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EU offers to end lavish farm subsidies
2004-05-18
Business Weekly
The European Union (EU) is ready to eliminate its lavish subsidies on farm exports to galvanize sluggish world trade talks, provided its main partners do the same, EU trade chief Pascal Lamy announced last week.
Details of the proposed move, long demanded by critics of its generous farm subsidies, have been sent to members of the World Trade Organization (WTO) just days before ministers from several WTO states hold a potentially crucial meeting in Paris.
"We feel a breakthrough is possible, and the EU is ready to do its part," Agriculture Commissioner Franz Fischler said.
"All our export subsidies are effectively on the table."
The EU spends 43 billion euros (US$50.74 billion) a year on its farm policy, nearly half of its annual budget. By far the largest proportion of this goes to France.
The EU has faced mounting pressure to abolish its export subsidies.
Lamy said the offer depends on the EU's WTO partners matching the move. The United States has indicated it is willing to do so.
The offer also depends on progress in the two other key areas of the negotiations, domestic farm aid and market access.
"If an acceptable offer emerges on market access and domestic support, we will be ready to move on export subsidies," Lamy said.
Up to now, European unwillingness to eliminate these subsidies by a set date has been a major obstacle to reaching a deal on agriculture, widely viewed as the key to unlocking the WTO's troubled Doha Round of trade liberalization talks.
Fischler said the EU was offering concessions on new trade issues, known as the Singapore issues, special treatment for the weaker developing countries and on agriculture.
"This means our international partners have to make clear they are ready to fully match the EU on their forms of export support, such as export credits, abuse of food aid or state trading enterprise," he told reporters during a meeting of the EU's 25 farm ministers.
The meeting was held in the Irish city of Killarney.
Stalled talks
The round, whose successful conclusion economists say would give a huge long-term boost to world growth, was supposed to have been wrapped up by the end of this year.
That deadline is certain to be missed and, in its place, negotiators want to reach outline deals, or frameworks in WTO parlance, in the main areas by the end of July.
Diplomats from EU trade partners welcomed the EU's offer, but said it will have only a limited impact because it is simply a public announcement of something the bloc had signalled privately some time ago.
"Of course it is good news, but I do not see it making an awful lot of difference," said one Geneva diplomat from a leading developing country.
The bloc insists it has already made massive strides in reducing the worst of its trade-distorting farm support -- market price guarantees and export subsidies -- in two reforms, in 1992 and 1999, and also in major changes agreed last June.
On market access, Lamy said the EU was sticking to its guns for a "blended" formula, which would allow the 25-nation bloc and countries like Japan, with expensive domestic farm industries, to keep high tariffs on some politically sensitive goods.
But the G20 group of developing countries, led by Brazil, India and China, has rejected this, arguing it would ask too much of developing nations and too little of richer states.
The market access formula to determine how much states will open markets to others' goods was the focus of recent talks in Paris at the Organization for Economic Co-operation and Development (OECD).
Some 28 trade ministers -- including Lamy and US trade chief Robert Zoellick -- met for the last chance to bring so many ministers together before the July deadline for the frameworks.
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