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Doha Review: New U.S. Offer, Food Inflation (Biofuels) and the CRP
Doha
Alan Beattie reported earlier this week at the Financial Times Online that, “The US on Tuesday made the first significant move in this week’s politically fraught meeting of trade ministers in Geneva, cutting its proposed ceiling for farm subsidies to $15bn a year.
“The move would reduce US farm subsidies deemed to distort international trade by about $2bn (€1.3bn, £1bn) compared with the current offer in the so-called ‘Doha round’ of trade talks, much lower than the present ceiling of about $48bn.
“But it would be comfortably above the US’s recent real spending in trade-distorting farm support, estimated at $7bn-$9bn a year.”
Mr. Beattie explained that, “The offer would require substantial rewriting of the ‘farm bill’ – the generous five-year programme of agricultural subsidies recently approved by the US Congress, which overcame an attempted White House veto.
“Brazil and India, two of the US’s main negotiating partners in the struggling World Trade Organisation talks, dismissed the offer as inadequate. ‘This is a nice try but it is not enough,’ said a spokesman for the Brazilian foreign minister, Celso Amorim. ‘It is not the final offer they can do.’
“The European Union, which will be under pressure to reduce its subsidies if the US offers bigger cuts, was more supportive, saying it was a ‘reasonable offer at this stage, which will … have constraining effects’”.
The FT article noted that, “[US Trade Representative Susan Schwab] said the offer was conditional on other countries opening their markets to US farm exports and agreeing not to launch litigation against US farm payments at the WTO, as has happened repeatedly. One such case, brought by Brazil, forced the US to revise its controversial cotton support subsidy programme.” And, the article added that, “The US offer did not change its existing proposal to limit the most trade-distorting form of subsidies to an annual $7.6bn a year, nor did it introduce new limits on the amount of money spent on any specific crop.”
To listen to an audio replay of a press conference from Tuesday with Amb. Schwab and USDA Under Secretary for Farm and Foreign Agricultural Services Mark E. Keenum, in which the U.S. offer is discussed in more detail, just click here (MP3).
To listen to a clip from the press briefing where Mr. Beattie asked Amb. Schwab if she ran this offer past the U.S. farm lobby and the Congress and what the reaction was, just click here (MP3- 3:00 minutes). The clip also includes comments from Under Secretary Keenum.
In addition, a reporter also inquired about the U.S. offer and the relationship with the new ACRE program, an optional revenue-based program contained in the 2008 Farm Bill. To listen to this transaction, which also included comments from Dr. Keenum, just click here (MP3- about 2:30 minutes).
Meanwhile, Peter Shinn reported at Brownfield on Tuesday that, “During a press conference, Schwab told reporters the U.S. would be willing to trim its offer on how much it could spend each year on trade-distorting domestic farm programs from around $17 billion to no more than $15 billion in exchange for concessions on tariffs by developing nations. According to Schwab, if a deal is done on the basis of that offer, Congress would have to go back to the drawing board on at least some portions of the farm bill.
“‘They would require adjustments to our farm programs,’ Schwab said. ‘We are prepared to make these changes, but we must also have assurances that if our programs meet these disciplines they are not subject to subsequent legal challenges that reduce them further.’
“Senate Ag Committee Chairman Tom Harkin issued a statement Tuesday saying he welcomed Schwab’s new offer on farm program spending. But Harkin also said Schwab’s proposal has to be met by ‘comparable initiatives on the part of other key WTO members.’”
Mr. Shinn noted that, “[National Farmers Union President Tom Buis] issued a statement decrying the Schwab proposal as essentially a sell-out of U.S. ag producers.”
DTN Political Correspondent Jerry Hagstrom reported on Tuesday (link requires subscription) that, “Senate Agriculture Committee ranking member Saxby Chambliss, R-Iowa, was more cautious of the U.S. offer. ‘I am watching the negotiations very closely,’ Chambliss said in an e-mail. ‘Ambassador Schwab’s offer is conditional on our trading partners stepping up to the table and offering significant market access offers. The United States is offering to reduce domestic support from a current ceiling of $48 billion to $15 billion. I would expect our trading partners would make a similarly ambitious and reciprocal offer on lowering their tariffs.’”
The DTN article stated that, “Senate Budget Committee Chairman Kent Conrad, D-N.D., said, ‘Ambassador Schwab appears to be negotiating against herself. She’s certainly not negotiating in the interests of hard-working family farmers in North Dakota and elsewhere in the country. Under her position, family farmers stand to lose the farm income safety net and get nothing in return. Once again, this Administration’s trade negotiators have made unilateral concessions with only a hope that our trading partners might later match those concessions. In the past, other countries have just pocketed our concessions and demanded even more from the U.S. while refusing to open their markets to our agricultural exports. There’s an old saying, ‘fool me once, shame on you; fool me twice, shame on me.’ Ambassador Schwab should be ashamed.’”
