export subsidies, providing other industrialized nations (a.k.a. the United States) did the same. U.S. officials had already said they would cut farm subsidies in tandem with Europe, so Mr. Lamy’s belated move could give some impetus to a global trade round mired in disagreements over agricultural subsidies and protections. The potential impact, though, shouldn’t be overstated. As the world’s main agricultural producers are well aware, Europe didn’t have much choice in making its latest move.

This January, a so-called peace clause in agricultural trade expired, opening the way for developing countries to challenge the trade-distorting agricultural policies of industrialized countries at the World Trade Organization (WTO). Brazil and other countries have already opened a case against Europe’s sugar subsidies and U.S. support of cotton at the WTO, and these challenges will likely mount.

The United States, meanwhile, could also see its agricultural export credits and its food aid shipments challenged at the WTO. Poor countries could argue at trade courts that credits give U.S. producers an unfair advantage and create gluts in the global market, depressing prices. The same argument could be used for food aid, in cases where the aid isn’t used to feed a starving population.

U.S. Trade Representative Robert Zoellick sent a rallying letter in January, outlining his commitment to strike a deal despite the looming election in November. Farm groups have been generally supportive of limiting subsidies.

Developing countries will surely want Europe and the United States to go beyond offers to cut farm-export subsidies. These subsidies are considered to the most hurtful to farmers in poor countries, but they constitute a small part of Europe’s and America’s largesse.

Europe should be commended for taking a positive step toward reforming an agricultural policy that is burdensome to both its own taxpayers and poor farmers across the globe. If EU officials really do want to save this trade round, and not just check WTO challenges, they will have to cut more seriously into their towering subsidy scheme, as will the United States.

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