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The World

Deal to Loosen Trade Reached

The U.S. and others in the WTO will reduce their farm subsidies. Developing nations, which stand to benefit, will cut import barriers.

August 01, 2004|Bill Sing | Times Staff Writer

Nearly a year after a revolt by developing nations derailed negotiations, the United States and other countries agreed early today to eliminate billions of dollars in farm export subsidies and reduce barriers to global trade.

The agreement by the 147 member governments of the World Trade Organization in Geneva rescues comprehensive free trade talks designed to boost global growth and promote economic development in poor nations. The 3-year-old negotiations had broken down last year in Cancun, Mexico, amid a show of unity and power among poorer countries.

Developing nations, led by Brazil and India, have contended that massive subsidies allow rich nations to flood global markets with farm products, depressing prices and impeding the economic development of poor countries that rely on agriculture as their primary source of exports. For example, African nations complain that American cotton subsidies contribute to the impoverishment of thousands of African growers.

Combined U.S. and European Union farm supports total $150 billion a year; the EU dairy industry, for instance, gets the equivalent of $2 per day per cow.

Under the latest accord, wealthier nations agreed to eventually do away with a host of government export subsidies of agricultural products such as cotton, rice, soybeans and wheat. Other forms of government farm subsidies would also be reduced or scrapped.

In return for the concessions on agriculture, developing nations agreed to support guidelines that would reduce tariffs and other barriers on manufactured products as well as on services such as telecommunications and banking. Details of that process, however, were left to further negotiation.

The United States has contended that tariffs imposed by some developing countries have virtually closed their markets to American manufactured products.

Although the deal could increase competition in the American market, it could also enable U.S. farmers and manufacturers to more effectively compete abroad, some analysts said.

"Today's decision is a crucial step for global trade," said U.S. Trade Representative Robert B. Zoellick, a key player in the agreement. He said the deal "will make life better for millions of our citizens."

"This is a historic moment for this organization," WTO chief Supachai Panitchpakdi told reporters after the deal was approved shortly after midnight in Geneva.

The accord now becomes part of the "framework" for continued global free trade talks that are set to resume in September. Details of today's deal must still be ironed out, and other thorny issues are subject to further negotiation.

A legally binding global free trade treaty, the ultimate goal of the talks, may not be reached for two or three more years.

Farm subsidies were seen as the most contentious issue in the so-called Doha round of trade talks that began in Qatar in 2001. But the talks went off the rails last year at a meeting of trade ministers in Cancun when poor nations objected to what they saw as rich countries' intransigence on farm subsidies.

Failure to reach an agreement today could have ended the Doha round, delaying further trade liberalization for many years. The U.S. and other nations, discouraged by the slow progress of the Doha round, have recently been making their own bilateral trade deals.

The latest agreement may not significantly hurt U.S. farmers, at least not initially, said Spencer S. Griffith, an international trade lawyer with Akin Gump Strauss Hauer & Feld in Washington. That's because subsidies for U.S. farmers may not need to be cut initially because they are already below the levels mandated under the first year of today's accord, he said.

And reductions in European farm export subsidies would in effect make European products more expensive against competing American goods, he said.

A recent WTO ruling in a case filed by Brazil already calls for reductions in subsidies to U.S. cotton growers, affecting farmers in California and other states. Today's agreement doesn't affect that ruling.

It was not immediately clear whether the deal would affect the presidential election debate over the Bush administration's trade policies.

The White House view is that more open global markets would benefit the U.S. economy.

Democrats, however, have attacked President Bush for not doing enough to save American jobs lost through unfair trade practices of foreign rivals.

The WTO agreement "may be a small step forward, but it is far from 'mission accomplished' for U.S. manufacturers and the service sector," said Rep. Sander M. Levin of Michigan, senior Democrat on the House Ways and Means subcommittee on trade. "We can and must do better for hard-working Americans."

Democratic presidential challenger Sen. John F. Kerry had no immediate comment on the WTO developments.

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Times staff writer Jonathan Peterson in Washington contributed to this report. Times wire services were used in its compilation.

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