EU, U.S. work on farm subsidies cutbacks

GENEVA -- The European Union and the United States reached a rare compromise on opening up international trade in farm goods Wednesday, sketching out plans to cut subsidies and import duties on a massive scale over the next few years.

But now they face another hurdle -- filling in the blanks and persuading the other 130 members of the World Trade Organization that their plan will work. This is set to be a tough task, as ambassadors from developing countries, whose support is vital, gave the proposal a cool reception after U.S. and EU officials presented the document to a WTO meeting Wednesday.

"This seems to be an attempt to prize open the developing country markets without any clear commitment on the part of (the United States and EU) to open their own markets," Indian Ambassador K.M. Chandrasekhar told reporters. "I think it isn't feasible for us."

Australian Ambassador David Spencer welcomed the fact that United States and EU made a proposal, but said it was "really an accommodation of their own interests, not the remainder of the members."

The proposal's authors acknowledged that it needed more work, but said it still was important.

"While we believe that this provides an important step in the process, we don't pretend that this solves all the issues," U.S. chief agriculture negotiator Allen Johnson said.

EU Director General of Trade Peter Carl said the proposal was meant "to demonstrate leadership."

"The negotiations were stuck. They had, for all practical purposes, been blocked since the end of last year," Carl said.

Unlike earlier proposals, the document -- obtained by The Associated Press -- stops short of demanding the elimination of subsidies given to farmers specifically to support exports. The United States and other major exporters like Canada and Australia say these are the most damaging to free trade, but the European Union has insisted it must retain some export subsidies to support its own farmers and protect rural communities.

For the first time, payments to farmers based on acreage rather than production -- a system considered less trade-distorting -- would be limited. Payments based on how much farmers produce, which are already limited, also would be reduced.

However, there is no commitment to reduce payments aimed at supporting farm incomes -- a demand of countries like Australia, Canada and Brazil that claim these payments are abused, especially by the United States.

Brazil's ambassador to the WTO, Luis Felipe de Seixas Correa, said he was wary of the proposal -- like the other 17 members of the Cairns Group of agricultural exporting countries.

"At first glance (the accord) falls short," said Brazil's ambassador to the WTO, Luis Felipe de Seixas Correa. "We have to be very careful not to use as a basis anything that falls short of the level of ambition" set when the current round of global trade talks were launched in 2001 in Qatar.

Differences over agriculture have threatened to waylay the upcoming WTO meeting scheduled for Cancun, Mexico, in September. That conference is key for concluding the round by Jan. 1, 2005.

Developing countries have insisted they would not consider giving ground in areas of interest to the United States and Europe, such as reducing tariffs on industrial goods, unless they stop subsidizing farm exports.

Taxpayers in rich countries spend about $300 billion each year supporting their farmers.

The poor nations complain that hurts them by flooding markets with artificially cheap commodities, like subsidized European sugar and American corn. Meanwhile imports are often kept out with tariffs and quotas, further distorting prices.

The EU-US proposal strikes a new compromise on the method of calculating cuts in import duties, although details are left vague -- including the deadlines for change. Products considered to be the most "sensitive" will be cut by a percentage, allowing countries to maintain fairly high tariffs.

"I think their exercise to try to bridge the gap between the United States and the EU is laudable but there are also gaps between them and the rest of the world on a lot of issues," said Canadian Ambassador Sergio Marchi.

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EDITOR'S NOTE: Associated Press Correspondent Paul Geitner in Brussels, Belgium, contributed to this report.