GENEVA, 21 September 2007 — The United States has agreed to cut its maximum agricultural subsidies in a “significant step” toward advancing negotiations on a new global trade pact, the mediator of the farm talks said yesterday.
Crawford Falconer, New Zealand’s ambassador to the World Trade Organization (WTO), said Washington had for the first time agreed to cut its subsidies to levels he proposed in July.
That would mean the United States would cut its farm subsidy ceiling to $13-$16.4 billion a year. Washington had earlier said it would cut the ceiling to $22.5 billion, from above $45 billion now, and signaled it may go as low as $17 billion.
“I don’t claim it’s a breakthrough, but it’s a significant enough event,” Falconer told Reuters.
US willingness to restrain its trade-distorting but politically sensitive subsidies is a key element in efforts to clinch a trade-opening deal known as the Doha Round, and the move was welcomed by Washington’s trade partners.
Other major factors are the level of tariffs on farm goods in the European Union and Japan, and the level of tariffs on industrial goods in developing countries.
Diplomats said the US move on subsidies could prompt reciprocal moves from others in the negotiations.
“This signals that, like the EU, the US is ready to negotiate and bring this round to a successful conclusion,” a spokesman for EU Trade Commissioner Peter Mandelson said.
The US offer was dependent on other countries moving into the ranges Falconer had proposed for tariffs.
“The US will lead, but others must step up to ensure the strongest possible market access outcomes implied by the texts in agriculture, manufacturing and in the services negotiations,” said a spokesman for US Trade Representative Susan Schwab.
The languishing Doha round was launched nearly six years ago to boost confidence in the world economy, increase trade flows and help developing nations export their way out of poverty.
Agriculture talks resumed in Geneva in early September after a month-long break meant to allow diplomats to mull over Falconer’s draft paper, which suggested ranges of tariff and subsidy cuts within which members may reach consensus.
“After three weeks of hard grind it makes it worthwhile,” Falconer said of the renewed talks. “This is a further indication that they’re seriously negotiating.” The US offer was helped by the strong state of world food markets, which means the level of subsidies actually being paid out is well below even what is proposed in the draft, trade diplomats noted.
But if the move is painless economically, it remains sensitive politically, with a new farm bill setting out support for US farmers for the next five years working its way through Congress.
Falconer said the farm talks need to make further progress on the way sensitive products are treated for both developed and developing nations, and on a safeguards mechanism allowing countries to react to sudden shifts in import volumes or prices.
Hopes of an agreement in six-year-old WTO talks on reducing global trade barriers appeared to have been revived yesterday after the US accepted to negotiate more stringent limits on subsidies to its farmers.
Diplomats at the World Trade Organization said the US agricultural negotiator, Joseph Glauber, had announced during talks late Wednesday that the United States accepted WTO proposals on subsidy cuts made two months ago as a basis for negotiations. It marked a shift in the US position on the compromise proposal suggesting a limit of $12.8 to $16.2 billion (9.2-11.6 billion euros) a year on its agricultural subsidies.
Until now, Washington has refused to accept a ceiling below $23 billion.
“I had never heard them say that before. It’s not a small thing,” said Crawford Falconer, the New Zealand ambassador chairing the farm negotiations.
The European Union, which has been calling for greater concessions from the United States on farming, yesterday welcomed the shift.
“It’s a positive move which we welcome,” said the spokesman for EU Trade Commissioner Peter Mandelson, who represents the 27-country bloc in the WTO talks.
The spokesman, Peter Power, said in Brussels that it demonstrated a “US commitment to negotiate on the basis of the Geneva text and we urge all partners to do likewise.” “Unless the US is committed then there is no future,” he added.
The Doha round of trade negotiations covering agriculture, industrial goods and services was launched in the Qatari capital in 2001 in an attempt to increase trade flows largely for the benefit of poor countries. However, the talks slumped into deadlock, missing a 2004 deadline amid squabbles between rich and poor countries, and disagreements between the world’s leading trade powers, the United States and the European Union.
Bush Optimistic About US Economy
In Washington, President George W. Bush said yesterday he was “optimistic” about the prospects for the US economy, while acknowledging the “unsettling” times in the housing market.
“I’m optimistic about our economy,” Bush said when asked in a White House news conference about predictions from some analysts for a recession.
“I say that the fundamentals of our nation’s economy are strong. Inflation is down. Job markets are steady and strong. The national unemployment rate is 4.6 percent. Corporate profits appear to be strong. Exports are up,” he said.
But, he added, “There is no question that there are some unsettling times in the housing market and credits associated with the housing market.”
He called on legislators to set new rules that will ease the refinancing process for homeowners with mortgage problems, and to improve the tax rules on refinancing.