By BRIAN FALLOW economics editor
Trade Minister Jim Sutton has welcomed United States proposals to liberalise world agricultural trade.
The proposals, which are the Unites States' opening position in the Doha round of World Trade Organisation talks, would require WTO members within five years to:
* Eliminate export subsidies.
* Make deep cuts in agricultural tariffs.
* Make deep cuts to trade-distorting domestic farm support measures.
The US has also called on WTO members to set a deadline for the elimination of tariffs and trade-distorting domestic support.
The US Ambassador to New Zealand, Charles Swindells, said: "This is our blueprint for real free trade.
"Everything's on the table and we think we can bring others on board."
Initial reactions had been very positive, he said.
The US has proposed a formula that would reduce agricultural tariffs from the present average of 62 per cent to 15 per cent, with a maximum of 25 per cent.
The average tariff on industrial goods worldwide is about 5 per cent.
Sutton said yesterday that the proposals were bold and ambitious.
"These proposals, if adopted, would radically liberalise trade restricted by high tariffs," he said.
"But they would have a relatively limited effect on trade constrained by quotas."
Under tariff rate quotas, countries allow a limited quantity of imports at a relatively low tariff, and subject anything above those quantities to much higher tariffs.
The US has such quotas on beef and dairy products, among other commodities.
Under its proposals the volumes allowed in under quotas would be expanded by 20 per cent, and tariffs applying within the quota amount would be abolished.
Out-of-quota tariffs would be subject to the 25 per cent maximum.
"That looks pretty ambitious to us," said the US deputy chief of mission, Philip Wall.
Though the Europeans are the most enthusiastic users of export subsidies, the US dairy export incentive programme, which would go, is one of the factors depressing prices for New Zealand's dairy exports.
On domestic subsidies, the US proposes a formula that would bring down each country's limit for trade-distorting support measures to 5 per cent of the value of total agricultural production within five years.
That would lower the US ceiling from US$19 billion ($41 billion) to about US$10 billion, but it would cut the European Union's US$60 billion ceiling by about 80 per cent and Japan's US$30 billion to a similar extent.
"They are asking more of others than they are offering themselves, and at a time they are increasing agricultural subsidies [through the Farm Bill]," said Trade Liberalisation Network executive director Stephen Jacobi.
"'But overall it's certainly a bold proposal. It shows the US is still into the business of trade liberalisation."
The proposals show the US is prepared to bring a lot of bargaining chips to the table.
But the Doha round will be an arduous negotiation, and at least 2 1/2 years of horse trading lie ahead.
The negotiations at Doha to start the round nearly foundered over European opposition to including a reference to phasing out agricultural export subsidies.
The proposals are fresh evidence of President George W. Bush's free trader credentials, but he has so far been unable to get "fast track" negotiating authority from Congress.
Swindells said talks to reconcile the Senate and House versions of the fast track bill were making progress.
"We're hopeful we will have a conclusion shortly."
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