The Associated Press reported on Tuesday that, “Washington is currently allowed to distribute over $48 billion in subsidies linked to price, production and other trade-distorting criteria. It agreed last year to come to at least below $16.4 billion in a move that generated criticism from American farm groups. The European Union and Japan are also offering steep cuts in subsidy limits.
“‘Anyone who understands farm programs will understand how significant the reduction is implied by this number,’ said Schwab, noting that U.S. subsidies have exceeded her proposed limit in seven of the last 10 years.
“Without a global trade deal that includes the new U.S. offer, they may exceed $15 billion again as part of the United States’ new, five-year farm bill worth nearly $300 billion that Congress passed over President Bush’s veto.”
An update posted on Wednesday at the International Centre for Trade and Sustainable Development explained that, “Under the WTO’s complex rules for classifying farm subsidies, OTDS [overall trade-distorting support] is made up of three components: ‘amber box’ payments (the most distorting kind), ‘blue box’ payments (less distorting), and ‘de minimis’ (could be just like the amber box, but allowed up to a certain percentage of the value of agricultural production).
“The US’ new offer has left its proposed future cap on amber box payments untouched at $7.6 billion, a figure that commands enough acceptance among Members to be present in the current draft text without brackets. Therefore, the additional $2 billion cut in allowable subsidies entailed by the $15 billion offer would come from Washington’s blue box and ‘de minimis’ spending entitlements.
“However, the $2 billion reduction to these latter two components of OTDS may not ‘do very much’ to place real new constraints on US spending, suggested David Blandford, a professor of agricultural and environmental economics at Pennsylvania State University. Because of the way US farm programmes are designed, most of the price-sensitive payments are in the amber box, he explained. On the other hand, Blandford said, the US might run into trouble meeting its amber box limit if it notifies payments under a new, potentially expensive revenue stabilisation plan called ACRE as belonging in that box.”
Bloomberg writer Jennifer M. Freedman reported on Tuesday that, “Some countries quickly dismissed the U.S. offer as inadequate. Argentine Foreign Minister Jorge Taiana said he was ‘disappointed’ by the proposed cut. Pablo Solon Romero, Bolivia’s chief negotiator, said that with U.S. trade-distorting payments amounting to $7 billion last year, the offer to cap such subsidies at $15 billion ‘means they are not reducing anything in reality.’”
Reuters writers Robin Pomeroy and Doug Palmer reported on Wednesday that, “India welcomed on Wednesday an offer by the United States to limit its farm subsidies as part of efforts to save a global trade deal.
“‘The first thing which we must take note of and must appreciate is that the United States is moving,’ Indian Commerce Minister Kamal Nath told reporters at last-ditch World Trade Organisation talks in Geneva over the Doha trade round.
“Nath’s optimistic tone contrasted with his reaction earlier on Wednesday to the U.S. offer which he called ‘wholly inadequate’. Washington had to give more but the move showed the deadlock had been broken, he said.”
**
In a broader summary of Tuesday’s action in Geneva, an update posted at the WTO Online stated that, “The first day of ‘Green Room’ talks among a representative group of ministers produced no new ideas, but provided a clearer understanding of key issues and constraints, WTO Director-General Pascal Lamy reported to a morning meeting of the full membership today.”
And on Wednesday, a WTO update stated that, “Director-General Pascal Lamy, at the informal Trade Negotiations Committee meeting on 23 July 2008, characterized the second round of consultations held the day before as ‘constructive, with a strong commitment to engaging directly and in good faith’. He said he plans to start ‘working on key issues in agriculture and non-agricultural market access in smaller groups, together with the Negotiating Groups and General Council Chairs’”.
Reuters writers Laura MacInnis and William Schomberg provided an overview of the talks from yesterday and reported that, “Talks to save a global trade deal struggled into a third day on Wednesday with emerging economies like Brazil and South Africa saying the United States had not done enough on farming to justify moves by them.
“Without a breakthrough in the coming days, the World Trade Organisation’s Doha negotiations risk further years of delay.
“On Tuesday, the United States said it was ready to cut its annual ceiling on trade-distorting farm subsidies to $15 billion — a level lower than its spending in seven of the last 10 years — in order to kick-start the talks.
“But India, Brazil and other big developing countries said Washington had to make deeper cuts before they would offer concessions of their own because the ceiling represented virtually double the level of U.S. farm subsidies last year.”
