SAN ANTONIO, Texas – It is hard for a Canadian farmer to know where to point the finger when it comes to assessing blame for trade-distorting agricultural subsidies.
The United States maintains that the Europeans have by far the richest package of supports.
Yet many Canadian farmers have first-hand experience competing with American products shielded from market realities through that country’s lucrative farm programs.
So which competitor is the worst offender?
It depends on how you look at it, said Paul Drazek, a trade policy consultant from Washington, DC.
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He told delegates attending the North American Grain Congress how on a per acre basis European Union supports dwarf those of the U.S. government.
He said the EU doles out $398 Cdn in trade-distorting domestic supports for every acre of land in production. That is more than six times the $62 per acre spent in the United States.
On his next slide, Drazek showed supports calculated on a per farmer basis.
In that one, the U.S. jumped ahead of the EU by providing $23,923 per farmer compared to $18,430. It is a chart that often takes American producers by surprise, he said. They tend to have the “knee-jerk reaction” of blaming Europe for all the troubles facing the grain industry.
Although both charts provide interesting comparisons, neither measure has much meaning when it comes to World Trade Organization talks.
In that arena, the only number that counts is the aggregate level of trade-distorting supports and the EU is definitely the biggest spender in that department.
Europe’s WTO limit for that category of subsidies is $92 billion per year compared to $22 billion in the U.S., although neither region is close to its limits under current spending patterns.
But Drazek warned producers that both spending caps will be dramatically reduced if the Doha round of WTO talks is ever completed because the rest of the world is not about to let domestic supports slide off the negotiating table.
Agricultural subsidizers are becoming a voice in the wilderness at WTO talks.
“There are very few countries in the world that do actually provide support to their farmers. They are either European or North American or they’re Japan. It has gotten to be about that limited,” said Drazek.
So the cuts are coming and when they arrive it will be the U.S. that bleeds most profusely, said the former assistant to the U.S. secretary of agriculture for international affairs.
That’s because the Europeans have taken steps to insulate themselves from the spending cuts since 1992 when they adopted a series of spending cap reforms.
After the Uruguay round of WTO talks the EU implemented the reforms designed to shift spending out of what is known as the amber box, the most trade-distorting category of farm supports, and into the less offensive blue and green box categories.
The U.S., on the other hand, is only now contemplating how it can make its next farm bill more trade-friendly once the current one expires in 2007.
By failing to make substantive changes earlier in the game, the U.S. has left itself more vulnerable in the Doha round of discussions.
“The country that will feel the most pain if there is an agreement on the reduction of trade-distorting subsidies is the United States,” said Drazek.
