Reductions in domestic farm subsidies outlined in the new World Trade Organization framework agreement amount to little, according to a high-ranking American agriculture official.
J.B. Penn, U.S. undersecretary for Farm and Foreign Agricultural Services, told a Reuters reporter last week the 20 percent reduction in agriculture supports agreed to in Geneva, Switzerland, on Aug. 1, is tantamount to a paper cut.
“The key is we’re talking about a cut in permitted levels, not actual levels,” he said.
WTO rules permit the U.S. to spend up to $49 billion annually on trade-distorting farm subsidies, but actual expenditures were less than $20 billion in 2003.
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“You can cut 20 percent from your permitted level and not cut anything at all,” Penn told Reuters.
His comments prompted one Canadian farm leader to question what Canada accomplished at the WTO negotiations considering the agreement restricts how the Canadian Wheat Board operates and potentially threatens its export monopoly.
“That in effect means that our competitors who cobbled together Section 18 of this framework agreement really don’t expect to feel any pain at all from it,” said CWB chair Ken Ritter, at a news conference.
But a member of Canada’s WTO negotiating team said Penn is speaking half-truths in his assessment of what was agreed to in Geneva in order to appease angry farmers.
“Certainly the U.S. is on the defensive,” said Denis Landreville, deputy director of Agriculture Canada’s market access and regional trade negotiations office.
South Dakota senator Tom Daschle is calling on president George Bush to instruct his negotiating team to rescind the offer to cut agricultural supports and safety nets by 20 percent, referring to it as a “devastating blow” to American farmers.
Landreville said American officials are understating the impact of what was agreed to in order to quell such objections.
While the main focus of the new WTO framework agreement is the elimination of export subsidies, significant progress was also made on achieving substantial reductions in trade-distorting domestic subsidies, he said.
Penn is correct in stating the 20 percent cut will have no impact on what’s called the Aggregate Measure of Support, because the U.S. and the European Union are subsidizing farmers at levels well below what is permitted.
But there are two other categories of domestic farm support that the U.S. negotiator failed to mention in his statement.
“What he’s forgetting is that this commitment is also on de minimis support and Blue Box payments,” said Landreville.
A reduction in those two categories of support would have a “binding impact” on decreasing overall domestic subsidy levels. How big an impact depends on coming negotiations that will attach specific commitments to the framework agreement.
“There’s a number of elements that still need to be negotiated to see what the actual concrete impact will be of this 20 percent reduction,” he said.
While the specifics have yet to be ironed out, there is no doubt in Landreville’s mind where the agreement is heading.
“Certainly the intent of it was that it will result in real reductions in domestic support,” he said.
WTO negotiations resume this fall with the next ministerial conference set for December 2005 in Hong Kong.
