President Barack Obama’s pledge to cut subsidies to big U. S. farm businesses falls short of the cuts needed to revive mor ibund world trade talks, proponents of an expanded global trade agreement said Feb. 25.
“Anything that would reduce payments to farmers in the U. S. would be looked on favour-ably by the rest of the world,” said Ross Korves, an economist at Truth about Trade and Technology, a group that promotes free trade in agriculture.
“It’s what happens next when times get tough” that would spell out the longer-term impact of U. S. domestic farm policy on WTO talks, Korves said.
In his address to Congress Feb. 24, Obama said his 2010 budget would “end direct payments to large agribusinesses that don’t need them.”
U. S. trading partners have long attacked the payments, which total about $5.2 billion a year. The payments, handed out no matter what farmers grow or what prices do, are popular among U. S. farmers and Congress members from big farm states – particularly southern states rich in rice and cotton.
U. S. spending on farmers has been one of many points of contention in World Trade Organization talks and trading partners want to see more concessions.
Some groups think Obama wants to cut direct payments to farmers in half to $40,000 a year. The U. S. Agriculture Department has declined comment. U. S. lawmakers from farm states have routinely fought off similar attempts.
Total U. S. crop and dairy subsidies are estimated to tally only about $7.5 billion this year due to relatively strong crop prices. In 2005, when prices were lower, farmers racked up subsidies of more than $16.4 billion. The WTO limit is around $48 billion.
Canada’s Farm Minister Gerry Ritz said Obama’s pledge to cut the subsidies was a “good right step” to reviving the Doha round of WTO talks, which are in their eighth year.
“It’s one of the aspects. On the top 10 list, it’s one of them,” Ritz said.
CUTS MISS TARGET
But the direct payments are not as trade distorting as other subsidies that go up when prices plunge or crops fail. Those are of greater concern to trading partners.
Some analysts said Obama would help the U. S. case at the WTO by cutting other programs that support prices or revenues.
“A cut in direct payments would do little or nothing for the talks,” said Dan Sumner, an economist at University of California-Davis who specializes in farm and trade policy.
“It is hard to see the current (U. S.) leadership moving forward on trade opening or paying much attention to the WTO,” Sumner said.
“Restarting Doha requires more than just tinkering with U. S. support payments,” added Gary Blumenthal, analyst with World Perspectives.