EU offers deal on export subsidies

By IRENE CHAPPLE and REUTERS

Europe has offered to ditch agricultural export subsidies in a move which could kickstart stalled World Trade Organisation talks trying to abolish international trade barriers.

But the apparently major policy shift comes with conditions, including a demand for a matching about-face from the United States.

Australia and Canada would also have to change export policies.

In New Zealand, the Government and exporters welcomed the European move yesterday, but remained wary that the conditions could stall progress.

"On the face of it, it amounts to a significant move forward by the EU," said Dairy Companies Association chairman Earl Rattray.


"Export subsidies are the most destructive form of agricultural subsidy.

"Eliminating them has been the number one priority for the New Zealand dairy industry since the [Doha round of trade talks] began."

European Union commissioners Pascal Lamy and Franz Fischler said in a letter to WTO counterparts that the EU was "ready to move on export subsidies", provided acceptable results could be negotiated over market access and domestic support.

They also urged an end to all forms of export support "to provide free and unfettered market access and to significantly reduce and if possible eliminate the most trade-distorting domestic subsidies".

The letter was welcomed by the United States, castigated in highly subsidised France and greeted by other trade partners, including New Zealand.

It was issued before the annual OECD ministerial meeting in Paris, for which Trade Negotiations Minister Jim Sutton left yesterday.

He said the letter was timely.

"We are fast approaching our July target date to agree the frameworks for the rest of the negotiations.

"This letter gives a welcome boost to the intensive efforts that we're making to try to find consensus."

The offer from Lamy and Fischler is conditional on the United States taking similar steps to end export aids and trade-distorting food aid, and on Australia and Canada reforming export trading boards.

These conditions leave significant hurdles in the way of a deal.

A spokesman for Australia's Trade Minister, Mark Vaile, said the Australian Government defended the role of the country's farm export monopoly trading boards.

"We are only prepared to talk about the role of State Trading Enterprises [export boards] in the context of substantial progress in all other elements of agricultural negotiations, including improved market access, reduction in domestic support and export subsidies," Vaile's spokesman said.

"We also insist that our STEs are not in any way trade-distorting."

Canada also says its wheat export monopoly, the Canadian Wheat Board, does not distort trade and is not on the negotiating table.

Sutton's office said Europe did not set any condition with which NZ had to comply.

Sutton said elimination of export subsidies was "fundamental for New Zealand and virtually all other WTO members".

Other exporters said the comments were pleasing but were just a small step towards freeing trade access.

Fonterra's director of government and trade, Philip Turner, said the letter was in "coded negotiation language" but still signalled a significant change in policy for the EU.

He said a change would have a huge effect on New Zealand agriculture.

WTO trade reform talks collapsed at a ministerial conference in Cancun, Mexico, last September.

Farm subsidies were the most serious sticking point.