U.S. and European Union negotiators have announced an agreement on trade reform that could phase out or eliminate export credit programs in exchange for reductions in EU export subsidies.
The agreement followed two weeks of intense discussions aimed at getting the Doha Round of the next World Trade Organization Agreement back on track. Observers had said the lack of agriculture framework threatened to de-rail the nearly two-year-old trade reform process.
“We were asked by the WTO leadership to try to reach accord with the EU so that agricultural and other negotiations could move forward,” said Agriculture Secretary Ann M. Veneman in a statement released following the announcement of the breakthrough in Geneva.
“We have responded and now appeal to the other WTO members to show similar leadership and flexibility as we near the important Cancun Ministerial meeting (in September).”
Although the United States reportedly dropped its insistence on a complete end to agricultural export subsidies, Veneman said U.S. negotiators are continuing to push toward its earlier objectives.
There were reports that U.S. negotiators would also include decades-old U.S. food aid programs in the agreement. European Union officials have complained that such programs interfere with commercial sales, although the recipients rarely have the resources to make such purchases.
“The progress in the three important areas for American agriculture — export competition, market access and domestic support — clearly is along the pathway envisioned in our initial proposal,” she said. “We view the framework agreement as a significant achievement, even though further difficult negotiations will be required to fully define the package.”
She said U.S. negotiators have been consulting with USDA's advisory committees and “appreciate their assistance along with the support of our industry. We will need their assistance even more as the negotiations move to the next phase.”
Some industry groups applauded the agreement while others expressed concern about the sketchy details that were coming out of Geneva.
“This is a significant development, and corn growers are cautiously optimistic both the United States and the EU can reach agreement in Cancun next month,” said Fred Yoder, president of the National Corn Growers Association.
The three main pillars of the agreements, those mentioned by Veneman, appear to be focused on partial elimination of export subsidies, a compromise formula for market access and partial harmonization of domestic support levels. Observers said the framework appears to narrow some of the major differences between the United States and the European Union.
Nonetheless, U.S. producers continue to need a safety net through domestic supports, and a successful trade agreement should not move producers backward but be a win-win for all parties, Yoder said.
“A successful trade round is essential if corn growers are going to expand markets and increase the profitability of domestic producers,” he noted. “We still have a long way to go before a final agreement, but this is an important step in the process.”
American Soybean Association leaders also commended negotiators on reaching an agreement on the framework.
“It is important that the two largest participants in global agricultural trade have agreed on a way to move these negotiations forward,” says ASA President Ron Heck of Perry, Iowa.
The value of any final agreement to U.S. soybean farmers, he says, will depend on many details yet to be negotiated including the issue of placing restraints on the level of support provided by developing countries to expand their agriculture production and transportation infrastructure.
“Market access is the most important area for U.S. soybean producers in the Doha negotiations, and the framework provides little detail on how tariffs will be reduced. ASA strongly believes the success of the Doha Round will depend on requiring developing countries with low per capita consumption of protein and vegetable oil to open their markets in a substantial way.”
Soybean growers are also concerned that export credit is dealt with in the same manner as export subsidies. “Credit guarantees are important to the competitiveness of U.S. soybean exports, and ASA would not support sharp reductions in or elimination of this program.”
The USA Rice Federation's Ben Noble called the conceptual paper “short on numbers,” but says it does signal agreement on key issues.
“The U.S.-EU agreement is not comprehensive. Rather, negotiators sought to reach agreement on the most contentious issues, and the joint agreement leaves much for further negotiation. There are, for example, many gaps in the text where numbers or time frames need to be agreed to by WTO members,” he says.
According to the USA Rice Federation, the agreement, as it stands, will not be sufficient for a successful ministerial, and further negotiations will be required. “USA Rice will examine the paper to assess the impact on the U.S. rice industry and develop input to U.S. negotiators,” the commodity group says.
The National Farmers Union wasn't as sanguine about the agreement's potential results.
“On the surface, this plan appears to continue down the road of past failed trade plans by reducing domestic support for agriculture with no plans of action for increasing prices,” said David Frederickon, the NFU's president, who added that the NFU is studying the agreement.
“We cannot continue to pursue this race to the bottom on prices without providing farmers and ranchers a free, fair and open marketplace that will allow them to receive a decent return on their hard work and investment. Reducing our domestic safety net without providing an alternative to get a decent price in the marketplace could be a recipe for disaster.”