Fingers pointing towards Washington

Analysis: Bush's promises to farmers limited US flexibility, writes Denis Staunton, Washington Correspondent

As United States trade representative Susan Schwab surveyed the wreckage of world trade talks in Geneva yesterday, she said now was a time to look forward to "this degenerating into a finger-pointing exercise".

Ms Schwab's distaste for such an exercise makes sense because, as the Doha round lies comatose, fingers are pointing towards Washington.

This week's talks came after leaders of six key WTO players - the US, the European Union, Brazil, Australia, Japan and India - signaled this month that they wanted an early deal. The leaders sent their negotiators to Geneva promising to show flexibility on the opening up of markets to agricultural products, the issue that had until now proved the biggest obstacle to agreement.

Agriculture is no longer the key economic sector it once was in developed countries, although it remains crucial to poorer nations and farming lobbies wield disproportionate political influence in Europe and the US.

Governments use two mechanisms to protect farmers from foreign competition - subsidies for domestic producers and tariffs on imports. The EU and the US have both agreed to cut domestic subsidies and abolish export subsidies altogether but tariffs remain prohibitively high.

Before they arrived in Geneva, the EU proposed that tariffs on agricultural imports should be cut by 39 per cent, developing countries wanted a cut of 54 per cent and the US said tariffs should be cut by 66 per cent.

EU trade commissioner Peter Mandelson indicated that the EU could improve its offer to a cut of a little less than 54 per cent but the US held to its demand.

The reason for Washington's inflexibility is that, when the US announced last October that it would slash domestic subsidies to farmers, including programmes dating back to the New Deal of the 1930's, the Bush administration promised farmers they would be rewarded with expanded access to foreign markets.

"From day one we said look, we know we've done something really dramatic, we know we've eliminated the possibility of our farm programmes continuing in their form in the United States, we know that we are flying in the face of 75 years of history here with our farm programmes, we have to have market access," US agriculture secretary Mike Johanns said yesterday.

Mr Mandelson's spokesman, Peter Power, told The Irish Times the collapse of the talks yesterday could be traced back to the commitment the Bush administration made to US farmers, a commitment that fatally limited Washington's room for manoeuvre in the negotiations.

"They have made a major political miscalculation here," he said.

Washington's hand is further weakened by the prospect of mid-term congressional elections in November, when Republicans may struggle to retain control of the Senate and the House of Representatives.

America's massive trade deficit and the flight of industrial jobs to China, Mexico and elsewhere have made economic globalisation unpopular among many Americans. Mr Bush's "fast track" authority to negotiate trade deals, which means that Congress must either approve or reject any deal without amendment, expires in July 2007 and it is not certain in the present climate that it will be renewed.