Monday, May 10, 2004

Where's the Catch?

This is the sort of news one would be a fool to take at face value. The EU's southern members are simply too addicted to subsidies for them to agree to any proposal of the sort outlined below. Here's betting that there'll be a poison pill of some sort buried within the proposal, just as contentious proposals on intellectual property were cynically utilized to sink the last round of talks.

KILLARNEY, Ireland (Reuters) - The European Union is ready to eliminate its lavish subsidies on farm exports to galvanize sluggish world trade talks provided its main partners do the same, EU trade chief Pascal Lamy said on Monday.

Details of the proposed move, long demanded by critics of its generous farm subsidies, have been sent to members of the World Trade Organization (WTO) just days before ministers from several WTO states hold a potentially crucial meeting in Paris.

The EU spends some 43 billion euros a year on its farm policy, nearly half of its entire annual budget. By far the largest proportion of this goes to France. It has faced mounting pressure to abolish its export subsidies.

Lamy said the offer depended on the EU's WTO partners matching their move, which the United States has indicated it is willing to do.

It also required progress in the two other key areas of the farm negotiations, domestic farm support programs and market access.

``If an acceptable offer emerges on market access and domestic support, we would be ready to move on export subsidies,'' Lamy said in the letter, a copy of which was obtained by Reuters.

Up to now, European unwillingness to eliminate these subsidies by a set date has been a major obstacle to reaching a deal on agriculture, widely viewed as the key to unlocking the WTO's troubled Doha Round of trade liberalization talks.

The round, whose successful conclusion economists say would give a huge boost to the world economy, was supposed to have been wrapped up by the end of this year.


The bloc insists it has already made massive strides in reducing the worst of its trade-distorting farm support -- market price guarantees and export subsidies -- in two reforms in 1992 and 1999 and also in major changes agreed last June.

On market access, Lamy said the EU was sticking to its guns for a ``blended'' formula, which would allow the 25-nation bloc and countries like Japan with expensive domestic farm industries to keep high tariffs on some politically sensitive goods.

But the G20 group of developing countries, led by Brazil, India and China, has firmly rejected this approach because it says it would asks too much of the developing countries and too little of the richer states.

The formula for market access, the extent to which countries open their markets to the goods of others, will be at the center of talks in Paris at the OECD, which kick off on Wednesday with meeting of technical experts.

What's most infuriating about all this is that it isn't just the farmers of the Third World who suffer from these protectionist policies, but the poor of the EU as well. It's easy enough for well-paid politicians and bureaucrats to blame the European working-classes for pigging out on McDonalds Happy Meals, but one thing the elitists who go in for this sort of thing fail to realize is that the poor go for such food largely because eating healthily in Europe can be much more expensive. When decent-quality bananas go for $2.00 for a bunch, a small basket of nectarines can only be had for $4.80, and Indian basmati rice costs $3.60 a kilo, is it any surprise that people on marginal incomes opt for fried spuds and milkshakes instead?