The recent proposal over farm subsidy by the U.S. government came under fierce criticism in Europe for not reducing subsidies enough to ensure breaking the deadlock in global free trade talks. The European Union in response to the proposal said that the U.S. needs to make more ambitious subsidy cuts to achieve success at Doha round talks. The proposal outlined that the U.S. would cut agricultural spending by $18 billion over the next five years.
The U.S. farm subsidies have been the main controversial point in the World Trade Organisation negotiations for developing nations. The developing nations led by Brazil and India argued that the current farm subsides given by the U.S. government prevent true global competition. The EU, Brazil and India want the U.S. to cut its farm subsidies by around $8 billion a year. While at the present level the U.S. farm subsidies hovers around $22 billion.
On the other hand, the Bush administration insists that it can only cut so much until others, pointing towards EU, reduce their tariff rates significantly. As of now, the EU has proposed to reduce its tariff rates by an average of 54 percent, which seems to be acceptable by the developing nations but being resisted by America.
As a matter of fact, at present the U.S. government’s farm bill authorizes to provide $22.5 billion a year but last year the government has used only $11 billion of that amount. Therefore, there is a clear signal that the difference between the amounts ensures that the U.S. could improve its offer without reducing actual subsidies, as the European nations and developing nations have demanded.
The EU trade officials while describing the proposal as modest criticized that they did little to end generous subsidies for dairy and sugar production that were obstructing the global trade talks and the view was shared by Australian and Brazilian negotiators.
The EU spokes person Michael Mann said that ‘the proposals assume that commodity prices will remain at their current high levels. If so, U.S. farm support will be lower. But if price trends change, trade distorting farm support would rise again under these proposals’.
