Farm bureau unlikely to accept more than 50 percent cut in subsidies

American Farm Bureau Federation (AFBF) President Bob Stallman said late last week that U.S. negotiators in the Doha round should not accept more than a 50 percent reduction of trade-distorting amber box subsidies in the negotiations. Such a cut would be the outer limit of what U.S. farmers can accept, he said in a Sept. 30 press conference with Peter Corish, president of the Australian National Farmers Federation.

Fifty percent is probably the outside number I have heard [could be acceptable], he said. Stallman added that AFBF was not necessarily endorsing the idea that the U.S. commit to this level of cuts in its current amber box subsidy limit of $19.1 billion. At the same time we are not precluding it, assuming that the market access agreement will be sufficient to offset the economic impact of that, Stallman said.

Stallman said he saw potential cuts of trade-distorting domestic subsidies ranging from a high of 50 percent to a low of 20 percent. He said this low is reflected in the August 2004 framework agreement on the Doha round, in which the U.S., European Union and other developed country WTO members committed to reducing their total allowable trade-distorting support by 20 percent in the first year of implementing the Doha round.

However, this commitment reflects a reduction to the sum of allowable amber box and de minimis support, in addition to so-called blue box support that is considered less trade-distorting. In the case of the United States, this amounts to a total of about $49 billion. Since the U.S. generally spends less than $19 billion annually on trade-distorting support, a 20 percent reduction from the U.S. total allowable limit under a new WTO agreement would not cut into actual U.S. spending.

Deputy U.S. Trade Representative Peter Allgeier also mentioned the possibility of a 50 percent reduction to allowable U.S. amber box subsidies in a speech in Washington last week but stopped short of endorsing it. He suggested such a cut would be a significant contribution by the U.S. to substantial reductions in trade-distorting domestic support and that, coupled with restrictions on de minimis and blue box subsidies, would likely lead to reduced U.S. spending.

Stallman also rejected a formula for cutting agricultural tariffs floated by the European Union in Paris in late September. He charged that it would only allow the EU more wiggle room to do nothing. He said he hoped the proposal would be a non-starter in the WTO talks.

The EU proposal builds on a formula advanced by Brazil and India that would divide tariffs by value into different tiers, with higher tariffs placed in tiers subject to larger cuts. The new element added by the EU is a pivot that would allow smaller tariff reductions within each tier for some products. In exchange for this pivot, the EU would lower its declared number of sensitive products, which under the framework would not be subject to formula cuts but for which members would have to expand market access.

Stallman stressed that any U.S. cuts in trade-distorting domestic support and other concessions had to be commensurate with the willingness of foreign countries to cut their tariffs, which would give U.S. producers new opportunities for exports.

If we reduce trade-distorting domestic support, there will be a direct economic hit on agricultural producers -- that s pretty much a given and easy to calculate with an economic model, Stallman said. He explained the AFBA had hired economic analysis teams that were doing modeling with respect to calculating what market access gains in foreign countries were necessary to offset U.S. subsidy cuts.

Stallman said he was now more optimistic about the chances of success at the Hong Kong ministerial than before the WTO s summer recess. At the end of July, I said prospects looked really dismal, but since that time real negotiations are actually going on, rather than people just talking past each other, he said. It gives me some degree of hope that I ll change my dismal rating to maybe giving it a 50-50 chance.

Asked whether the AFBA could accept a less ambitious outcome to the Doha round than the U.S. now envisions, Stallman said the AFBA considered every trade agreement on the basis of its economic impact on agriculture. Whatever the ultimate outcome ends up being, we ll have to make the analysis about whether it s good or bad for agriculture, he said.