TWN Info Service on Trade and WTO Issues (July08/28)
23 July 2008
Third World Network

Agriculture: Initial sceptical response to US offer on domestic support
Published in SUNS #6523 dated 23 July 2008

Geneva, 22 July (Martin Khor) -- An offer by the US Trade Representative that her country's overall trade distorting domestic support (OTDS) ceiling be brought down to $15 billion was met with sceptical initial responses by negotiators of several developing countries, especially since the offer was coupled with the demand that the United States should not face legal challenges on domestic support at the WTO.

The announcement by Ms. Susan Schwab was made at a press briefing at the WTO, just an hour before the second session of the Green Room meeting.

She said that the US is prepared to reduce its allowable OTDS to $15 billion, from the current level of $48 billion, and from its previous offers of $22.5 billion in 2005 and $17 billion in July 2007 at the G4 meeting in Potsdam.

The $15 billion level is within the bracketed range for the US in the agriculture text (10 July 2008). The 66-73% reduction of OTDS in the text translates into $13-16.4 billion for the US.

Schwab said her offer was on condition the US would get adequate extra market access to developing countries in agriculture and NAMA.

She also controversially said that the US needs assurances that its programme is not going to be subject to legal challenges that could reduce the figure even further.

To a question, Schwab denied she was advocating a restoration of the "peace clause" (which has expired). But her elaboration on the need not to face a legal challenge, presumably on farm subsidy issues, left the impression that the US wanted "some kind of peace clause", in the jargon that is now going around the WTO halls and corridors.

The offer by Schwab of $15 billion did not impress WTO diplomats, trade journalists or NGOs, mainly because the actual OTDS level in 2006 and 2007 had fallen to $11 billion and $7 billion reportedly.

Thus, developing country Ministers and officials in recent days have criticized the text's range as allowing the US to have a level of allowed OTDS that is double the current actual level.

That is a lot of "water", in WTO negotiating jargon.

Asked what he thought of the Schwab offer, the head of a leading developing country's delegation said: "It won't fly. It's not going to work."

Senior official of another developing country that is one of the main demandeurs of an improved US offer on OTDS dismissed the $15 billion level as being of little utility, especially since the high farm prices at present had reduced the subsidy levels in the US.

He was even more cynical about the US condition that it must get "some kind of a peace clause", as the official put it.

"This will make whatever disciplines we have on domestic support useless, as they can then be violated without consequence." +