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EU needs WTO accord to prevent legal attacks

The European Union needs a global trade agreement to fend off possible attacks on its farm payments and limit competition from subsidized US exports, Agriculture Commissioner Mariann Fischer Boel said.

Without a better offer from the US to cut farmers' compensation at the World Trade Organization, where talks collapsed in July, the EU's offer to eliminate subsidies by 2013 is no longer on the negotiating table, Fischer Boel said. The 25-nation bloc uses subsidies to compensate exporters for lower prices on international markets for grains, milk powder or beef. Aid, now worth about €3 billion ($3.8 billion) a year, is a “trade-distorting measure and will be under attack without reform” at the Geneva-based WTO, Fischer Boel told farmers in Strasbourg yesterday. “But I wouldn't like to give it away for nothing” in the negotiations, she added. Farmers in the EU are under pressure because they need to prepare now for future changes to the €44 billion budget and want to avoid any surprises when the current spending plan runs out in seven years, Fischer Boel said. The five-year-old WTO talks stalled over disagreements on how to limit rich nations' aid to farmers. An eventual deal would add at least $96 billion to global commerce every year, the World Bank says. Unless the negotiations resume within five months, they'll probably be on hold until at least 2009, WTO chief Pascal Lamy has said.

EU Trade Commissioner Peter Mandelson mustn't make further concessions now to broker a deal, said Noel Devisch, president of the Belgian farmers' union. “It's not good enough to say an offer is no longer on the table; once you make an offer it's gone,” he said of Fischer Boel's comment. “What bothers me is that Mandelson every week says we will have to go further. That's what I really object to because what was offered already goes too far,” Devisch said. “If you say that, you will have to go further to have an agreement.” Several years ago, the EU overhauled the way it spends money supporting farmers and the rural environment. In a series of changes in 2002 and 2005, the bloc began paying farmers a flat rate, regardless of what crops they produced and subject to meeting environmental criteria. That encourages them to look for market opportunities, Fischer Boel said. “We need this agreement now,” said Peter Gaemelke, president of the Danish Agricultural Council. “We've already paid the price of reforms, and now we'll not get anything back for it.”

The EU has already been successfully challenged by Brazil, Australia and Thailand over its sugar exports, which WTO judges ruled benefit from subsidies. The bloc slashed its minimum prices for the sweetener after the world's three biggest sugar producers won the ruling that barred the EU from exporting all of its surplus production. The US has also lost a WTO ruling against its use of subsidies to cotton producers that the trade arbiter said exceed commitments made in 1994. Other US payments that compensate producers when commodity prices fall “have kept American farmers in exactly the same commodities,” Fischer Boel said. “They haven't moved into the market place to talk about what consumers want, so they're far behind the EU model,” in which farmers are beginning to adapt to the market. The European Commission has calculated that its offer at the WTO would cost EU farmers €20 billion in lost income, which “is a hell of a big loss” that would wipe out beef production in the bloc, Devisch said. “It's unacceptable.” (Bloomberg)