9 February 1996

Area payments in the spotlight at trade talks

By Philip Clarke

AREA aid and headage payments will be in the firing line when the next round of world trade talks gets under way in 1999.

Addressing this weeks NFU annual meeting, Australian ambassador to the World Trade Organisation in Geneva, Don Kenyon, stressed that the recent GATT deal was "only the first step to a freer and fairer world trade in agriculture".

It had been right to start by attacking intervention prices because these were the most distortive forms of support. But the next round of talks should lead to further decoupling of subsidies from production.

Spelling out the likely negotiating position of the Cairns group, he said he hoped product specific area aid and headage payments would be removed from the "green box" of support measures, which are currently exempt from cuts.

"The category of exempt payments should be tightened to ensure they are truly decoupled," he said. That would also mean removing investment aids and regional subsidies which Mr Kenyon described "as a dirty shade of green".

The next round would also lead to deeper cuts in import tariffs and export subsidies, he predicted. "The Cairns group of countries hope and expect that future negotiations in the World Trade Organisation will lead to a situation where export subsidies in agriculture no longer exist."

Though accepting that further change was inevitable, senior Brussels official, Russell Mildon said the EU should use the "window of stability" it has until 1999 to establish a consensus.

The commission had already dismissed the "do nothing" option, not least because there are already 11 countries on the official waiting list to join the EU. It had also rejected the idea of radical reform – ending all price support and phasing out compensation.

But a middle path would have to be taken, extending the 1992 CAP reforms and "gradually weaning farmers off the old-fashioned subsidisation process".

"If agriculture is to thrive we have to be able to export. But Geneva wont allow us to do this by increasing subsidies," he said. It would have to be achieved by providing quality products at attractive prices with consistent deliveries.

NFU president Sir David Naish was optimistic farmers would respond positively and achieve success.

But a number of delegates expressed concern about the path ahead. Philip Bennion, county chairman for Staffordshire, pointed out that, unlike the Australians, British farmers did not have a "factory floor" to farm on. Instead they had "suburban man" to contend with, which led to additional costs.

Richard Campbell, pig committee chairman, added that experience of free trade in the pig industry showed what damage price volatility could do. &#42

David Naish: Farmers must rise to the challenge in a positive way.

Don Kenyon: Some subsidies could be acceptable,

so long as they break the link with production.

Russell Mildon: Some form of price stability is essential and will form a basis in future trade talks.