Bush's Need for Farm Votes May Have Killed Trade Deal (Update1)
July 25 (Bloomberg) -- Efforts to salvage talks on a global trade agreement may have fallen victim to the difficult mid-term election outlook facing President George W. Bush and his fellow Republicans.
Trade experts on both sides of the Atlantic say the Bush administration's unwillingness to risk alienating Farm Belt supporters with cuts in agricultural subsidies was a key factor in the collapse of weekend talks in Geneva. The subsidy cuts were sought by the European Union and developing nations in exchange for agreeing to steep tariff reductions.
``Everybody has seen the writing apparently on the wall for the Republican Party come November,'' said David Woods, managing director of World Trade Agenda Consultants in Geneva. In the last-ditch drive for an agreement, ``it was clear that there was little appetite for making concessions.''
The breakdown means a major pact is unlikely before 2009, trade analysts said. The so-called Doha Round of World Trade Organization talks was aimed at securing agreement on what the World Bank estimated would have been $96 billion in lower tariffs, subsidy reductions and other steps designed to stimulate trade. That proposal itself was sharply scaled back from earlier efforts.
The six WTO members who huddled in Geneva -- the U.S., EU, Japan, India, Australia and Brazil -- were attempting to swap U.S. concessions on subsidies for commodities such as corn and cotton for EU farm tariff reductions and lower tariffs on manufactured goods from countries such as Brazil and India.
Election Prospects
Republicans hold 231 seats in the House of Representatives, where all 435 seats are up for re-election this year, and 55 seats in the Senate, where a third of the 100 seats are being contested. A Bloomberg/Los Angeles Times poll conducted June 24- 27 found registered voters favoring Democrats over Republicans in congressional contests by a margin of 49 percent to 35 percent.
In his 2007 budget, Bush proposed capping subsidy payments to farmers at $250,000 a year, a move that would save taxpayers $4.9 billion over five years. Lawmakers rejected that change.
In June, a bipartisan group of senators sent the White House a letter demanding a halt to further U.S. farm concessions barring significant new overtures from Europe. ``Agricultural interests are very well represented in the Senate,'' said Daniel Ikenson, a trade expert at the Cato Institute, a free-market think-tank based in Washington.
European Pressure
With U.S. elections drawing near and Republicans facing several contested races in the Midwestern heartland, the administration became even less willing to ask for additional sacrifices from American farmers, trade analysts said. Meanwhile, Ikenson said, European politicians in thrall to their own farm blocs were likewise reluctant to accept unfettered competition. ``The Europeans were unwilling to give that kind of access,'' he said.
Judith Lee, an international trade lawyer with Gibson Dunn & Crutcher LLP in Washington, said ``domestic politics has driven this issue from the beginning.'' Farm lobbies in the EU and U.S. ``make it very, very difficult to put forward packages to move negotiations forward because politicians fear they're going to pay a price at the polls.''
EU Trade Commissioner Peter Mandelson directly blamed the U.S. for the collapse of the Geneva talks. ``Having been mandated by heads of government to come together to indicate further flexibility, I felt that each of us did, except the United States,'' he said yesterday.
U.S. Trade Representative Susan Schwab denied that the U.S. had been inflexible. ``The countries that have tended to be finger-pointing at this point are the ones that are reluctant to act in terms of market access,'' she told reporters yesterday.
No Deal
Meanwhile, farm-state Republicans cheered the outcome. ``The United States is willing to change its domestic agriculture policies, but American farmers demand equal access to markets on the world stage,'' House Majority Leader John Boehner, an Ohio Republican, said in a statement. ``No deal is better than a bad deal for America's producers.''
``The U.S. can't accept cuts in subsidies, and in return, get nothing real in market access,'' said Clayton Yeutter, U.S. agriculture secretary under President George H.W. Bush. ``That's the political calculus the administration had to make.''
While U.S. negotiators said the administration's agriculture proposal would have resulted in a 60 percent reduction in subsidies, a WTO analysis concluded loopholes might actually have permitted farm supports to rise to $22.7 billion a year from the current $19.6 billion.
U.S. demands for tariff cuts were nowhere near what Brazil, India and the EU were offering. ``Their demands were way outside the parameters of what anybody else was negotiating,'' said Carin Smaller, an official with the Institute for Agriculture and Trade Policy, a Minnesota-based research group that's allied with small farmers.
While the talks could theoretically be restarted, ``I don't think there's a fat lady who's going to sing, so it looks like this round will just peter out,'' said Claude Barfield, a scholar at the American Enterprise Institute in Washington and a former consultant to the U.S. trade representative's office. ``The odds are Bush will leave office without a trade deal.'' |
