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Tue, Jul 13, 2004 - Page 12 News List

EU softens stance on US farm credits

AGRICULTURE With the WTO trying to pick up where things fall apart in Cancun last year, negotiations between Europe and the US are seen as key to a broader agreement


The EU softened demands that Washington scrap export credits for farmers when five major trade powers met in Paris for talks ahead of a looming deadline for a global framework trade deal.

European Trade Commissioner Pascal Lamy said that Brussels would "factor in" the insistence by US Trade Representative Robert Zoellick that not all of the credits distort trade.

"Our starting position is to eliminate [them] but the US made a point which we have to check now," Lamy said.

The EU and US representatives were in Paris on Sunday for informal talks with Australia, Brazil and India, three weeks before the deadline for an outline trade accord among the WTO's 147 members.

Differences on farm trade scuppered the last attempt to reach a framework deal at a September summit that was held 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 US export credits.

`being pregnant'

Lamy's remarks represent a considerable softening of the Brussels line.

On Saturday, an EU agriculture spokesman had insisted that all the US credits distorted trade and would have to go.

"It's like being pregnant or not," Gregor Kreuzhuber had said. "There is not very much in between."

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 as 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 hard part is 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.

"Any market access which impinges on the livelihood security of Indian farmers is not possible," Indian Trade Minister Kamal Nath said.

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 will have to accommodate some governments' sensitivities over particular farm goods, allowing them to preserve their rural communities and food production capacities.

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