More specifically with respect to Brazil, Dow Jones writer Tom Murphy reported yesterday that, “Although professing optimism about this week’s crucial international trade negotiations in Geneva, Brazilian President Luiz Inacio Lula da Silva said Wednesday his country would veto any agreement that doesn’t provide for greater flexibility for trade in agricultural commodities.
“‘A good accord under the Doha Round is one in which the Europeans adopt a more flexible approach to trade in agricultural commodities and in which the United States reduced its agricultural subsidies,’ the president said in remarks published by the government’s official Agencia Brasil news service. ‘Otherwise, there is no Doha deal.’”
An update posted today at the International Centre for Trade and Sustainable Development, which summarized yesterday’s developments in Geneva, stated that, “Seven of the world’s largest trading powers emerged front and centre in the struggling talks at the WTO on Wednesday, meeting all afternoon and late into the night in an attempt to find a way out of the impasse in governments’ push for breakthrough deals on agricultural and industrial goods trade.
“‘We made progress, but not enough,’ said Indian Commerce Minister Kamal Nath after the meeting, which ended past 3am. ‘Not enough for an agreement, but not no progress, for it to fail.’
“EU Trade Commissioner Peter Mandelson told reporters that there had been progress ‘in the sense that after a great deal of very hard work, some issues are nearer solution.’ He declined to comment on the issues in question.
“Brazilian Foreign Minister Celso Amorim sounded a more sombre note, saying that things were still fluid, and that ‘there is no balance yet.’”
An additional overview of yesterday’s Doha news has also been posted at the WTO Online.
***
Joe Guinan and Courtney Phillips-Youman of the German Marshall Fund, have recently provided a more detailed analytical look at some of the factors associated with Doha in an easy to read opinion brief entitled, “If Not Now, Then When?”
A summary of the brief indicated that, “As ministers gather around the WTO negotiating table the week of July 21 in Geneva, there are troubling questions about whether the deal that is at hand is really worth doing and whether it is even possible to conclude an agreement at present, given the political constraints-especially those associated with a U.S. presidential election year.
“This opinion brief argues that Doha skeptics are missing the critical importance of a WTO agreement in terms of imposing new disciplines and binding current practice in trade in agriculture, industrial goods, and services, and that there are large benefits to be had from an agreement on trade facilitation and from ensuring the continuing trade relevance of Aid for Trade. Waiting is not a good option, as upcoming elections around the world suggest that the political calendar for Doha will become more not less unforgiving.”
Food Inflation
The Wall Street Journal reported today that, “The U.S. Agriculture Department said Wednesday it expects U.S. food prices to climb an additional 4% to 5% in 2009 as high grain prices continue to squeeze their way into the American diet.
“The 2009 outlook, the first by the department, is lower than the 5%-to-7.5% range issued by some private economists.”
The article stated that, “Prices of corn and soybeans have dropped 27% and 14% over the past month. Still, prices of these commodities remain twice as high as a year ago.”
DTN writer Todd Neeley reported yesterday that, “Though recent studies have blamed U.S. ethanol mandates and subsidies for pushing demand — and prices — for corn higher, a new Farm Foundation study suggests rising energy prices and a declining U.S. dollar are the main contributors to the increase in commodity prices.
“The July 2008 Farm Foundation report ‘What’s Driving Food Prices’ by Purdue University professors Phillip C. Abbott, Christopher Hurt and Wallace E. Tyner, said that ethanol industry supporters and others have it right when they point to rising oil prices as a corn price driver.”
New York Times writer David Streitfeld provided additional coverage of ethanol related issues in an article published in yesterday’s New York Times.
Mr. Streitfeld reported that, “The ethanol industry, until recently a golden child that got favorable treatment from Washington, is facing a critical decision on its future.
“Gov. Rick Perry of Texas is asking the Environmental Protection Agency to temporarily waive regulations requiring the oil industry to blend ever-increasing amounts of ethanol into gasoline. A decision is expected in the next few weeks.
“Mr. Perry says the billions of bushels of corn being used to produce all that mandated ethanol would be better suited as livestock feed than as fuel.”
In CRP developments, DTN writer Chris Clayton reported yesterday (link requires subscription) that, “With another court hearing over Conservation Reserve Program land slated for Thursday in Seattle, Secretary of Agriculture Ed Schafer has shifted away from suggestions earlier this month that a decision on whether to allow an early out of CRP land was imminent.
“Schafer had said before a hearing in the same court last week that he planned to make a quick decision on whether to allow early out without penalties. However, Schafer told DTN on Wednesday that the lawsuit brought by the National Wildlife Federation and the decisions by the federal judge in that case have complicated the situation.
“‘We’re not sure how it’s going to affect what we do in CRP in the short term or in the long run,’ Schafer said.”
Keith Good
