Jim Lobe

WASHINGTON, Oct 12 2005 (IPS) — If U.S. Trade Representative (USTR) Rob Portman thought that his proposal to cut the ceiling on some government farm subsidies by 60 percent over five years would be greeted favourably by civil society, development and family farm groups, he is sure to be disappointed.

Oxfam International has denounced the plan, which was released in Zurich Monday amid preparations for a critical round of World Trade Organisation (WTO) talks in Hong Kong in December, as “smoke and mirrors” that will have a negligible impact on the most trade-distorting subsidies that encourage “dumping” in poor countries.

Dumping, which occurs when products are sold in a foreign market at prices substantially below the costs of production, reduces the price farmers in that market can get for their goods and may eventually drive them off the land.

“If this offer goes ahead, trade-distorting domestic subsidies will remain almost completely unchanged, and dumping will continue,” said the head of the British-based group’s Make Trade Fair Campaign, Celine Charveriat.

U.S. groups also criticised a key element of the proposal that would permit the government to maintain so-called counter-cyclical payments to farmers at near current levels as a “shell game” that would result in only nominal declines in the overall levels of U.S. agricultural subsidies.

“The U.S. is playing a shell game for U.S. farm policy,” according to Dennis Olson of the Minnesota-based Institute for Agriculture and Trade Policy (IATP). “And it is U.S. farmers and farmers around the world who will lose.”

The Portman proposal, which comes amid growing concern about the fate of the four-year-old Doha Round of WTO negotiations, calls for eliminating farm-export subsidies by 2010 and making an across-the-board 2.5 percent cut on domestic farm subsidies.

The negotiations have been stalled over developing nation demands that the U.S. and the European Union (EU) make sharp cuts in the tens of billions of dollars they provide in agricultural subsidies.

In addition, the proposal calls for Washington to reduce the ceiling on its most trade-distorting domestic subsidies – those that encourage over-production of commodities that may then be dumped in foreign markets – by 60 percent. At the same time, Portman offered to reduce U.S. agricultural import tariffs by between 55 and 90 percent.

Under the Portman plan, all of these cuts would be made in exchange for sharp reductions in tariffs and other import barriers in both EU and developing countries that have made it more difficult for U.S. agricultural goods to penetrate their markets.

In particular, Portman is demanding that the EU, which had already also offered to phase out its own export subsidies, go beyond the U.S. offer by reducing its ceilings on the most trade-distorting subsidies by 83 percent. In Washington’s view, the EU, in particular, currently spends substantially more in agricultural supports than the U.S. does and thus must go further.

On Tuesday, the EU responded by announcing that it was prepared to cut its tariffs on food imports by 50 percent and the ceiling on its most trade-distorting subsidies by 70 percent.

But Oxfam, which has also criticised the EU’s proposal, insists that there is far less to the U.S. offer than meets the eye. According to the group, the Portman proposal would require the U.S. to reduce its spending on agriculture by only two percent – from the 74.7 billion dollars it spent last year to 73.1 billion dollars – if and when the Doha Round is successfully concluded and implemented.

Moreover, the group warned that Washington’s demands for tariff reduction in poor countries go beyond what the U.S., the EU and other wealthy WTO members would be required to do, despite the fact that the Doha Round, which has been deemed the “Development Round”, is predicated on the principle that developing countries should receive preferential treatment.

“It’s a case of smoke and mirrors,” said Charveriat. “If this offer goes ahead, trade-distorting domestic subsidies will remain almost completely unchanged, and dumping will continue. Meanwhile, harsh concessions on market access will be wrung from developing-country members in exchange for illusory progress.”

Particularly discouraging to NGOs here is the administration’s year-old proposal to move “counter-cyclical” payments – payments that are made by the government to farmers when prices are below a stipulated price – from the WTO’s “Amber Box”, which includes those subsidies that are considered most trade-distorting, to its “Blue Box”, which includes less trade-distorting kinds of subsidies that are designed primarily to limit production rather than encourage it.

By shifting counter-cyclical payments to the “Blue Box” at the same time that the ceiling on “Amber Box” subsidies are reduced, the Bush administration is effectively “playing a shell game”, charged David Waskow of the U.S. chapter of Friends of the Earth, one of 20 development, family-farm, and church NGOs that sent a letter protesting the shift to the Senate Agriculture Committee Tuesday.

“Through this revised definition of the Blue Box, the USTR seeks simply to shift counter-cyclical payments from Amber to Blue Box to continue current U.S. agricultural trade policy, which has failed either to reduce costly overproduction or to curtail dumping,” said the groups, which included the National Family Farm Coalition, the Presbyterian Church, ActionAid International, and American Corn Growers Association.

“The USTR’s Blue Box proposal is designed to help facilitate the continuation of current U.S. agricultural policy without acknowledging its obvious shortcomings, which are indefensible from either a domestic cost or an international fairness standpoint,” the letter stated.

“Rather than rethinking U.S. policies that lead to dumping and hurt farmers all over the world, the U.S. is simply shifting among the categories of subsidies, an accounting trick that will fool no one,” said Karen Hansen-Kuhn of ActionAid.

Noting that the food-subsidy issue has split key constituencies in the Republican Party, IATP’s Olson suggested that the Portman proposal may have been crafted more to escape responsibility for an eventual collapse of the Doha Round than to save it.

“Is the Bush administration really going to cut farm subsidies at the expense of one of its most important political constituencies – U.S. farmers in the (predominantly Republican) red states – on behalf of international conglomerates whose main interest is opening markets, or by imposing such conditions on their proposal placing the bar so high that no one will accept it, and then they can blame everyone else for failure?”