Trade deal ends EU farm export subsidies

Ministers from countries around the world have averted the collapse of a global trade negotiation, ending the six days of talks with a limited deal centred on the ending of European farm export subsidies by 2013.

Developing nations welcomed the accord, struck after round-the-clock diplomacy in Hong Kong, but campaigners rejected its conclusions yesterday as "profoundly disappointing" and "more symbolic than substantial".

Peter Mandelson, the EU's trade commissioner, said: "In a week of disappointments, this is no small prize. It is not enough to make this meeting a true success. But it is enough to save it from failure."

Speaking on behalf of the G20 grouping of leading developing nations, Celso Amorim, Brazil's Foreign Minister, described the agreement as "a modest but not insignificant deal which could be a driving force to make real cuts in agricultural subsidies".

Jacques Chirac, the French President, said the agreement would be good for economic growth and jobs in France, Europe and the world. "It will help the development of the poorest countries while maintaining the indispensable potential of Europe's farm sector," he added. But most of the really difficult issues in the global trade negotiation remain unresolved, despite the accord that emerged yesterday from fractious talks between ministers from 149 countries.

The meeting attracted large anti-globalisation protests and vicious street battles left 140 people injured and nearly 1,000 in police custody. Inside the harbour-side conference centre the mood was also tense. Last year the EU offered to eliminate all its export subsidies, worth around €2.7bn (£1.8bn) a year, but refused to put a target date unless other countries, including the US, gave similar commitments.

Though under pressure to make an agreement on the curbs by 2010, the EU insisted on the 2013 date, at which point emerging nations such as Brazil will gain opportunities to fill the gap that will be left by the Europeans.

Dairy products take up the biggest category of EU export subsidies, worth €1.495bn in 2004. Sugar exports cost European taxpayers €988m, processed foods €380m, beef €251m and wine €13m each year.

The EU says that the 2013 target date makes its pledge concrete but will not require any further changes to the Common Agricultural Policy since reforms already under way will reduce production. We have used our reform to lock in equivalent reform from America," said Michael Mann, a spokesman for the European Commission. The EU has long complained that up to 60 per cent of the US's $2.6bn (£1.5bn) food aid programme ends up in the pockets of American agribusiness companies, logistics and shipping firms.

Nevertheless the relief agency Cafod (the Catholic Agency For Overseas Development) said that, because EU export subsidies are declining in value the concession was "a depreciating asset, sold to developing countries at too high a price".

It added: "This is more symbolic than substantive. In reality, its impact on the damaging effects of dumped cheap European food will be very limited."

Yesterday's agreement will also bring about the elimination of export subsidies for cotton in 2006 and quicken the pace at which Washington dismantles subsidies for US cotton producers. African economies argue that these handouts are ruining their economies. But one key element of the plan - an offer of duty-free, quota-free access for imports from the 49 poorest nations of the world - was watered down because of American and Japanese reluctance to accept unbridled trade in goods such as textiles and rice.

Alan Johnson, the UK's Secretary of State for Trade and Industry, said it was "thoroughly disappointing" that 3 per cent of goods from the poorest countries, amounting to 250-300 tariff lines, had been exempted from the scheme. But on trade in manufactured goods, the accord fell short of US and European hopes for greater access to poor and developing nations' markets.

Even before the Hong Kong ministerial meeting had started, Pascal Lamy, the director general of the World Trade Organisation, had downgraded expectations; so far apart were the main players. M. Lamy underlined the modest progress made when he told a press conference that before Hong Kong, negotiators were 55 per cent of the way towards concluding the Doha round. After the meeting, ministers had now completed 60 per cent of the work, he said.

Ministers need to reach agreement by the end of next year if they are to take advantage of fast-track powers granted to the US administration to agree any deal. That means that, for the technicalities of a deal to be agreed, a substantial political breakthrough is required in the first half of 2006. Yesterday's agreement also proposed 30 April 2006 as a deadline for reaching a draft for the Doha round, an objective once set for Hong Kong.

The international development charity Oxfam said: "This is a profoundly disappointing text and a betrayal of development promises by rich countries whose interests have prevailed yet again."

The Hong Kong accord

* DEVELOPMENT

Least-developed countries will be guaranteed duty-free, quota-free access for 97 per cent of their exports from 2008, or from no later than the coming into effect of any final trade treaty. Developed countries also undertook to ensure that so-called "rules of origin" are "transparent and simple".

* AGRICULTURE

Rich-nation export subsidies will be eliminated "progressively" by 2013. They include European Union export subsidies and the US food aid programmes as well as subsidies involved in the activities of monopolistic trading companies in Australia, New Zealand and Canada. For cotton, export subsidies will be eliminated by developed countries in 2006. Trade-distorting domestic subsidies should be reduced "more ambitiously" than under any general formula for subsidy cuts, and over a shorter period of time. Disciplines on export credits, export credit guarantees or insurance programmes, state trading enterprises and food aid will be agreed by 30 April 2006.

* SERVICES

The United States and the European Union successfully resisted attempts by some developing countries to weaken the wording of the draft text negotiated at the WTO headquarters in Geneva. Developing countries feared it could force them to open sectors they want to protect. EU and US companies were worried that the services talks, already behind schedule, could slip further if the text was weakened.

* MANUFACTURING

A so-called Swiss formula will be used to ensure that the highest tariffs fall most. But the accord said nothing about the number of coefficients to be used.