The U.S. and the European Union, the world's biggest agricultural exporters, are at loggerheads over how to move forward on reducing farm...

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The U.S. and the European Union, the world’s biggest agricultural exporters, are at loggerheads over how to move forward on reducing farm subsidies. Other players, most notably the so-called Group of 20 nations including India, Brazil and China, have their own ideas.

The G-20 countries appear to be the ones to watch at the Hong Kong talks this week. Unless they are appeased on agriculture, the talks are likely to fail, just like earlier WTO summits.

The EU also bears watching to see if it will give up more on agriculture to reach agreement on cutting developing nations’ tariffs on manufactured goods.

Each of the main participants has made its own offer, proposing changes in the different categories of subsidies recognized under WTO rules — known as the green, amber and blue boxes (see accompanying diagram).

For example, in negotiations on the amber box, the most trade-distorting payments, the U.S. proposes to cut its subsidy limit for all farmers by 60 percent, to $7.6 billion, from its existing cap of $19.1 billion. But the U.S. currently spends less than its cap — only $14.4 billion — so the actual cut would be about 47 percent.

The EU has proposed cutting its ceiling by 70 percent to $26.5 billion, from its current cap of $88.2 billion. But compared with the $36 billion it currently spends, the proposed cut would amount to just 26 percent.

The U.S. wants the EU to cut its ceiling on amber-box payments by 83 percent, capping them at $15 billion.

What is the World Trade Organization?

The WTO is a multilateral organization that sets and enforces rules for about 97 percent of world trade. Established in 1995 as a successor to previous trade agreements, the Geneva-based organization provides a forum for the 149 member countries to negotiate standard rules simplifying and enhancing trade.

To join, countries often must alter their trade policies to bring them into line with other members.

When members disagree on how trade rules are being applied, the WTO can decide who’s right and grant the winner the right to impose trade sanctions — usually tariffs — on the other. Boeing and Airbus have filed such a case over government subsidies.

The WTO agreements are available online at

“We’d be taking them from 4-to-1 down to 2-to-1,” said an official with the U.S. Trade Representative’s Office, describing how the U.S. proposal would bring the two sides closer to parity in allowed subsidies.

But the EU is balking.

“The favorite blood sport of trade negotiators is to go after the EU on its agricultural policy,” said Anthony Gooch, a European Union spokesman.

He said there is little more the Europeans can do, in part because France and other countries think the EU proposal already goes too far.

Gooch also said large developing nations like Brazil take the position that since this round of talks is supposed to focus on helping developing countries, they don’t need to offer much, and that the EU should offer more. “We haven’t seen the color of their money,” he said.

Similar strictures apply to blue-box payments, farm supports that are not limited by current WTO agreements.

The U.S. doesn’t make payments in that category but considers about $6 billion in so-called countercyclical payments as qualifying. It would cut those to $5 billion, if the EU would cut its estimated 2005 blue-box payments of $20 billion to $8.5 billion.

Neither side’s offer would limit payments in the green box, which could expand to keep farmers like Walla Walla wheat grower Chris Shaffer from losing much income.

It may seem that such plans are deceptive to developing countries, because the rich countries would still be propping their farmers up. Developing countries, while not seeking caps on green-box payments, want to take a hard look at what programs would qualify.

But the U.S. and EU proposals aren’t as insincere as they sound.

Amber- and blue-box money encourages farmers to overproduce commodities like corn, wheat and soybeans — flooding world markets and driving down prices. Farmers in developing countries oppose such subsidies, saying they can’t compete with the low prices and receive little or no subsidy from their poor governments to compensate.

“The U.S. proposal is seen as constructive by the G-20,” said Jeffrey Schott, a WTO expert at the Institute for International Economics, a nonprofit think tank in Washington, D.C.

“And the U.S. saw the G-20 proposals as constructive. The Europeans fell short, and that’s acting as a very substantial drag on the negotiations,” he said.

Officials from Brazil and India have expressed disappointment with the EU offer, particularly its modest tariff cuts. Without further EU concessions, there is unlikely to be a deal in Hong Kong, and that could jeopardize the goal of reaching a final trade deal next year.

Ministers from another big bloc, the Asia-Pacific Economic Cooperation group, said they, too, are hoping for further EU cuts in tariffs and to eliminate subsidies by 2010.

Without that, observers fear another failed meeting.

Alwyn Scott: 206-464-3329 or