Farm Trade Talks Take Slight Turn
July 13, 2004
The Forum

In what looks to be a slight opening for United States agricultural trade, the European Union has backed off demands that Washington scuttle farm export credits. The apparent crack in the EU's stance on U.S. export credits comes three weeks before a deadline for a draft trade accord among the World Trade Organization's 147 members, the Associated Press reported.

The concession is important for American farmers who have seen their share of the export market - specifically for wheat - shrink in the last decade. Competition from previous customers is part of the reason for the decline in U.S. exports. Russia, for example, has become a major player in world wheat trade.

But trade policies of competing nations also are responsible for a smaller market share for American farmers. What free traders call trade-distorting policies are, in effect, policies to improve the trading position of individual nations. Systems of tariffs, quotas and phony quality control standards are designed to manipulate the market.

One aim of the WTO has been to stimulate more free trade by forcing nations to drop or modify protectionist trade measures. The European Union has, for the most part, lined up against the United States, while continuing to subsidize agriculture at levels far higher than U.S. subsidy and support programs.

The change in the EU's stance regarding U.S. export credits is significant in that it recognizes the American position that not all export credits distort trade. That's been the bargaining position of United States Trade Representative Robert Zoellick.

The credits are government loans that enable U.S. ag exporters to offer low-risk credit to overseas customers. The credits are a useful tool for enhancing American exports, and in effect, have helped American commodities remain competitive in a global export market in which subsidies of all kinds affect the grain trade.

The softening of the EU position does not mean the WTO will go along. Several major farming nations have not signed on. Nations that use high tariffs to protect domestic agriculture would not readily compromise away those tariffs in order to make concessions to the United States. The idea of an open market in Japan, for example, is anathema to the Japanese.

But the EU's apparent change of heart on export credits is a sign that free traders likely will have to accept some so-called protectionist trade rules. After all, what some see as trade-distorting subsidies, others see as legitimate means to protect a nation's agricultural economy.

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