India rejects US offer to cut farm subsidies to $15 billion a year

India rejects US offer to cut farm subsidies to $15 billion a year
Comment E-mail Print Share
First Published: Wed, Jul 23 2008. 12 11 AM IST

Strong reaction: A file photo of commerce secretary Gopal Pillai.
Strong reaction: A file photo of commerce secretary Gopal Pillai.
Updated: Wed, Jul 23 2008. 12 11 AM IST
Geneva: India on Tuesday rejected an offer by the US to cut its trade-distorting farm subsidies to $15 billion (Rs64,050 crore) a year, saying the move would not help as it still gives America enough headroom to increase incentives.
Reacting strongly to the US offer being made at a press conference, commerce secretary Gopal Pillai said: “India does not negotiate through the press. We negotiate in the green room at the WTO meet.”
Strong reaction: A file photo of commerce secretary Gopal Pillai.
US has a bound-limit of $48 billion for farm subsidies. Dubbing the offer to bring it down to $15 billion as inadequate, Pillai said that as per the current offer, the applied subsidies would be $7 billion only and therefore, it still gives enough room to increase farm support to $15 billion.
US trade representative Susan Schwab earlier said the US is prepared to reduce its trade-distorting farm subsidies to $15 billion a year provided large emerging economies such as Brazil, India and China open their markets further to imports of industrial products.
“These reductions are not offered in isolation,” Schwab told journalists in Geneva. “They must be accompanied by significant market opening” in agriculture and industrial goods by other World Trade Organization members.
The proposed cut is $2 billion deeper than the US promised in June last year.
Schwab will make the offer to trade ministers from about 30 governments who are trying to lock up a deal on cutting tariffs and subsidies in agriculture and manufactured goods before the US presidential election.
Rich nations are seeking greater access for their manufactured goods in developing countries, while poor nations aim to sell more commodities such as rice and beef to wealthy trading partners.
Draft texts that serve as the basis for the discussions call for the US to cut trade-distorting farm subsidies to between $13 and 16.4 billion from the current ceiling of $48.2 billion. That’s more than what the US now spends because handouts have declined as global food prices have climbed.
US trade-distorting farm subsidies, known as OTDS, exceeded $15 billion in seven of the last 10 years, Schwab said. The payments reached $18.9 billion in 2005 and fell to about $8 billion last year.
“In 70% of the last 10 years, this would have been an effective cut,” Schwab said. “It is nearly $2 billion below our average OTDS over the last 10 years.”
Brazil, another key developing nation in the WTO talks, was unimpressed by Schwab’s offer and said the US had to go further.
“It’s a nice try, but it’s still too high,” a member of the Brazilian delegation said immediately after Schwab made the announcement.
Schwab’s offer comes a day after European Union trade commissioner Peter Mandelson said the 27-nation EU was willing to slash its farm tariffs by an average of 60% to encourage emerging economies to make bigger concessions. The offer was a clarification of EU’s position and depended on whether tropical products were included in the tariff-cut calculations.
Still, Crawford Falconer, who leads the WTO discussions on agriculture, said the EU pledge to lower farm duties by 60% was “the first time they’ve made that commitment” publicly.
Collective responsibility
While trade ministers haven’t budged from their positions since the meeting began on Monday, WTO director-general Pascal Lamy says negotiators “developed a clearer sense of the key issues at the political level that need to be resolved” before they can turn to the so-called modalities — the key percentages for tariff cuts that would form the basis for any comprehensive deal.
“A strong sense of collective responsibility has emerged,” WTO spokesman Keith Rockwell told journalists. “Members are determined to engage in good faith with one another. The overall attitude was constructive” during discussions on Tuesday morning.
Lamy’s next step is to move into “detailed text-based work” on both agriculture and industrial goods and to start discussions on possible solutions to the outstanding issues, Rockwell said.
Lamy told delegates on Monday that revised proposals will probably be released by the end of the week.
feedback@livemint.com
Bloomberg and AFP contributed to this story.
Comment E-mail Print Share
First Published: Wed, Jul 23 2008. 12 11 AM IST