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Texas Agriculture Archive

November 4, 2005

U.S., other countries
offer WTO proposals

The U.S. Trade Representative (USTR) on Oct. 10 proposed a new strategy for cutting agricultural subsidies and tariffs worldwide in an effort to rejuvenate the Doha Round of World Trade Organization (WTO) agricultural trade negotiations.

The proposal, which USTR called "ambitious," would phase out trade-distorting agricultural subsidies and tariffs in two stages. In the first stage, countries would cut the subsidies and tariffs by set amounts, depending on their current levels, over five years. They would then take a five-year break before deciding whether to move into a five-year second phase to eliminate all remaining trade-distorting policies in agriculture.

Ambassador Rob Portman, the head of USTR, said that the proposal had "generated a lot of good" and re-energized discussions with the European Union and other WTO members.

American Farm Bureau Federation President Bob Stallman said that, while this is only a proposal and the outcome of the negotiations is still far from certain, the proposal would advance the idea of increasing access to world markets.

In the domestic support "pillar" of the negotiations, U.S. farm support payments, and those of other countries allowed to spend between $12 billion and $25 billion a year in trade-distorting farm subsidies under the current WTO agreement, would be reduced by 60 percent overall, contingent on equally ambitious reform in the other pillars of the Doha negotiations: market access and export competition.

Countries that are currently allowed to spend more than $25 billion a year in such subsidies, such as the EU, would have to reduce them by 83 percent. Countries that can spend less than $12 billion today would have to reduce their subsidies by 37 percent.

Likewise, the developed countries with the highest tariffs would have to make the deepest cuts—anywhere from 90 percent for the highest tariffs to 55 percent for the lowest. A few trade-sensitive products—those that face particular challenges from freer trade—would face lesser tariff reductions. However, countries could only declare up to 1 percent of their tariff lines as trade-sensitive products.

Developing countries would be subject to slightly lesser tariff reduction commitments and longer phase-in periods, consistent with a framework agreement reached in July 2004.

Export subsidies that countries use to lower the cost of exported goods and make them more competitive in other countries would be eliminated no later than 2010, under the latest U.S. proposal. The United States spends very little in export subsidies.

Stallman, in an Oct. 10 statement issued from Geneva, Switzerland, where trade ministers from a handful of countries met, said that if the proposal became the final agreement it would not be easy for U.S. agriculture. That's why he reiterated that any reductions in domestic support must be contingent on increased market access.

"Changes in domestic support programs resulting from an agreement will result in significant short-term economic challenges for some commodities and specific farm types," Stallman said. "We firmly believe, however, that in the long term, U.S. agriculture will overcome any challenge through the expanded opportunity for exports created by specific and measurable improvements in market access."

The EU on Oct. 11 offered its own new proposal; however, USTR's Portman said that the proposal does not meet expectations on improving market access. The EU proposed to reduce the highest tariffs 50 percent, compared to the 90 percent reduction proposed by the United States.

The group of 20 (G-20) developing countries on Oct. 13 offered a counterproposal calling for developed countries to cut trade-distorting domestic support by up to 80 percent, depending on their current levels.

However, the proposal exempts developing countries from the reduction requirement and would only cut developing country tariffs by an average of 36 percent. Some of the world's highest import tariffs are maintained by developing countries. Developed countries would have to slash tariffs by up to 54 percent, under the G-20 proposal.