24 May 2002

Bush set for afrosty welcome

US president George W Bush arrived in

Berlin this week on the first leg of his mini

European tour. Combating terrorism is likely

to top his list of priorities. But, his EU hosts

are more likely to press him on trade concerns,

as Europe editor Philip Clarke explains

SIX months ago US president, George W Bush could have expected the warmest of receptions as he set off on a tour of European capitals.

In the aftermath of Sept 11 he would have enjoyed a massive show of political support, as western leaders clubbed together to counter the threat of international terrorism.

But things have moved on apace and Mr Bushs reception in Berlin, Paris and Rome is likely to be much frostier.

It is in the area of trade policy that the greatest concerns lie smouldering, fuelled by the USs "do as I say, not as I do" approach.

The list of grievances is a long one, including ongoing spats over beef hormones and GM crops, the US system of corporate taxes to boost exports and, most ostentatiously, the recent introduction of 30% import tariffs to protect the inefficient US steel industry.

To that list now add agricultural policy, as represented by the US Farm Bill.

Signed off by Mr Bush less than a fortnight ago, the new legislation will stuff another $45bn (£31bn) into US farmers pockets over the next six years. With a raft of marketing loans, direct income aids and deficiency payments, plus new supports for dairy, wool and pulse producers, that amounts to a 62% increase in current farm spending.

The policy has drawn stinging criticism from around the world. In an unprecedented move, leaders of the World Trade Organisation, the International Monetary Fund and the World Bank last week put out a joint statement criticising "any increase in protectionism by any country".

The EU has been more vitriolic in its condemnation, accusing the US of blatant hypocrisy, flunking its responsibilities and hurting developing countries.

Clearly the US is not going to roll over. Senior politicians have been quick to claim they are still committed to free trade. That is hard to swallow.

Already the US supports its farmers to the hilt. In terms of direct producer supports, it currently pays out around $20,000/farmer (£13,800/farmer) compared with $14,000/farmer (£9650/farmer) in the EU. Add in such things as export aids and the US Food Stamp policy, and the cost to US taxpayers comes to $338/head (£233/head) compared with $276/head (£190/head) in the EU.

These imbalances can only be further tilted in the USs favour by the latest subsidy increases, leading to more trade distortion and less market orientation.

The US claims that, since its direct payments are linked to historic production, they are decoupled and do not count against its WTO limits. But the EU notes that planting figures are being updated to include the crop currently in the ground and the payments are therefore recoupled.

The US also claims that its deficiency payments are non-product specific, since farmers do not actually have to grow the crop to claim the subsidy. But the EU says they clearly are, since they are based on target prices for specific crops.

All this will have to be clarified during the course of the ongoing Doha round of WTO negotiations.

Meanwhile, if president Bush is made to feel a bit uncomfortable as he moves from European capital to European capital, he only has himself to blame. &#42