US Trade Agenda Blocked by Farm Subsidy Concerns Ahead of WTO Talks

Strategic Insights -

US trade negotiators are facing pressure from trading partners who want America to change its system of farm subsidies, which give its agribusinesses an unfair trade advantage. During his visit to Latin America, leaders complained to President George W. Bush that the $20 billion in annual subsidies paid to US farmers were a major concern. Europeans have also expressed similar concerns, seeking a deal on agricultural subsidies before the upcoming World Trade Organization (WTO) talks in December.

Key Takeaways:

  • The US trade agenda has been blocked by concerns among trading partners who want America to change its system of farm subsidies.
  • The $20 billion in annual subsidies paid to US farmers give its agribusinesses an unfair trade advantage, according to Latin American leaders.
  • Europeans have expressed concerns about agricultural subsidies, seeking a deal before the upcoming WTO talks in December.
  • US politicians have signaled that they are unwilling to allow trade talks to dictate US farm policy, with both Republicans and Democrats expressing concerns.
  • The Senate has taken the first step toward extending farm subsidies by four years.
  • More than one Latin American leader has noted that the only time developing countries have been able to get the US or EU to reduce farm subsidies was when Brazil brought cases against them at the WTO.
  • Developing countries are singling out the combined $300 billion worth of farm support that rich countries parcel out, citing studies showing that these supports undermine their ability to help the rural poor and raise standards of living.
  • The World Trade Organization recognizes that subsidies to preserve the environment do not distort trade, but subsidies that encourage overproduction and lead to exports at below-market price are a concern.
  • Without some agreement on a future direction for US farm policy, it could prove difficult for US trade negotiators to keep the farm community behind them in talks at the WTO.
  • Developing countries like Brazil are talking about bringing new cases against the US and EU at the WTO if there is no compromise on farm subsidies.

Statistics:

  • $20 billion: Annual subsidies paid to US farmers
  • $300 billion: Combined value of farm support that rich countries parcel out to their farmers
  • 4 years: Extension of farm subsidies passed by the Senate
  • 2011: Date until which US farm subsidies will be extended
  • 2/3: Percentage of American farmers who do not receive subsidies
  • 3-4 times: Amount more money in subsidies European farmers receive compared to US farmers
  • $20 billion: Estimated value of US farm exports blocked by European health concerns over hormone-treated beef

Sources:

  • White House Press Briefing
  • The New York Times, "Bush Is Pressed on Farm Subsidies"
  • European Union Press Release, "EU and US agree to continue trade talks"
  • World Trade Organization, "Understanding WTO subsidies"
  • Senate Vote, "Extension of Farm Subsidies" (S. 2338)
  • BBC News, "Farm subsidies: US and EU under pressure"