Posted on: Tuesday, January 13, 2004

U.S. offers to get rid of export subsidies

By James Cox
USA Today

The United States yesterday proposed the elimination of export subsidies on all farm goods in an effort to restart global free-trade talks that collapsed at a World Trade Organization summit last fall.

U.S. Trade Representative Robert Zoellick advanced the idea in a letter to members of the 146-country WTO, based in Geneva.

The current round of WTO negotiations, aimed at lowering barriers to trade in goods, services and farm products, fell apart in September at a Cancun, Mexico, summit after poor countries accused the United States, the European Union and other wealthy countries of failing to make concessions.

Poor countries complain that export subsidies by developed countries prevent their farmers and ranchers from competing at home and in export markets.

The United States generally has backed the notion of eliminating export subsidies on farm products, but Zoellick in his letter called such a move the basis for any new global trade agreement.

"I believe that we will not be able to solve the puzzle (of the talks) ... unless we have an agreement to eliminate export subsidies by a certain date," he said in his letter, obtained by Reuters.

U.S. farmers collected just $55 million in direct export subsidies in 2001,versus $2.3 billion for farmers in the 15-nation EU. But American farmers get billions in domestic supports — federal payments intended to prop up prices and cushion their income in years of bad weather or natural disasters.

Advocates for poor countries argue that rich nations' domestic supports also hurt farmers in developing countries by pricing their exports out of foreign markets.

U.S. dairy farmers do get export subsidies for cheese, butter and skim milk powder.

Christopher Galen, a spokesman for the National Milk Producers Federation, said the U.S. dairy industry would back an end to export subsidies if it was coupled with reduced domestic supports and increased access in Europe and other key markets.

One area where U.S. farmers could be forced to sacrifice, though, is in government credit guarantees. The EU and other countries argue that U.S. crop growers get a subsidy when Washington provides credit guarantees to buyers abroad. The guarantees allow purchasers to pay for American farm exports on favorable terms. Zoellick's proposal reportedly puts U.S. credit guarantees on the negotiating table.

Zoellick called on WTO countries to finalize an outline for a new agreement by midyear.