Global Policy Forum

by Naomi Koppel

Governments should stop paying subsidies to farmers to help them export their goods, according to a mediator's confidential proposal that comes as a setback for the European Union in international trade. The 26-page document, obtained by The Associated Press Wednesday, calls for the World Trade Organization's 145 member states to eliminate all export subsidies over a nine-year period as part of the new round of trade liberalization talks.

The proposal likely will inflame tensions among WTO members in the key area of agriculture, generally pleasing countries like Australia and Brazil that have called for an end to export subsidies while infuriating the EU, which wants to retain a proportion of its payments.

The 15-nation EU, which devotes around half its annual budget to farm subsidies, issued a statement calling the proposal "unbalanced."

The document, prepared by former Hong Kong Ambassador Stuart Harbinson, who chairs the WTO agriculture negotiations, is based on proposals made by WTO members over the past year. It will be discussed by a group of trade ministers meeting in Tokyo this weekend and then formally at WTO headquarters in Geneva on Monday. It is supposed to be approved by the end of March.

Harbinson stressed that there were big differences between WTO members over agriculture and the text "therefore represents no more than a first attempt to identify possible paths to solutions.

"It does not claim to be agreed in whole or part and is without prejudice to the positions of participants," he added.

The issue of export subsidies was a huge stumbling block when WTO trade ministers launched a wide-ranging round of trade negotiations in November 2001 in Doha, Qatar. Under heavy pressure from the French, the EU held out for a long time before finally agreeing to a text that committed it to "reductions of, with a view to phasing out, all forms of export subsidies."

Major agricultural exporters that use few or no export subsidies, such as the United States and the 18-nation Cairns Group led by Australia, Canada and Brazil, called for the quick elimination of the payments, which they claim make it impossible for their farmers to compete with EU producers.

Jim Sutton, trade minister of Cairns Group member New Zealand, said Harbinson's proposal is "good in parts" but does not go far enough.

"The date is still much too far away. Export subsidies undermine world markets and hurt farmers in New Zealand and around the world. They must be removed as soon as possible," he said.

The European Union said the paper "appears unbalanced, spreading the burden very unevenly among the developed countries, and it does not reflect the balance of views put forward by the Members of the WTO."

It added that the document does not tackle the problem of other sorts of subsidies that are used by other rich countries — a reference to emergency aid payments made by the United States and other indirect payments made by Cairns Group members.

Asian pressure group Focus on the Global South also criticized the document, saying rich countries will continue to make billions of dollars in farm payments while poorer nations will be forced to open up their markets.

"I think this would be terrible for developing countries," said Aileen Kwa, the group's research director. "You are going to have ordinary people suffering, because agriculture is the key that gives employment to developing countries."

Harbinson's proposal also sets possible targets for the reduction of import duties, using a banding system that would make the largest cuts to the highest tariffs, with the some tariffs falling by at least 60 percent over five years.

Developing countries can specify a small number of "strategic products" on which higher tariffs would be allowed. These would be products that are important to "food security, rural development and/or livelihood security," the document said.

The document also calls for an increase in import quotas to at least 10 percent of a country's domestic consumption of an individual product, which likely will be opposed by the Japanese, who had proposed a formula that in some cases would have allowed them to reduce their quotas.

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