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Monday, October 10, 2005

US Offers to Cut Farm Subsidies

In my last post on administration suggestions that farm subsidies are on the table, considerable skepticism is expressed in comments over the suggestion that farm subsidies will be cut because of the difficult politics involved. Today, there is further discussion from the administration along these lines. Is this an example of the game Krugman discusses, lots of lip service with no real action to back it up, or is this a serious intention?:

US trade chief offers to cut farm subsidies,  by Alan Beattie, Financial Times: The US will on Monday offer to end farm export subsidies in five years and slash its domestic subsidies by more than half, in an attempt to revive the flagging Doha round of trade talks. ... Agriculture, one of the most protected areas of world trade, is a sticking point in the negotiations, with the European Union and US at odds about cuts in tariffs and subsidies. ... Writing in the Financial Times, Rob Portman, US trade representative, offers to eliminate farm export subsidies by 2010, the date demanded by the Group of 20 developing countries and some European leaders, including Tony Blair... Mr Portman also agrees to cut those domestic farm subsidies believed to distort world trade by 60 per cent, higher than the 55 per cent reduction the EU was demanding... Bob Stallman, president of the American Farm Bureau, recently said the US should not go beyond 50 per cent. The US also suggests halving a ceiling agreed last year on those farm subsidies regarded as less distorting of trade. This cut, though it meets a demand from development campaigners such as Oxfam, would still allow the US to retain its controversial “counter-cyclical payments”, which compensate farmers for low prices. “The US offer is conditional on other countries reciprocating with meaningful market access commitments and subsidy cuts of their own,” Mr Portman says. The US proposals are designed to put the ball back into the EU's court by offering cuts in domestic farm support and ending export subsidies a key demand of Peter Mandelson, Mr Portman's European counterpart. But Dominique Bussereau, the French agriculture minister, has gained the signatures of 13 of the EU's 25 member states, including Italy, Ireland and Spain, on a memorandum insisting that Brussels trade negotiators consult with them before offering any farming concessions in the Doha talks. His memorandum, seen by the FT, says: “The task is not to negotiate a date for the elimination of our export subsidies, but a period of implementation for what is a conditional concession.” It is likely to dismay Brussels trade negotiators, who assumed they had a clear mandate last year when the EU offered to phase out farm export credits. ... In return for subsidy cuts, Mr Portman also repeated a proposal for substantial cuts in agricultural tariffs, which will require big cuts from the EU and Japan.

I will be surprised if substantial action is taken on this front, particularly given the statement that reciprocal action by other countries will be required and the resistance by France and others to such proposals. And on the notion of "counter-cyclical prices," see PGL at Angry Bear.

    Posted by on Monday, October 10, 2005 at 12:10 AM in Budget Deficit, Economics, International Trade | Permalink  TrackBack (0)  Comments (2)

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