U.S. officials have unveiled a comprehensive trade reform proposal designed to reduce or eliminate tariffs and trade-distorting subsidies and give U.S. farmers a long-sought “level playing field” in overseas markets.
The plan calls on foreign countries to reduce their tariffs from current levels of 50 to 60 percent to near the U.S. average of 12 percent. It would also require the European Union and Japan to bring the WTO cap on their farm subsidies from $59 billion and $30 billion to close to the U.S. limit of $19 billion.
“Our proposal lays out our vision for reforming and liberalizing global trade in agricultural goods,” said U.S. Trade Representative Robert B. Zoellick. “Our initiative opens a world of opportunity for America's farmers. We outline practical steps for ensuring that our farmers can thrive, while opening doors for other countries to participate in the growing global agricultural marketplace.”
“U.S. farmers and ranchers support free trade because they rely heavily on market expansion for continued growth,” said Agriculture Secretary Ann M. Veneman, who was traveling in China and Japan on a tour promoting the use of U.S. agricultural products.
“However, we need to level the playing field by reducing and eliminating the unfair trade barriers that not only hurt our farmers, but other countries around the world. The goal of the U.S. proposal is to bring more equity to the world agricultural trading system and strengthen the rules of trade.”
The U.S. proposal, which will be presented to members of the World Trade Organization (WTO) in Geneva, Switzerland, next week, outlines a strategy for reducing and eventually eliminating tariffs and other forms of trade-distorting subsidies in agriculture.
Under the U.S. market access proposal, all WTO members would reduce tariffs using a formula that would demand greater reductions of high tariffs than low tariffs, and result in no tariff over 25 percent. This would result in global average allowed agricultural tariffs falling from the world average of 62 percent to 15 percent or 3 percent above the U.S. average.
The U.S. proposal also calls for a number of specific reforms that would substantially improve market access opportunities.
The U.S. proposal on domestic support would simplify the current system: subsidies would be considered either trade distorting or non-trade distorting. Trade-distorting support would be capped at 5 percent of the value of agricultural production. This would result in a global reduction of over $100 billion of allowed trade distorting support. Non-trade distorting support would not be limited as long as certain criteria are met.
Currently, the allowable level of trade-distorting support for WTO members is disproportionate, Veneman and other USDA officials have noted in recent weeks. The European Union, with roughly the same value of agricultural production as the United States, can provide $60 billion in support a year, while the United States is limited to $19 billion (so called “amber box” payments).
The EU can support its farmers at a rate that is approximately 25 percent of the value of its agricultural production, Japan can provide support equal to 40 percent of its value of production, but the United States is limited to less than 10 percent of the value of its production. In addition, the EU spends over $20 billion in trade distorting “blue box” programs while the U.S. spends zero.
“The U.S. package addresses the disparities that exist under current WTO commitments and increases the market orientation of world agricultural trade,” said Zoellick. “The average U.S. agricultural tariff is 12 percent, while the average worldwide tariff is 62 percent, with many tariffs in excess of 100 percent.
“Our approach to reducing these tariffs goes beyond the incremental formula of the Uruguay Round and creates a more equitable result at far lower levels.”
“This proposal is aggressive, visionary and assures U.S. leadership as we move forward in the WTO negotiations,” said Veneman. “Under current WTO rules, the scales are unbalanced and this proposal would put U.S. farmers and ranchers on an equal footing with others around the world.”
Secretary Veneman briefed agriculture ministers from key U.S. trading partners in Japan on July 25, and provided public briefings throughout her Asia trip.