US and Europe agree on deal that could cut farm subsidies

The European Union and the United States yesterday hammered out a deal to cut farming subsidies that could represent a major breakthrough in the stalled negotiations for a global trade agreement.

The pact covered the three key areas of agricultural trade - domestic support, export subsidies and market access - but steered clear of calculating the cut to the present £350bn global package of farm aid.

The proposal was concluded on Tuesday night by EU and US negotiators and was last night being debated by the 146 members of the World Trade Organisation.

"There is an agreement in principle," Carlo Trojan, the EU's ambassador to the WTO told journalists in Geneva.

A deal to liberalise agricultural trade is seen as a key to unlocking a new trade agreement at the WTO's high-profile summit in Mexico next month.

European and American agreement is vital as developing countries say rich nations' subsidies - running to more than £190bn a year - prevent them competing on equal terms in international markets. The deal still needs to be approved by EU members, including Britain.

Franz Fischler, the EU farm commissioner, said: "It should give an impetus to more ways forward ... and it also looks better for developing countries."

But some of the key players in the developing world gave the proposals a lukewarm reaction. India's ambassador to the WTO, KM Chandrasekhar, said it was not feasible.

"This seems to be an attempt to prise open the developing country markets without any clear commitment on the part of [the United States and EU] to open their own markets," he said.

The Brazilian envoy, Luiz Felipe de Seixas Correa, said it "fell short" of the targets set out in November 2001 when the WTO's members agreed to launch the present round after a tense negotiating session at Doha, Qatar.

The Cairns Group of mainly southern hemisphere countries were quick to slam the deal, saying it fell short of targets set for the Doha round and was too vague on proposed cuts in tariffs and subsidies.