July 20, 2008 / 5:26 PM / 12 years ago

U.S. and EU face calls for farm reform at WTO

GENEVA (Reuters) - Developing countries and food exporters from rich and poor nations called on Sunday for the United States and European Union to open up their farm markets and eliminate trade-distorting subsidies.

Global trade in farm products was at the centre of discussions as ministers from three dozen trading powers met in negotiating alliances to prepare for next week’s make-or-break talks on a new world trade pact.

World Trade Organisation Director-General Pascal Lamy has called the ministers to Geneva to seek a breakthrough in the WTO’s 7-year-old Doha round to free up world trade.

The various alliances among the WTO’s 152 members, from the Cairns group of food exporters to the African, Caribbean and Pacific (ACP) countries met on Sunday to plot their strategy.

“Those members responsible for the most significant distortions in global agricultural trade — the EU, U.S. and Japan — bear a heavy responsibility,” the Cairns Group of agricultural exporters said.

“We can and must now seize this opportunity to secure the main parameters of the Doha round. The costs of failure are too high,” the group, whose members include Canada, New Zealand, Argentina, South Africa and Thailand, said in a statement.

NOW OR NEVER

Australia, which chairs the group, said the prospects of a Doha deal were better than ever.

“This in our judgment is the best opportunity ever, in the whole seven years of this round, to conclude the deal,” Trade Minister Simon Crean told a news conference.

World Bank President Robert Zoellick said progress on farm issues would bolster confidence in a world economy strained by soaring food and energy prices and a financial crisis.

“It has never been more important for WTO members to move forward on the Doha Development Agenda,” he said in a statement before the talks.

“It is now or never,” said Zoellick, who as former U.S. trade representative helped launch the Doha round in 2001.

He said an open and fair trading system would give farmers in developing countries a reason to expand production. Consumers would benefit from lower prices and governments could save on the costs of subsidies and improve their budgets.

But ministers will face tough negotiations next week as they seek a deal on tariff and subsidy cuts in the most sensitive areas of agriculture and industrial goods, and the main exceptions to them.

Developing countries want rich nations to open up their markets for farm goods like beef and cotton, in exchange for liberalizing their own markets in industrial goods like cars and textiles or services such as banking and telecoms.

A major sticking point is the level of U.S. farm support.

U.S. Trade Representative Susan Schwab has said the United States is ready to make “enormous” cuts in agricultural subsidies, which developing countries say distort international trade and squeezes their own farmers out of the market.

The latest WTO proposals call for a cut of about 70 percent in U.S. trade-distorting subsidies to $13 billion to $16.4 billion.

But those figures refer to the ceiling negotiated at the WTO, and the actual, or “applied”, figure is already about half that at $7 billion thanks to soaring food prices.

NARROW THE GAP

So big developing countries like India and Brazil want either cuts in actual support, or at least a narrowing of the gap between the actual level and the ceiling — known in trade jargon as “water”.

“Reducing the amount of water is the objective,” Indonesian Trade Minister Mari Pangestu told reporters after a meeting of the G-33 group of developing countries chaired by Indonesia.

Switzerland, which has one of the most protected farm sectors, said any special treatment in industrial goods for poor countries would have to be matched with higher average cuts.

“This will be a huge discussion this week with developing countries,” Economic Affairs Minister Doris Leuthard said. “I will fight for each percentage point in this negotiation.”

Rich countries are concerned that proposals to allow developing countries to protect their fledgling industries from the full impact of tariff cuts could allow them to shield entire sectors from market opening.

That would not fly with U.S. and European business lobbies.

“We want a fair balanced deal,” said EU trade chief Peter Mandelson. “It’s doable this week but it has to be sellable to all our constituencies and not just some of them,” he told reporters after meeting Lamy.

Additional reporting by Lesley Wroughton in Washington, editing by Mary Gabriel

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