Capital Press: Bush administration says U.S. will cut farm subsidies if E.U., Japan also make cuts

Bush administration says U.S. will cut farm subsidies if E.U., Japan also make cuts

U.S. seeks reductions in tarriffs by other nations as part of deal

Jerry Hagstrom
Washington, D.C., Correspondent

WASHINGTON, D.C. -- The Bush administration offered today to cut the most trade-distorting U.S. farm subsidies 60 percent over the next five years and limit other less trade-distorting programs if the European Union and Japan agree to cut their most distorting domestic subsidies 83 percent and both developed and developing countries agree to substantial cuts in their tariffs.

U.S. Trade Representative Rob Portman made the offer in Zurich, Switzerland at a meeting of trade ministers in Zurich that he hosted. Agriculture Secretary Mike Johanns accompanied Portman to Zurich to lend support to the offer. The offer was in line with a speech Johanns had given the week before.

A fact sheet from Portman’s office emphasized, “This is not a unilateral offer – bold reforms from all countries participating in the (World Trade Organization) process are needed to reach an agreement.”

Portman did not say whch programs would be affected, but according to the usual definitions of the most-distorting “amber box” programs, the U.S. programs that would be reduced by 60 percent would be direct payments to farmers, marketing loan gains, loan deficiencies, some dairy subsidies and water irrigation subsidies.

The U.S. government hopes to put the countercyclical program that was established under the 2002 farm bill in the “blue box” of less, but somewhat trade-distorting subsidies. Under Portman’s proposal that subsidy would be limited to 2.5 percent of agricultural production. Together, the reductions in U.S. amber and blue box subsidies would amount to 53 percent of current U.S. subsidies while Portman wants the European Union to cut its amber and blue box subsidies by 75 percent.

The World Trade Organization currently limits the U.S. amber box programs to $19.1 billion per year. There is no limit on the blue box subsidies, but trade negotiators last year said they wanted to cap them at 5 percent of production. Portman has proposed cutting that in half to 2.5 percent of production. Economists contend that subsidies in the United States, the European Union, Japan and some other countries encourage farmers to grow more and therefore create surpluses that lower world prices.

Green box programs such as research and the Conservation Reserve Program and the new Conservation Security Program, which theoretically do not distort production, would not be affected and the criteria for inclusion of a program in the green box would not be changed.

Portman said in an article published the same day in the Financial Times, a London newspaper, that the offer followed up on President Bush’s Sept. 14 speech at the United Nations in which Bush said “the surest path to greater wealth is greater trade.” Bush also said, “The United States is ready to eliminate all tariffs, subsidies and other barriers to free flow of goods and services as other nations do the same.”

Portman’s statement Oct. 10 is the most substantial offer that the United States has made in the World Trade Organization Doha Round of negotiations to increase trade that started in 2001 but has been plagued by disagreements and indecision.