Rich countries agree to cut agric subsidies
A HISTORIC decision towards assisting in making the developing countries grow, was at the weekend taken in Geneva with rich nations agreeing to cut subsidies on agriculture to their farmers.
The agreement, which was reached at the end of World Trade Organisation (WTO) meeting, saw the 147 member-states okaying a cut in export subsidies and many other forms of financial support for farmers.
The work-plan reviving deadlocked global trade talks, which was adopted by the WTO member states after days of hard bargaining, sets the tar`get of eliminating or reducing subsidies in what is likely to be years of tough negotiations to come.
Decades into the drive for international free trade, the decision marks the first time that governments have accepted to anchor elimination in a global agreement, trade sources said.
"We have agreed to make historic reforms in global agricultural trade," United States (U.S.) Trade Representative, Robert Zoellick, told journalists.
"This is the beginning of the end for subsidies," Brazil's Foreign Minister Celso Amorim, who was leading the G-20, a group of developing countries at the talks in Geneva, said.
The Doha round will now aim to wipe out export subsidies, which have been a 2.8 million euro (3.3 million dollar), a year pillar of the European Union's help to farmers, and make more cuts in protective tariffs.
Poor countries, and the EU's economic competitors, had been demanding the step for years.
Wealthy nations were reluctant to make it because many of their farmers rely on support to make ends meet while prices were skewered at low levels.
Developing nations blame export subsidies for artificially driving down prices, making their produce uncompetitive or diminishing the value of one of their few potential export earners.
But the WTO went further by advocating tariff cuts, restricting export credits -- a form of loan-subsidy that U.S. pays to some farmers -- and also charting cuts in domestic support that might distort international competition.
Domestic support accounts for a larger proportion of the EU's budget than export subsidies.
Zoellick predicted that the agreement would lead to cuts in domestic support for agriculture of a greater magnitude in the first year than the whole Uruguay round of trade liberalisation in the 1990s.
"In the agreement, it's clear that support given to farm exports will disappear first, but the process leading to the disappearance of domestic support has also started," Amorim told journalists.
Ultimately, the package will not only affect the 25 EU nations, the U.S. and state trading enterprises in Canada or Australia, it will also hit wealthy farm importers in the G10 group, like Japan, South Korea and Switzerland, with small but highly supported and protected farming.
On July 21, France's President Jacques Chirac dismissed an "unacceptable" WTO proposal and sharply criticised the European Commission for selling out.
Agriculture Commissioner Franz Fischler, one of the architects of the recent subsidy-reducing reform of EU farming, said domestic support levels would remain untouched by the WTO talks.
"We can assure our farmers that there's no risk we cannot keep our reforms as they are," he said yesterday, as France rallied around the EU's position.
Switzerland's President and Economics Minister, Joseph Deiss, was less reassuring, warning his agricultural community of tougher times ahead.
"We must recognise that it will be asked to contribute even more to restructuring," he said.
The U.S. sought to highlight improved access to other markets for its farmers rather than the limits on export credits or support.
"The point is that our farmers support open markets, they face high tariffs in other countries, so this is a part of an overall package and we believe this is a great deal for American farmers," a U.S. official said in Geneva.
In a written statement released after the WTO deal, Zoellick said: "President George W. Bush confounded conventional wisdom by empowering me... to make trade success a priority even in an election year."
