(July 29) While prodding Congress to wrap up negotiations on trade promotion authority, U.S. trade negotiators July 25 unveiled an ambitious proposal designed to give new momentum to World Trade Organization agricultural negotiations.

“Our proposal lays out our vision for reforming and liberalizing global trade in agricultural goods,” said U.S. Trade Representative Robert Zoellick.

The proposal aims to scrap all export subsidies after five years, reduce worldwide average agricultural tariffs from 62% to 15% and reduce domestic subsidies to 5% of agricultural production.

Mark Powers, vice president of the Northwest Horticultural Council, Yakima, Wash., said he was pleased with the U.S. trade proposals.

“It was aggressive and a good starting point,” he said. “It was a comprehensive proposal, as it had to be to move the negotiations forward,” he said.

WELL-TIMED SALVO

Robert Guenther, vice president of government and public affairs for the United Fresh Fruit & Vegetable Association, Alexandria, Va., also called the proposal a well-timed salvo for trade reform.

However, he said the produce industry would like to see a call for the complete elimination of domestic supports.

“We have no domestic support, and we are competing with other countries with large domestic support,” he said.

Chief agricultural negotiator Al Johnson said he expects the comprehensive proposal will find a good reception from many WTO trading partners.

The exceptions could be Japan and Europe. The U.S. proposal asks for swifter reductions in tariffs and subsidies from countries with the highest agricultural tariffs, and Japan and Europe are in that group.

DIFFERENCES WITH URUGUAY ROUND

That accelerated reduction for high-tariff countries contrasts to the Uruguay Round agreement, which mandated all countries to reduce agricultural tariffs at the same rate — no matter how high they were in the first place.

The Uruguay Round of multilateral trade talks was the first in five decades that included agriculture, and Johnson said U.S. agriculture needs to reap more benefits from the Doha round.

“The Uruguay Round approach isn’t good enough; it’s natural that those countries with the most distorting practices have the farthest to go,” he said.

Zoellick said he thought the proposal was ambitious in scope and timetable. He noted that much of the agricultural negotiations are scheduled to be largely complete by March.

He said trade is undeniably important for agriculture, as 96% of the world’s population lies outside the U.S. and one of three acres is planted for export markets.

“Agriculture is key to economic strength and recovery; we export more fruit and vegetables than household appliances,” he said.

Zoellick said the U.S. negotiating position sits on a three-legged stool of the farm bill, the WTO proposal and trade promotion authority, which was in conference committee and close to being wrapped up by July 25.

The U.S. proposal, which will be presented to members of the WTO next week in Geneva, outlines a strategy for reducing and eventually eliminating tariffs and other forms of trade-distorting subsidies in agriculture.

U.S. PROPOSAL

Under the U.S. market access proposal, all WTO members would reduce tariffs using a formula that would demand greater reductions of high tariffs than low tariffs and result in no tariff over 25%. This would result in global average allowed agricultural tariffs falling from 62% to 15%.

The U.S. proposal also calls for a number of specific reforms that would substantially improve market access opportunities.

The U.S. proposal on domestic support would simplify the current system, Zoellick said. Subsidies would be considered either trade distorting or nontrade distorting. Trade-distorting support would be capped at 5% of the value of agricultural production. This would result in a global reduction of over $100 billion of allowed trade distorting support. Nontrade distorting support, such as U.S. Market Access Promotion funds, would not be limited as long as certain criteria are met.

The current allowable level of trade-distorting support for WTO members is not equal. And although the U.S. has received international criticism for the recent farm bill, Zoellick pointed out subsidies are much higher in Europe and Japan.

The EU, with roughly the same value of agricultural production as the U.S., can provide $60 billion in support a year, while the U.S. is limited to $19 billion (so-called “amber box” payments), most of which are for grains and dairy.

For agriculture, domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box.

The EU can support its farmers at a rate that is approximately 25% of the value of its agricultural production; Japan can provide support equal to 40% of its value of production, but the U.S. is limited to less than 10% of the value of its production, he said.

BLUE BOX PROGRAMS

In addition, the EU spends over $20 billion in trade distorting “blue box” programs, while the U.S. spends zero.

“Blue box” refers to payments directly linked to acreage or animal numbers but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land for conservation.

“The U.S. package addresses the disparities that exist under current WTO commitments and increases the market orientation of world agricultural trade,” Zoellick said. “The average U.S. agricultural tariff is 12%, while the average worldwide tariff is 62%, with many tariffs in excess of 100%. Our approach to reducing these tariffs goes beyond the incremental formula of the Uruguay Round and creates a more equitable result at far lower levels.”

Secretary of Agriculture Ann Veneman was in Japan when the WTO proposal was announced, talking with government officials there about the U.S. proposal.

“This proposal is aggressive, visionary and assures U.S. leadership as we move forward in the WTO negotiations,” Veneman said in a release. “Under current WTO rules, the scales are unbalanced and this proposal would put U.S. farmers and ranchers on an equal footing with others around the world.”

A complete packet of agriculture trade facts, charts, questions and answers and other documents are available online at www.ustr.gov and www.usda.gov.