Chambliss, Goodlatte urge USTR to resist EU subsidy cut demands

The chairmen of the two congressional agriculture committees yesterday (Sept. 8) said they have told U.S. Trade Representative Rob Portman that the U.S. cannot make any specific commitments to reduce agricultural subsidies at this time and that the U.S. should resist demands by the European Union to cut domestic subsidies in order to spark momentum in World Trade Organization talks.

Speaking after a Sept. 8 meeting with Portman and other Senate and House members on trade, Senate Agriculture Chairman Saxby Chambliss (R-GA) said the U.S. cannot make any specific commitments on domestic subsidies right now as it prepares to write a new farm bill, and that the administration understands this. He added that it makes no sense for the U.S. to make any commitments absent an EU commitment on market access.

"We've seen no indication from the Europeans that they're going to give us greater market access, and without market access we have a non-starter relative to any significant changes we want to make," Chambliss said after leaving a Sept. 8 meeting of the Congressional Oversight Group (COG).

House Agriculture Committee Chairman Bob Goodlatte (R-VA), after leaving the same meeting, said making a move on domestic subsidies right now would be contrary to U.S. interests. "I think the burden is on the EU to jump-start the negotiations," said Goodlatte, who added that he had made this point to Portman during the COG.

Chambliss held out the possibility that the U.S. could move on domestic subsidies at the Hong Kong meeting in December, but repeated that this would depend on what the EU offered on market access. Chambliss said USTR had not given any specific demands to agricultural leaders in Congress relative to Doha, adding "that's the way it should be."

Separately, Portman told reporters he had "great discussions" with both chairman this week on this issue of the Doha round, and emphasized that USTR would continue to consult on this issue to members of Congress and their staffs about where USTR is on the Doha round.

The COG meeting preceded meetings between Portman and European agriculture and trade commissioners next week. Their main message is likely to be that failure by the U.S. to agree to more cuts on domestic farm subsidies will mean the Hong Kong ministerial in December is unlikely to deliver a substantive result, according to EU sources.

"It's up to the U.S. to determine how serious Hong Kong is," one of these sources said. "If the U.S. is ready to move on domestic support, the round can move forward. If it can't, then the round is stalled."

If agriculture does not produce a substantive result, concessions on non-agricultural market access also will have to be downscaled because developing countries in the G20 will not want to make them, a Geneva source said. "We need a major change in [non-agricultural] market access if we lower expectations in agriculture," this source said.

The EU has said that it cannot agree to any more market access concessions unless the U.S. agrees to more cuts on domestic farm subsidies. The European Commission needs this signal from the U.S. if it is to convince member states to agree to more market access concessions, another EU source said.

But the U.S. up to now has insisted that the EU needs to move on market access before it can move on domestic support. The U.S. also has repeatedly said it needs to see gains in developing country markets to offset any concessions it would make on domestic subsidies, a point backed by U.S. agriculture groups. One agriculture lobbyist said the EU is isolated in the Doha round agriculture talks, and that the U.S. should not have to make any concessions on domestic support to break the current stalemate.

The European Commission has sought the support of Brazil in its push for the U.S. to make the first move to end this stalemate, according to one government source. EU officials including EU Agriculture Director General Jose Manuel Silva are meeting Brazilian officials this week in Brasilia before going on to Argentina, he said.

But one informed source suggested Brazil is unlikely to enter the fray because it wants both sides to move on these issues, and does not care who moves first. This source said Brazil would be happy with tariff reductions by the EU and developing countries along with U.S. subsidy reductions.

In a Sept. 1-2 meeting with Brazil's lead negotiator, Portman asked Brazil to persuade India, a member of the G20 group led by Brazil, to make more concessions on agricultural market access as a way of advancing the Doha round. Brazil replied that this would not be possible, according to a source familiar with the meeting.

Portman also said in that meeting that he was still in the process of developing a U.S. position for Hong Kong. A source familiar with that meeting said U.S. officials indicated Portman would be holding intensive consultations with colleagues in the administration and members of Congress over the next few weeks.

As a result, some EU government sources said next week's meetings between USTR and the commissioners may be premature, as the U.S. is unlikely to be in a position to move.

European Trade Commissioner Peter Mandelson is expected to be in Washington Sept. 12-13 and will meet with Portman and U.S. Agriculture Secretary Mike Johanns, according to sources. EU Agriculture Commissioner Marianne Fischer Boel will be in Washington Sept. 13-16 and is also expected to meet Portman and Johanns in addition to members of Congress. A meeting between the four officials is unlikely because of scheduling difficulties, sources said.

Portman has met with several agriculture groups this week including the American Farm Bureau Federation. One agriculture lobbyist said the meetings were expected to give USTR an opportunity to tell farm groups what it seeks for the Hong Kong ministerial and to give farm groups a chance to tell USTR what they seek for Hong Kong.

Some sources said the politically sensitive issue of cutting domestic farm subsidies, which would also be reflected in a new farm bill, is something the administration will have to discuss with House and Senate Republican leaders. But some sources said that the key members that would need to be part of that discussion are currently preoccupied with the aftermath of Hurricane Katrina and the Supreme Court nominations.

They also questioned whether Republican congressional leaders or White House political operatives would support cuts in domestic support because they fear it could cause problems in the mid-term elections.

One private-sector source said that the administration has to make the case to members of Congress for any subsidy cuts. This could include an explanation of how farm programs might change to reflect more U.S. subsidies that are minimally or non-trade distorting under WTO rules and classified as green box. It could also focus on how some farm subsidies could be classified in the blue box that faces lesser cuts than so-called amber subsidies linked directly to production, another source said.

Under a July 2004 WTO framework for agriculture, the rules governing the green box would not change, and the U.S. would have the ability to shift the counter-cyclical payments from the amber to the blue box, which the U.S. does not now use.

That framework also called for members to agree to tiered reductions in their allowable domestic support, with members that have higher subsidies ceilings making larger cuts. The U.S. has argued that it should be in a third tier in this system behind the EU in the top tier, and Japan in a second tier, but those trading partners have argued the U.S. should be placed with Japan in the second tier.

One possible compromise to this fight would place both the U.S. and Japan in the second tier, with Japan agreeing to a greater reduction rate to its subsidies ceiling, a Geneva source said.