US threatens to sink French plan to stop the West undercutting African farmers

Poltical fallout from the Iraq war is threatening catastrophe for millions of farmers in Africa, because the Americans may torpedo a French plan to ban the dumping of subsidised farm produce in African markets.

British diplomats have been working frantically to bridge the gap, in the hope of keeping alive the plan, which has Tony Blair's personal backing.

The US spends between $3bn (£1.8bn) and $4bn a year subsidising 25,000 American cotton farmers - more than its annual aid budget to the entire African continent - flooding the world market with cheap cotton, while in west Africa, 10 million people rely on cotton growing for their livelihood. A typical small farmer will make about $300 a year.

The European Union is also guilty of undercutting African farmers, through the Common Agricultural Policy (CAP), turning Europe into the world's biggest exporter of white sugar, with disastrous results in countries such as Malawi, Zambia and Mozambique, which are in effect locked out of the European market. The EU also dumps subsidised milk and wheat on markets from Kenya to Senegal, while restricting imports of African produce.

The French President, Jacques Chirac, has proposed a moratorium on all subsidies of produce that are sold in Africa, which could go a long way towards enabling African farmers to achieve self-sufficiency. But the plan has had a frigid reception in Washington. The US says its export credits should be exempt.

The American reaction is a striking departure from the normal courtesies of G8 summits, in which the host nation usually puts up proposals and the following year's host nation - in this case the US - promises to follow them up.

By contrast, President Chirac's proposal has been given enthusiastic public support by Mr Blair, not only because it will benefit Africa, but because Britain has been pushing for reform of the CAP against French resistance. He has promised that the idea will be followed up when the British host the 2005 G8 summit.

Justin Forsyth, of Oxfam, said: "This proposal is a casualty of the Iraq war. The Americans don't want a specific focus on Africa and they don't want to support a French proposal."

Jeremy Haywood, Mr Blair's private secretary, has been working behind the scenes for days in the hope of brokering an agreement between the Americans and the French. Yesterday, British officials said they were "hopeful" of a deal.

There was also a veiled warning to the Americans yesterday from Patricia Hewitt, the Trade and Industry Secretary, who told Radio 4's The World This Weekend programme: "The countries of the developed world really cannot go on preaching free trade abroad and practising protectionism at home. What I hope will happen at this G8 meeting is that the G8 countries together, faced with this demand - quite rightly - from Africa and the rest of the poor world, will reaffirm their commitment to creating rules for trade that are not only free but fair."

Meanwhile, British diplomats have helped to secure an agreement to fight corruption in Africa. Companies that extract oil and minerals will have to publish the full details of deals they strike with the relevant governments.

This follows a series of allegations that money from extraction rights has been siphoned off into private bank accounts. A dispute about whether the rules should be compulsory or voluntary was settled under a compromise deal that says governments will have the option of whether to sign up to the agreement or not, but companies will be bound by their government's policy. Supporters of the deal say that it will work provided a "critical mass" of the richest nations joins up.