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EU hints at farm export compromise with U.S.

The European Union softened demands Sunday that Washington scrap export credits for farmers ahead of a looming deadline for a global framework trade deal.
/ Source: The Associated Press

The European Union softened demands Sunday that Washington scrap export credits for farmers ahead of a looming deadline for a global framework trade deal.

At a weekend meeting of five major trade powers, European Trade Commissioner Pascal Lamy said the union would “factor in” the insistence by U.S. Trade Representative Robert Zoellick that not all of the credits distort trade.

“Our starting position is to eliminate (them) but the U.S. made a point which we have to check now,” Lamy said.

The EU and U.S. representatives were in Paris for informal talks with Australia, Brazil and India, three weeks before the deadline for an outline trade accord among the World Trade Organization’s 147 members.

Differences on farm trade scuttled the last attempt to reach a framework deal at a September summit in Cancun, Mexico.

Europe breathed new life into the process with a May offer to end controversial export subsidies to its farmers — but only in return for the scrapping of export support to producers in other developed countries, including U.S. export credits.

Lamy’s remarks represent a considerable softening of the Brussels line. On Saturday, an EU agriculture spokesman had insisted that all the U.S. credits distorted trade and must be eliminated.

“It’s like being pregnant or not — there’s not very much in between,” Gregor Kreuzhuber had said.

Lamy said on Sunday that the export credits — government loans enabling farmers to offer low-risk credit to overseas customers — should be evaluated according to how closely their interest rates and other conditions reflected commercial lending markets.

Zoellick did not comment on the apparent EU concession. Washington has already pledged to drop trade-distorting “subsidy elements” of its export credit program.

Export aid is just one of many thorny issues facing WTO negotiators as they seek agreement by the end of the month on formulas for cutting tariffs and subsidies, all part of a new global trade treaty.

Brazilian Foreign Minister Celso Amorim, who hosted the weekend talks at his country’s Paris embassy, said there had been a “convergence of ideas that might enable us to come to a result.”

WTO members broadly agree that the global economy needs a new trade treaty to open up markets to more international commerce.

The challenge has come in agreeing who should cut what tariffs and subsidies by how much — especially in the politically charged area of farm trade.

Negotiators are struggling to find a compromise between rich agricultural protectionists like Japan, who maintain high import tariffs to protect their own farmers, and exporters from Australia to Brazil who want tariffs slashed.

Japan, Switzerland and the eight other members of the so-called Group of 10 heavy farm importers warned last Monday that they would not sign on to a deal that imposed strict caps on their highest tariffs.

India is also wary of any commitment that would endanger its 600 million subsistence farmers.

Now, agricultural exporters — many of them also developing countries — are being asked to compromise for the sake of a deal.

Although tariffs will have to fall across the board, Brazil’s Amorim said, a final deal must accommodate some governments’ sensitivities over particular farm goods, allowing them to preserve their rural communities and food production capacities.

Proposals backed by Washington would allow protectionists to keep high tariffs on sensitive goods provided they expand quotas — the limited quantities allowed onto their markets duty free or at reduced tariffs.

But negotiators know they will have a tough time getting such a compromise past representatives of 60 poorer WTO members, who gathered on the Indian Ocean island of Mauritius for their own conference.

Zoellick said the global trade talks were a “tremendous opportunity” for the world economy, but warned that success was not guaranteed.

“There are many issues to resolve and not much time to do so,” he said.