EU makes ‘bottom line’ offer on tariffs

10/28/2005

By Dan Bilefsky and Graham Bowley
International Herald Tribune
SATURDAY, OCTOBER 29, 2005

BRUSSELS The European Union on Friday made what it called its most sweeping offer ever to cut its agricultural tariffs in an effort to save stalled world trade talks.

But dissent from France and a frosty reaction from Europe’s main trading partners, including the United States, put the future of those negotiations in doubt just weeks before a critical meeting in Hong Kong.

At stake is the so-called Doha round of trade talks - named because they began in the Qatari capital in 2001 - which are intended to significantly reduce trade barriers and subsidies across the board worldwide, with a special effort to help poor countries dependent on agriculture gain greater access to rich-country markets.

In recent days, the United States and other countries have blamed EU intransigence - driven by big farm-producing countries like France - for the stalemate.

Presenting what he called the EU’s “bottom line,” Peter Mandelson, the EU’s chief trade negotiator, said Europe was prepared to cut the bloc’s highest farm tariffs by 60 percent and the lower tariffs by 35 percent to 60 percent, while almost halving the overall tariff rate to 12 percent from about 23 percent.

“Europe’s farmers, like any others, cannot be expected to see their livelihoods negotiated out from under them,” he wrote in an opinion piece in this edition of the International Herald Tribune. (Page 7) “Our proposals are at the limit of what is socially tolerable in Europe and we will go no further. “

At a news conference in Brussels, he conceded that other countries would probably not “jump with joy,” but neither should they “walk away,” he said, warning that time was running out.

“If our trading partners don’t accept the seriousness of our proposals then the question is if they really want to relaunch global trade talks,” he said, seeking to turn the tables on critics.

The United States, which presented its own, more ambitious proposal for cuts this month, said it looked like the EU offer did not go far enough.

“From our early analysis we are disappointed with the new EU proposal,” said Christin Baker, a spokeswoman for Rob Portman, the U.S. trade representative.

“While in some ways it is a step in the right direction, much more needs to be done,” she added.

By exempting so-called “sensitive products” like beef, poultry or sugar from the tariff cuts, the EU was allowing itself “substantial loopholes,” Baker said. The United States and other countries have demanded a range of tariff cuts of 55 percent to 90 percent.

Trade experts warned it would be a daunting challenge to find consensus before a World Trade Organization ministerial meeting in Hong Kong in December.

Sergio Marchi, a former Canadian trade minister who has also chaired the WTO’s General Council, said the EU’s take-it-or-leave-it approach risked alienating its trading partners.

“I don’t think they should slam the door on further movement despite the pressure coming from France,” he said. “If developing countries get the sense the EU won’t improve on this, then what’s in it for them to continue talking.”

Brazilian officials, who have led the charge among developing countries for the opening of agriculture markets, said the EU was giving too little, while asking too much.

“I don’t think this deal is good enough,” said a Brazilian trade official, requesting anonymity because of the sensitivity of the talks.

The official said the EU had failed to sufficiently reduce tariffs on products like beef, sugar and pork, which make up a big portion of U.S. and Brazilian agricultural exports.

The EU has come under pressure to sharply reduce the number of products that it wants to exclude from a tariff reduction program. The EU is proposing that sensitive products should be limited at 8 percent of its total farm imports. That is lower than the EU’s previous limit of 12 percent, but well short of the 1 percent cap demanded by the rest of the world.

“It offers very little on market access,” an Australian trade official, also speaking on condition of anonymity, said in expressing his disappointment.

Mandelson said that his offer also was conditional on the EU’s main trading partners lifting their own tariffs on industrial goods and services - something countries like Brazil and India have been reluctant to do.

Even if the cuts were to satisfy Europe’s trading partners, the scene is set for a painful clash within the EU between Mandelson and a group of farm-reliant countries led by France.

Mandelson, who negotiates on behalf of the 25-nation EU, made the offer despite a fierce warning by the French president, Jacques Chirac, on Thursday, that he was prepared to veto any final deal that endangered Europe’s current farm subsidy and tariff regime.

On Friday, France showed little inclination of backing down.

“We have doubts about this offer,” said Nicolas de la Grandville, a spokesman for France at the EU. “We are making our views known now to avoid having to use our veto during the endgame later.”

Acknowledging that he had gone to the outer limits of the negotiating mandate handed to him by EU governments, Mandelson said he was still determined to win France over.

“Of course France has sensitivities,” he said. “That doesn’t negate France’s wider commitment, and I certainly look forward to being able to demonstrate convincingly to France that what we’re doing is negotiating in Europe’s, and that includes France’s, best interests.”

Once any deal is struck, it would requires unanimous agreement by all 25 EU countries, so France does have the possibility of vetoing it and so blocking the whole round.

Amid rising antagonism and hostility over the past few weeks between France and Brussels, France has accused Mandelson of overstepping his mandate by offering concessions that go beyond the 2003 agreement among EU countries for reforming its complicated system of farm subsidies and supports.

France is not alone. Ireland is also concerned that Mandelson has made excessively generous concessions too early in the discussions, weakening the EU’s negotiating position.

The U.S. offer on farm cuts this month surprised the EU and immediately put pressure on the EU to follow suit. The EU, however, has countered that the U.S. offer lacked detail and would still require congressional approval.

France, where unemployment is high and the farm lobby is strong, and where presidential elections are due in two years, has issued a string of protectionist broadsides in recent weeks. This has brought it into conflict with the commission. Over the summer, France pressured Mandelson into reimposing quotas on Chinese textile imports over fears in France for its domestic textiles industry, despite fierce calls from more free-trading nations in the EU for greater liberalization.

The issue of farm subsidies has also divided the EU between nations favoring more open markets and those who want to maintain protection for their domestic industries. Other countries, like Italy and Greece, have supported France, but it was unclear whether they would be won over by the commission’s latest offer.