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EU offers to scrap farm subsidies if others do

(Tuesday, May 11, 2004 -- CropChoice news) -- Jeremy Smith, Reuters, 05/10/04: KILLARNEY, Ireland - The European Union is ready to eliminate its lavish subsidies on farm exports to galvanise sluggish world trade talks provided its main partners do the same, EU trade chief Pascal Lamy said on Monday.

Details of the proposed move, long demanded by critics of its generous farm subsidies, have been sent to members of the World Trade Organisation (WTO) just days before ministers from several WTO states hold a potentially crucial meeting in Paris.

The EU spends some 43 billion euros a year on its farm policy, nearly half of its entire annual budget. By far the largest proportion of this goes to France. It has faced mounting pressure to abolish its export subsidies.

Lamy said the offer depended on the EU's WTO partners matching their move, which the United States has indicated it is willing to do.

It also required progress in the two other key areas of the farm negotiations, domestic farm support programmes and market access.

"If an acceptable offer emerges on market access and domestic support, we would be ready to move on export subsidies," Lamy said in the letter, a copy of which was obtained by Reuters.

Up to now, European unwillingness to eliminate these subsidies by a set date has been a major obstacle to reaching a deal on agriculture, widely viewed as the key to unlocking the WTO's troubled Doha Round of trade liberalisation talks.

The round, whose successful conclusion economists say would give a huge boost to the world economy, was supposed to have been wrapped up by the end of this year.

That deadline, however, is certain to be missed and in its place negotiators have set themselves the goal of reaching outline deals, or frameworks in WTO parlance, in the main areas by the end of July.

"A much positive atmosphere has now emerged in (the) Geneva (talks)...This letter sets out what we see as the key areas where more movement is needed," Lamy wrote.

But diplomats from EU trade partners reacted cautiously although they welcomed the move -- saying it would have only a limited impact because it was simply a public announcement of something the bloc had long ago been signalling in private.

"Of course it is good news but I do not see it making an awful lot of difference," said one Geneva diplomat from a leading developing country.

The bloc insists it has already made massive strides in reducing the worst of its trade-distorting farm support -- market price guarantees and export subsidies -- in two reforms in 1992 and 1999 and also in major changes agreed last June.

On market access, Lamy said the EU was sticking to its guns for a "blended" formula, which would allow the 25-nation bloc and countries like Japan with expensive domestic farm industries to keep high tariffs on some politically sensitive goods.

But the G20 group of developing countries, led by Brazil, India and China, has firmly rejected this approach because it says it would asks too much of the developing countries and too little of the richer states.

The formula for market access, the extent to which countries open their markets to the goods of others, will be at the centre of talks in Paris at the OECD, which kick off on Wednesday with meeting of technical experts.

Some 28 trade ministers, including Lamy and U.S. trade chief Robert Zoellick, will meet on Thursday over dinner and on Friday afternoon for what will be the last chance to bring so many ministers together before the July deadline for the frameworks.