Iowa Public Television


What's New on Subsidies?

posted on May 6, 2005

Hello, I'm Mark Pearson.

Gauging the U.S. economy is sometimes like watching a ball game through a strobe light. Every time the light flashes, the figures change.

The government figures were moving in all directions this week. *For starters, the Federal Reserve raised a key interest rate a quarter-point. It was the eighth increase since last June. *A sharp jump in fiscal third quarter revenue will help cut the budget deficit to its lowest level since 2002. *Even so, the projected $368 billion shortfall would be the third largest in history.

A contributing factor to that deficit is the red ink on the trade balance sheet. The U.S. trade deficit is at an all-time high. And analysts claim that scares away foreign investment and hurts stock market prices.

Traditionally, farm exports have been a bright spot in the U.S. trade outlook. But as the global economy expands, new pressures are building on the trading prowess of developed nations ... and their use of subsidies to enhance farm trade.

What's New on Subsidies? A variety of speakers from around the globe met this week in Washington to discuss agricultural subsidies, which remain one of the major stumbling blocks in the effort to liberalize world trade. At a non-negotiating forum, representatives from Canada, Brazil, Europe and the United States stated their trade and subsidy concerns.

Paul Bailey, First Secretary Trade Policy, Embassy of Canada: "We face a different world and we need to face the challenge and be more competitive as North Americans."

Farm subsidies long have been a hang-up in talks under the World Trade Organization. Negotiations started more than three years ago, but stalled at WTO talks in Cancun in late 2003. Developing countries insist that a global reduction in farm subsidies and tariffs is necessary for any long-term trade deal.

Aluisio De Lima Campos, Economic Advisor, Embassy of Brazil: "In the case of cotton, the best known of the subsidy issues, there is a date to watch --July 1, 2005, which two things will need to happen: first the removal of export credit guarantees and the removal of the step-two program."

Meanwhile, U.S. trade officials worry cutting farm subsidies and tariffs will put them at a disadvantage.

Roy Malmrose, Director-Subsidies, USTR: "There are separate rules for developing and certain exceptions for non-developed countries. In addition, provisions whereby countries that benefit from specific and differential treatments also are susceptible to an argument that they have become export competitive in particular production areas."

Other issues discussed include the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment, which remains a sore spot in trade talks. It awards U.S. companies a percentage of fines received for imported products dumped on the domestic market. The WTO has ruled the Byrd Amendment illegal under international trade law.

Roy Malmrose, Director-Subsidies, USTR: "Overall, the U.S. has taken a leadership role in promoting the strengthening of subsidy issues and is looking into deepening the subsidy disciplines."

The next ministerial meeting is scheduled for December 2005 in Hong Kong, a time when trade officials around the world hope resolutions will be reached.

Tags: agriculture news reform trade