The United States has offered a major trade proposal that has drawn the ire of the EU and the Japanese. U.S. Trade Representative Robert Zoellick presented the plan to the World Trade Organization meeting in Geneva last week.
Commenting on the proposal, Agriculture Secretary Veneman said the U.S. proposal would level the playing field for all countries by substantially reducing global trade barriers, slashing trade-distorting subsidies and eliminating export subsidies. Specifically, the U.S. is calling for all WTO members to reduce all tariffs using a formula that would reduce high tariffs more than low tariffs and result in no tariff over 25% after five years.
The plan simplifies the current domestic support system: subsidies would be deemed either trade distorting or non-trade distorting. Non-trade distorting support remains without limit, but trade-distorting support would be capped at 5% of a country's value of ag output. The proposal eliminates export subsidies over five years, phased down in equal amounts, and has tough new disciplines on state trading enterprises.
Currently, the allowable level of trade-distorting support for WTO members is disproportionate. The EU can support its farmers at a rate that is approximately 25% of the value of its agricultural production, Japan can provide support equal to 40% of its value of production, but the United States is limited to less than 10% 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.
"We need to level the playing field by reducing and eliminating unfair trade barriers that hurt our farmers and other countries around the world," said Veneman. "The goal of our proposal is to bring more equity to the world agricultural trading system and strengthen the rules of trade." Ambassador Zoellick added, "We outline practical steps for ensuring our farmers can thrive, while opening doors for other countries to participate in the growing global agricultural marketplace."