U.S. and Brazil wrangle over farm subsidies as top WTO powers start talks

~ Officials said the American and Brazilian positions were closer than the two countries have publicly stated.

POTSDAM, Germany -- The United States and Brazil disagreed Tuesday over how far the United States should cut farm subsidies as part of a global trade pact, officials said, as the World Trade Organization's four most powerful members began five days of crunch trade talks.

The meeting involving the United States, European Union, Brazil and India has been described as crucial if the WTO is to succeed in concluding a deal to liberalize the world by the end of the year.

Brazilian Foreign Minister Celso Amorim said the meeting started with an analysis of the current situation in the trade talks known as the Doha round for the Qatari capital where they were launched in 2001. The discussions then moved to agriculture, and particularly to the sensitive question of U.S. government subsidies to farmers.

"We made our case. We heard some rebuttals," Amorim told reporters. "I think our case was stronger than the rebuttals. Let us see."

Officials with knowledge of what happened in the private meeting said the American and Brazilian positions were closer than the two countries have publicly stated.

They said the United States indicated it was willing to limit its trade-distorting farm subsidies to $17 billion. Brazil is insisting on a figure somewhere below $15 billion, according to the officials speaking on condition of anonymity because of the sensitivity of the negotiations.

Unfair depression

Critics of the subsidies say they unfairly depress international prices, making it impossible for poorer nations to develop their economies by selling their agricultural products abroad.

Washington has not publicly moved since offering in October 2005 to restrict its subsidies to $22 billion. Amorim said last week Brazil wanted the United States to come down to $12 billion.

The Doha round aims to add billions of dollars to the global economy and lift millions of people out of poverty through new trade flows. But negotiations have struggled for six years, largely because of wrangling between rich and poor countries over eliminating barriers to agricultural trade.

U.S. trade representative Susan Schwab said after a Tuesday evening negotiating session that the talks were making "some progress."

"The United States is here with the intent to do everything we can to make this week successful," Schwab said.

'A critical week'

The round is already three years behind schedule, but trade officials are still hopeful that they can agree on the framework of a deal by the end of July, leaving enough time for the technical work on a final accord by year-end. Failure over the next six weeks could set the whole process back until 2010, as subsidy and tariff concessions are generally seen as unlikely in 2008, when U.S. elections will be held, and 2009, when Indian elections are scheduled.

"It's a critical week," Schwab said.

Washington has been demanding that the European Union and major developing countries provide greater market access for American farm products in exchange for U.S. subsidy cuts. Both the United States and the European Union say their agriculture concessions must be matched by lower industrial tariffs in Brazil and India.

The four powers do not have a mandate to negotiate on behalf of all of the WTO's 150 members, but as their positions cover the range of positions in the Geneva-based commerce body, agreement by them on some of the outstanding farm trade and manufacturing questions is seen as a key test of whether an overall trade deal can be reached.

Some analysts, however, are playing down hopes of a major breakthrough.

"There's an absolute mess of controversial detail that has not been not resolved," said David Woods, director of World Trade Agenda Consultants and a former WTO spokesman. "On the record of the Doha round to date, the idea that it all can be brought together in a few months is inconceivable."

The meeting is taking place in Potsdam's Cecilienhof manor, where 62 years ago Winston Churchill, Josef Stalin and Harry Truman met to redraw the map of Europe following the defeat of Nazi Germany in World War II. Throughout the day tourists visited the estate, which was recently filmed in Steven Soderbergh's "The Good German."

Discussions got off to a slow start Tuesday because Indian Trade Minister Kamal Nath missed a flight and arrived late for a scheduled lunch, officials said.