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Agricultural Subsidies in Rich Nations Become Major Issue in Trade Talks

  • Barry Wood

Trade ministers from some two-dozen countries are meeting March 3-5 in the Kenyan resort of Mombasa in an attempt to push forward the ambitious reduction in trade barriers that is the centerpiece of the Doha round of World Trade Organization (WTO) negotiations. V.O.A.'s Barry Wood reports that in over three years of fitful talks no issue has been more contentious than the trade distorting agricultural subsidies in rich nations.

Experts say that the success of the Doha round hinges on a deal over agricultural subsidies. The developing countries that comprise a big majority of W.T.O. members insist that farm subsidies in America, Europe and Japan be sharply reduced. That may or may not happen. Daniel Griswold is the agriculture specialist at the Cato Institute, a pro-free trade advocacy group in here in Washington, DC.

Daniel Griswold says, "Without some 'concessions' - quote, unquote - from the rich countries on agriculture, we're not going to have (success) a Doha round. And I put quotations around concessions because it really would be in the interests of rich countries to get rid of their subsidies and trade barriers on agricultural products. It costs their taxpayers. It costs their consumers. But this is a major irritant for poor countries. It drives down prices globally."

Mr. Griswold says the several billions dollars paid by governments to farmers in the rich countries perpetuates poverty in the Third World.

Development specialist Peter McPherson, a former head of the U.S. aid agency, agrees that the generous farm subsidies will have to be reduced.

"The way this is likely to work to truly have great reductions is through something like the Doha round, through not just bilaterally but multilaterally agreeing to have those reductions," says McPherson.

Politically, rich countries are more likely to accept farm subsidy cuts if they can point to equal or greater benefits for other sectors of their economies.

The meeting in Kenya is not exclusively focused on agriculture. But, say the experts, without progress on farm subsidies there is unlikely to be progress on other contentious issues like services and market access.

The European Union-which handles trade matters for all 25 E.U. nations-has offered to cut its farm export subsidies. The E.U. says it is awaiting a similar offer from the United States. Daniel Griswold of the Cato Institute is not optimistic that the Bush administration will take on America's powerful farm lobby.

"That remains to be seen. The Bush administration, while they talk a good game on trade, they don't have a good record of standing up to protectionist interests," says Daniel Griswold.

But Bob Young, chief economist at the American Farm Bureau, America's biggest agricultural organization, says American farmers might accept subsidy cuts in return for reductions on the high tariffs that developing countries impose on food imports.

"The developing countries need to recognize, you know, that it is very much in their best interest as well to reduce those tariff barriers and things of that nature and let trade happen," says Robert Young.

Mr. Young anticipates months of tough bargaining ahead of the big ministerial meeting of all of the world's trade ministers in Hong Kong this December. He believes a trade deal-including an agreement on agriculture-is likely to emerge in Hong Kong.

Some experts believe that the problem of subsidies for American cotton farmers-an issue that nearly wrecked the trade talks two years ago in Cancun, Mexico, may be on the way to resolution. American cotton growers are assisting cotton producers in West Africa and seeking methods to boost world prices without significantly reducing U.S. subsidies.

As to the talks in Mombasa, experts say the absence of any new problems emerging would represent progress. Trade ministers, they say, are beginning to recognize that without compromise on several issues the talks launched four years ago at Doha, Qatar are unlikely to succeed.