EU, US subsidies 'open to legal action'

Rich countries' farm subsidies are open to attack at the World Trade Organisation (WTO) after the collapse of free trade talks, according to aid agency Oxfam.

Agricultural subsidies were one of the prime causes of the failure of the WTO's five-year-old negotiations, with the United States resisting pressure to offer greater cuts.

Oxfam estimates $13 billion (€10.2 billion) of US and EU spending is illegal. "The option of litigation is still open because... the European Union and the US are violating existing WTO rules," the agency said.

"Oxfam believes that $13 billion worth of present-day EU and US subsidies are illegal."

Kenya, Peru, Ghana, Zimbabwe and Uganda are among the countries that could bring "solid" cases on rice, corn, sorghum, milk, butter, tobacco, fruit and tomato subsidies, it said.

The US has already lost a case on cotton brought by Brazil. Brazil also successfully attacked EU sugar policy in a dispute it brought with Thailand and Australia. After the WTO talks collapsed on Monday, Brazil's foreign minister Celso Amorim said it was possible that more cases could be brought, although none were currently being prepared.

The WTO's Doha round has been suspended indefinitely after major powers failed to achieve a breakthrough on agricultural and industrial goods.

n Meanwhile, the largest US farm group, the American Farm Bureau Federation (AFBF), said yesterday it backed an extension of the current farm subsidy law for "at least one year" as a response to the collapse of world trade talks. The 2002 law boosted crop and dairy supports by 67 per cent and is due to expire in September 2007. AFBF said extension of subsidies averaging $20 billion a year would give growers "the support they need to survive in today's contentious global trading environment."

AFBF president Bob Stallman said the group also supported an immediate extension of the law that guarantees a prompt vote in Congress on trade pacts. That is vital for the pursuit of beneficial bilateral and regional trade pacts, he said, or a World Trade Organisation agreement if talks resume.

An extension would include modifications to ensure US farm supports were in line with WTO limits.