16 November 2001

Export subsidies are to be cut back but not eliminated

By Philip Clarke

EXPORT subsidies on agricultural goods are to be cut further, but not necessarily eliminated, under a new round of world trade talks to start next year.

Representatives from 142 countries launched what will be known as the Doha Round of trade negotiations late on Wed, Nov 14 following six days of discussion. The new round is scheduled to last three years.

As expected, export subsidies were one of the main sticking points at the World Trade Organisation meeting this week. The original text called for "reductions of, with a view to phasing out, all forms of export subsidies".

This was fiercely resisted by EU trade commissioner, Pascal Lamy, who said this wording suggested their elimination was the pre-determined end-point of the negotiations.

The EU is wary that, despite the Agenda 2000 reforms, it will still need access to export subsidies for some products to help bridge gaps between EU and world prices.

Initially Mr Lamy was supported by Japan, Norway and Switzerland, but one by one these countries backed off, leaving the EU isolated. But such was the political capital invested in the issue by Ireland and France in particular, that a compromise had to be found.

This involved changing the words in the final document to a call for "a reduction, with a view to phasing out", of agricultural export subsidies, "without prejudging the outcome of the negotiations". That gives the EU, US and Cairns group free rein to continue haggling over the issue in the years ahead.

Depending on the extent to which export subsidies eventually have to be cut, the EU may well have to lower internal support prices further, to close the gap with world prices. But any cuts may be compensated, by increasing direct payments to farmers.

The EU compromise on export subsidies also allowed it to win concessions in other parts of the deal, in particular adding more substance to the environmental aspects of the new trade round.

This was despite fierce opposition from India, which sees any link between environmental standards and trade as a new form of protectionism.

The Doha Round will also deal with liberalising trade in services and reducing industrial tariffs. WTO director general, Mike Moore, described the launch of a new round as "a historic achievement", that would send a "signal of confidence" to a world facing recession. &#42

World trade in agricultural commodities received a boost this week when ministers launched a new trade round aimed at cutting tariff barriers and export subsidies.