Emad Mekay

WASHINGTON, Oct 28 2005 (IPS) — A U.S. proposal to cut agriculture tariffs and subsidies and set new trade rules at the World Trade Organisation (WTO) would do little to change the current system of global agriculture trade and preserves exceptions from the global rules that U.S. farmers enjoy, according to a leading U.S. think tank.

The Minneapolis-based Institute for Agriculture and Trade Policy (IATP) said in a new analysis of the U.S. proposal, floated on Oct. 10 in a bid to salvage the shaky global trade talks, that it ignores the most trade-distorting aspect of agricultural trade – “dumping”.

Dumping is when goods are sold at less than the cost of production on world markets, resulting in the impoverishment of small farmers and the rapid consolidation of food processing and retailing. The United States offered its deepest overhaul in farm subsidies and tariffs in five years of trade talks, including cutting the highest tariffs by as much as 90 percent. The offer calls for a zero-tariff and zero-trade-distorting support in the trading world.

But critics say that this proposed change in how the United States protects its farmers is impossible in reality since the resulting liberalisation would in practice be only partial.

Under the deal, the U.S. continues to expect to use what it considers to be non-trade distorting domestic support and some of the less obvious forms of export support, such as export credits and sales of food aid.

“The U.S. proposes a vision of zero-tariffs and zero trade-distorting support that seems neither sincere nor desirable,” says the report.

The offer has so far run into difficulties, since it is conditional on a number of unlikely trade-offs. It only stands if countries make reductions they have already publicly rejected. Both Japan and the EU have said they cannot slash their domestic support by 83 percent, as the U.S. proposal requires.

The EU made an offer Friday that it can cut support by only as much as 47 percent.

Even in the United States, the proposal does not have across the board backing. The chairs of U.S. Senate and House Agriculture Committees warned U.S. Trade Representative Robert Portman in a letter that “the negotiations and modalities should not preempt the responsibilities and prerogatives of Congress”.

The 148 members of the WTO will hold a landmark meeting in Hong Kong in December, with many trade officials warning that the meeting could collapse because of continued disagreements over farm subsides and agriculture trade, the sticking points of the meeting.

Rich nations want an international deal that would give them greater access to foreign markets in goods and services. In return, developing countries like India and Brazil want access to developed nations’ markets in agriculture.

But on Friday, Portman appeared to downplay the importance of the agriculture in the talks and said there still needs be a deal even without a comprehensive agreement on agriculture.

“Agriculture is central to this round,” Portman told reporters. “Unless we can make progress on agriculture, I think as a practical matter it will be important to see the progress that we’d like in these other areas.”

But USTR spokeswoman Christine Baker said Friday that agriculture remains the main issue on the table.

“If the final Doha agreement on agriculture were to go no further than this, other areas would also be weak and the Doha Round would not approach its potential for promoting development, opportunity and global economic growth,” she said, responding to the EU’s proposal to cut tariffs by only 47 percent.

Developing countries say that reforming agricultural trade rules is the only way that the long-running global trade talks launched in November 2001, which are supposed to give developing nations greater access to markets in industrialised countries, could succeed.

Failure of the rich nations to commit to reducing their agriculture subsides sank a similar trade meeting in Cancun, Mexico in September 2003.

IATP says the Hong Kong meeting could face a similar fate with no serious proposal on agriculture on the table.

And although the U.S. plan promises an ambitious total elimination of tariffs and domestic support by 2022, it backtracks by including flexibility to change course midway, which leaves developing countries negotiating in an atmosphere of uncertainty, the think tank notes.

“Subsidies complicate the picture, but are not alone responsible for the problem,” says the report.

The report finds that under the U.S. proposal, actual spending on U.S. domestic support would hardly change. The trick lies in that it allows the U.S. to include countercyclical payments, which support crop prices during down years.

Moreover, the inclusion of a renewed Peace Clause, which protects countries that use subsidies from retaliation, at the behest of representatives from powerful agriculture states in Congress is a deal-breaker for some countries, the analysis finds.

A Peace Clause would grant agricultural subsidies a privileged place at the WTO, even if the subsidies are found to nullify another member’s expected benefits from signing a round of agreements.

The report also faults the proposal for asking that even special products like crops that play a significant role in food security and rural employment in all non-least developed countries should be subject to significant tariff cuts.

This, the author says, would be disastrous for family farmers, food workers and small-scale producers worldwide.

“Such an exemption from WTO disciplines dramatically undermines U.S. credibility as a country that seeks fair rules for agriculture that treat all countries alike,” says the report.