Farm Deal Puts WTO Talks at Risk

A battle between the west and the developing world at next month's World Trade Organisation meeting in Cancun was looming last night after India rejected a late deal on farm subsidies stitched together by Washington and Brussels.

The world's two largest trading blocs claimed the deal would inject new life into deadlocked trade liberalisation talks but faced immediate objections from India, one of the WTO's most powerful developing country members.

"It is not feasible. It does not take into account our farmers' interests," said India's ambassador to the World Trade Organisation, KM Chandrasekhar.

With less than a month to go before the trade ministers arrive in Mexico, agriculture remains one of the most contentious issues on the table.

To break the logjam, the European Union and the United States are offering limited cuts to the most trade-distorting subsidies and some reductions in the high tariffs that hit developing country farm exports.

But aid agencies said western countries were backtracking on the pledge they made when the new round of talks was launched, two years ago, that developing country interests would be the priority.

One of the crucial promises western trade ministers made at the beginning of the new round in Doha - to abolish all export subsidies - would be watered down under the EU-US plan. Instead, Brussels and Washington are offering a more limited deal to phase out subsidies on a range of interests to developing countries.

But, for a product to appear on the list, farm lobbies in Europe will have to give their approval, and sceptics argue the EU will never agree to put sugar on it - one of the most heavily subsidised products that is harming farmers in the developing world.

"This is world class comedy from the world's subsidy super-powers," said Kevin Watkins, Oxfam's head of research. "They are completely reneging on the commitments they made two years ago."

Mr Watkins said Europe and the US appeared to have agreed to turn a blind eye to each other's lavish spending on farm subsidies. Campaigners say this encourages mountains of surplus food, which is dumped in the developing world, bankrupting local farmers in the process.

Washington enraged its trading partners last year when it increased spending on farm subsidies by $180bn over the following 10 years. Just months later, the EU came under equally heavy fire after France and Germany forced other member states to agree to keep spending on the common agricultural policy virtually unchanged until 2013.

The draft deal allows the EU and the US to claim most of their spending is "non-trade distorting" and so not subject to demands for cuts.

"This deal is designed to accommodate the US farm bill and the non-reform of the common agricultural policy," Mr Watkins said. "This is a reckless assault on the Doha development round."

Officials in Brussels believe the deal is the best chance that talks will be wrapped up by the end of 2004, as planned. The three-page framework leaves out much of the detail - such as how swingeing any cuts in subsidies might be - and will still have to be negotiated.

However, both sides insist privately that they have given real ground and signed up to concrete concessions - at least in principle.