WTO talks to start, doubts on US subsidies

A crunch year for the beleaguered Doha trade negotiations begins today at the World Trade Organization with the United States having to prove whether it is genuinely committed to rein in its farm subsidies running into tens of billions of dollars.

Ahead of today's talks, US lawmakers have prepared a new farm bill that seeks to considerably enhance what are called the domestic farm subsidies to a level of over $200 billion for the next five years.

A big component of these subsidies includes counter-cyclical payments and market-assistance loan programmes which have already been condemned by the WTO's Appellate Body.

Despite growing calls and dispute challenges against these programmes, the US Congress appears to be in no mood to eliminate them.

"We are going to face continuing challenges for our domestic support programmes unless lawmakers make significant changes to their legislation to overhaul the farm bill," Keith Collins, the chief economist of the US Department of Agriculture, told Dow Jones last week.

Against this backdrop, the Chair for Doha Agriculture Negotiations, Ambassador Crawford Falconer, will seek guidance from 30 countries how to address the cuts and disciplines for different domestic farm subsidies. He will later move the consultations to issues in the other pillars "" market access and export competition.

In a move to facilitate final round of Room E consultations at the WTO, Ambassador Falconer circulated four working documents spelling out the central elements in the domestic subsidies.

The documents cover "overall reduction of trade-distorting domestic support, cuts in their tiered formula for the amber (most trade-distorting) box support, de minimis, and Blue Box (minimally trade-distorting)".

The chair has suggested the overall trade-distorting domestic subsidies for the US should stay between $13 billion and $16.4 billion arguing that there is no consensus on this level yet.

The developing country coalition G-20, led by Brazil and India, wants the US to agree for an overall trade-distorting domestic support of $13 billion and adopt tighter disciplines that will drastically reduce farm subsidies which are provided through the last US farm bill of 2002 that will expire in September.

The chair also proposed "the base OTDS shall be reduced by one third at the commencement of the implementation period" for the European Union, the US and Japan.

As regards reductions in the aggregate measurement of support (AMS) or the most trade-distorting amber box subsidies, the chair proposed ranges between 70 per cent cut for the European Union, 60 per cent for the United States and 45 per cent for other industrialised countries.

Besides, the US will have to indicate whether it is prepared to consider the changes proposed by the chair in regard to cutting down its product-specific subsidies for cotton, corn, rice, wheat, fruits and vegetables and so on.

But in the new farm bill, the US lawmakers chose not to rein in subsidies despite high international prices that do not warrant subsidies, analysts said.

If there is no favorable response from the US to the ideas suggested by the chair, then the Doha negotiations will end in a failure, trade envoys said.

"Clearly, the US will have to provide leadership to demonstrate that it is willing to set its house in order before it asks others to deliver on far reaching commitments in other areas of Doha trade negotiations," a South American trade envoy told Business Standard.