Half speed ahead in Doha Round

It's half speed ahead in the Doha Round agricultural trade negotiations after the US and EU tabled new offers, following by a compromise paper by the G-20 which was in part an attempt to reconcile their internal differences.

The US put the EU on the spot with a new offer on domestic subsidies which was launched with a fanfare with a Financial Times article by US Trade Representative Rob Portman. The offer was not quite as generous as it seemed as it would allow the controversial counter cyclical payments initiated by the US in the 2002 Farm Act to continue, but their size would be limited to a maximum $5 billion a year, compared with $7.6 billion at the moment.

This was enough to alarm Senator Saxby Chambliss, chairman of the US Senate's agriculture committee who sent a letter to US ag secretary Mike Johanns telling him not to sell out the store and in particular to do nothing that would lower the level of farm spending in the US. The Bush Administration would like nothing more than to cut the level of farm spending as one means of dealing with the huge US budget deficit.

The EU has also had its internal problems with France, backed by thirteen other member states, trying to limit the room for manoeuvre of trade commissioner Peter Mandelson to an extent that would have probably derailed the Hong Kong ministerial. However, the French were beaten back at an emergency meeting of the Council of foreign ministers, in itself an unusual event. However, the French remain hot under the collar under the issue and will no doubt cause more trouble as they did in the Uruguay Round.

The real sticking point remains tariffs with the EU calling for a maximum 50 per cent cut on the highest tariffs compared with a 90 per cent figure advocated by the US. As Agra Europe has commented, a 90 per cent cut would mean that the EU butter intervention price would have to be slashed by 25 per cent which would be a heavy blow for Europe's troubled dairy industry. However, the US points out that the current EU offer would lead to an average cut in European farm tariffs of 24.5 per cent, less than the 36 per cent average agreed in the Uruguay Round.

The US wants 'sensitive' products to be limited to 1 per cent of tariff lines, with the EU asking for up to 8 per cent. This would offer protection for around 160 EU tariff lines. Remember, for 'sensitive' read 'politically sensitive'.

The real horse trading is beginning, but there is still a long way to go before agreement is reached.