Bridges Weekly Trade News Digest • Volume 13 • Number 20 • 3rd June 2009
US Export Subsidies Condemned by Developing Countries, Exporters
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The recent reintroduction of export subsidies on US dairy products has prompted a stinging response from developing countries and exporting countries at the WTO. The Cairns Group of agricultural exporters and the G-20 developing country group both issued statements last week condemning the move, which they said could harm producers and traders at a time of economic crisis.
The subsidies send a “wrong message to the world,” the Cairns Group declared, denouncing what they described as a “backwards step” on the part of the US. The G-20 said the move was ”a worrisome sign” that could hurt “unsubsidised farmers in the developing world.”
In a 22 May statement, US Agriculture Secretary Tom Vilsack singled out “the reintroduction of direct export subsidies by the European Union earlier this year” as a justification for the support payments, which will be made under the Dairy Export Incentive Programme (DEIP) of the US Department of Agriculture. The EU introduced support for some dairy products, as well as frozen poultry and eggs, at the start of the year (see Bridges Weekly, 28 January 2009, http://ictsd.net/i/news/bridgesweekly/38827/).
“Protectionism spreads quickly,” cautioned the G-20, which warned against the rise of ‘tit-for-tat’ measures across the world. If replicated by other countries, the US move could “aggravate significantly the world economic situation” and the hardship experienced in the developing world, the group said.
While Vilsack emphasised that the subsidies were “fully consistent with our WTO commitments,” the G-20 also warned against the rise of what they described as ‘murky protectionism’ - “not directly violating WTO obligations and yet potentially weakening the WTO system at a time of economic crisis.” The Cairns Group bluntly declared that whether the subsidies complied with WTO rules was “not the point”: raising tariffs, domestic support and export subsidies towards their maximum levels “would undermine the effectiveness and credibility of the WTO system,” the group said.
According to the US statement, the DEIP allocations will include 68,201 metric tons of nonfat dry milk, 21,097 metric tons of butterfat, 3,030 metric tons of various cheeses and 34 metric tons of other dairy products.
Vilsack also affirmed that “the Obama Administration remains strongly committed to the pledge by the Leaders of the Group of Twenty to refrain from protectionist measures” - a reference to commitments to tackle the global economic downturn that were made last November and again in April by 20 major trading powers (see Bridges Weekly, 8 April 2009, http://ictsd.net/i/news/bridgesweekly/44813/). The Cairns Group nonetheless called for the US and EU to “show better leadership, particularly during this time of global financial and economic crises.”
New blow for the Doha Round
The export subsidy announcement was seen by Geneva-based negotiators as another blow for the faltering Doha Round of trade talks, which have been battered by repeated setbacks since its launch in the Qatari capital in 2001. Confidence in the negotiations is once again at a low after discussions broke down last July, despite consensus apparently emerging on a raft of controversial questions.
The Cairns Group emphasised that the US and EU, along with other Members, have agreed “to completely eliminate export subsidies by 2013 as part of an overall trade deal.” However, some observers warn that this commitment might only be respected if an accord can be drawn up across all areas in the talks.
A new proposal from Uruguay seems aimed at jump-starting the agriculture negotiations, which some delegates indicate have slowed down since the departure of the previous chair of the farm trade talks, Ambassador Crawford Falconer (see Bridges Weekly, 22 April 2009, http://ictsd.net/i/news/bridgesweekly/45440/). The document seeks to highlight areas where “technical engagement” could move forward work on the draft ‘modalities’ text which is meant to serve as the blueprint for an eventual Doha deal – such as on the notification of domestic support commitments, or the number of ’sensitive products’ that developed countries would be allowed to shield from tariff cuts in exchange for enhanced market access through larger tariff quotas.
The Uruguay submission also seems aimed at refocusing delegates’ attention on the modalities framework that would provide guidance on the concessions to be made, implicitly rebutting an informal US-Canadian suggestion that countries move directly to detailed negotiations on a tariff line basis. Developing countries, as well as some of the smaller developed countries, have expressed concern that this approach could allow large trading powers to wring extra concessions from weaker WTO Members, without giving much in return.
In remarks to Bridges, one developed country delegate also acknowledged that developing countries might see the modalities draft as allowing them to “discipline the law of the jungle.”
However, at last week’s General Council meeting, WTO Director General Pascal Lamy appeared to endorse an approach that built on the US-Canadian idea, by outlining a twin-track approach to concluding the talks (see Bridges Weekly, 27 May 2009, http://ictsd.net/i/news/bridgesweekly/47407/). This would have Members continue work on the modalities framework whilst simultaneously exploring concessions on a bilateral or plurilateral basis.
While delegates remained largely pessimistic about the chances of an early breakthrough on a Doha Round deal, some hoped that the upcoming meeting of trade ministers from the Cairns Group in Bali, Indonesia, could help spark progress in the troubled talks. In addition to ministers from the grouping, US Trade Representative Ron Kirk is also expected to attend.
ICTSD reporting.
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