EU urges end to trade distorting subsidies

By Anthony Fletcher

- Last updated on GMT

Related tags World trade organization International trade Eu

Trade-distorting farm support must end, says the EU, as world
ministers finally meet in Hong Kong to try and revive the WTO Doha
trade round.

Writing in yesterday's Monitoring Agri-trade Policy (MAP) briefing paper, the directorate general of agriculture and rural affairs said that the Doha Round must guarantee that all policies move forward together, and undertake similar commitments to reduce their trade-distorting support.

It is still hoped that trade ministers will succeed in concluding negotiations on the WTO global trade agreement on agriculture and services, which would lead to the liberalisation of global food and agriculture markets. The EU has identified farm support as a key factor.

As the directorate acknowledges, the old EU farm support system left a lot to be desired.

It employed high border protection, high price support, used export subsidies widely and was clearly on a different tack to the emerging international consensus on disciplines to be applied to trade-distorting domestic support.

The bloc still spends some €43 billion a year on its farm policy, nearly half of its entire annual budget.

However the directorate claims that much has changed. It says that EU farm policy has moved in a consistent direction over the last ten years, and is clearly in line with the Doha objectives.

"Firstly, trade distorting domestic support has fallen dramatically,"​ said the report. "To give specific examples, for beef and wheat - two traditional 'European' exports - price support has fallen by over 40 per cent, andthe EU is now even a net importer of beef.

"And by 2007, when the impact of the measures introduced in the 2003 CAP reform will be evident, the vast majority of EU farm support will be non-, or at the very most, minimally trade distorting."

The EU wants to see its trading partners move in the same direction. What the EU proposes is that developed countries undertake parallel cuts in their most trade distorting support on the following basis.

It wants to see ceilings applied to product specific support, and the implementation of an 80 per cent reduction in the use of de minimis support for all developed countries from the 5 per cent level of production value currently allowed.

"It is the disciplining of trade-distorting support which is the objective at the heart of the Doha round,"​ said the report.

The report also attacks its partners' reluctance to commit to the same objectives. It argues that the US proposal would effectively allow it to keep both its export credits and its approach to food aid unchanged.

"Perhaps they are keeping other cards up their sleeves for Hong Kong but forsure, before there can be any real discussions over a time frame for the phasingout of export subsidies, all parties have to be clear on the objectives we are trying to achieve,"​ said the directorate. "The EU will not accept another Uruguay Round outcome in which its export support is disciplined alone."

It remains to be seen therefore whether a meaningful settlement can be achieved. A report from US-based think-tank the International Food Policy Research Institute (IFPRI) claims that protectionism and subsidies by industrialised nations cost developing countries about $24 billion (€22bn) annually in lost agricultural and agro-industrial income.

Ministers from around the world have simply been unable to resolve the underlying divisions that have existed since the Doha round of talks was launched in 2001. But fingers are crossed that a breakthrough could still be achieved.

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