Farm, manufacturing clash causes G4 trade collapse

By Doug Palmer and Laura MacInnis

POTSDAM, Germany (Reuters) - An effort to rescue world trade talks collapsed on Thursday with Brazil and India saying the United States and European Union were demanding too high a price for cutting their trade-distorting farm policies.

"The exchange rate being asked was too high," Brazilian Foreign Minister Celso Amorim told reporters, referring to U.S. and EU demands that developing countries make "a 58-percent cut" in their bound manufacturing tariffs in exchange for rich countries cutting their farm subsidies and tariffs.

Indian Commerce Minister Kamal Nath said the United States offered to cap its overall spending on trade-distorting farm subsidies at $17 billion, down from an earlier U.S. offer of $22.5 billion made nearly two years ago.

But since Washington currently spends only $10.8 billion on trade distorting farm subsidies, the proposal was not enough, Nath said. "There is no equity in this, no logic and no fairness," he said.

Brazil and India, as leaders of the G20 developing country group, have pushed for about a $12 billion cap on U.S. spending and about $20 billion for the EU, which has a higher allowance than the United States under WTO rules.

During this week's meeting at an historic German palace in Potsdam, the United States and European Union never came near the G20's demand and instead offered figures "that didn't represent any real cuts in domestic support," Amorim said.

But U.S. Agriculture Secretary Mike Johanns and U.S. Trade Representative Susan Schwab said they had offered real additional cuts that would be politically painful to implement.

Without mentioning a specific figure, Johanns said the U.S. offer this week would have reduced farm subsidies to a level below actual spending in five of the last nine years.

EXCHANGE

EU Agriculture Commissioner Marianne Fischer-Boel also defended the EU's latest offer, which she said would require average cuts of more than 50 percent in EU farm tariffs and more than 70 percent in EU farm subsidies.

The EU also offered developing countries significant new market openings for "sensitive products" such as beef, Fischer-Boel said. The additional access offered for beef was more than Argentina currently exports, she said.

Both U.S. and EU negotiators said they were prepared to go further on farm subsidies and tariffs. But they said Brazil and India refused to offer significant new market openings in manufacturing in exchange.

"It emerged from the discussion on NAMA (non-agricultural market access) that we would not be able to point to any substantive or commercially meaningful changes in the tariffs of the emerging economies," EU Trade Commissioner Peter Mandelson said. "We cannot negotiate with ourselves."

Schwab echoed that point, while Johanns accused Brazil and India of "moving the goalposts" in the talks.

Amorim said the United States wanted a tariff cutting formula that would effectively reduce developing country manufacturing tariffs to 18 percent, a cut of 58 percent from their current bound, or maximum, tariff levels.