May 29, 2009

The US has reintroduced export subsidies for its dairy products, but the move found little support as 29 countries at the World Trade Organisation (WTO) criticised the measure as protectionist and warned that it could incite "subsidy wars".

 

Brazil, speaking on behalf of 23 developing countries, told a WTO that the US was promoting a "murky protectionism" that weakens the global trading system at a time when world trade is already shrinking at a record pace.

 

Australia, on behalf of agricultural exporting nations, said the US move is unfair to countries that are trading fairly, and could be potentially harmful to the recovery of the global economy.

 

The subsidy decision under the US Dairy Export Incentive Programme follows a similar move by the EU in January.

 

Subsidy wars will only drive prices lower, thereby delaying economic recovery further, said Australia's WTO ambassador Peter Grey.

 

The subsidy wars penalise those trying to compete without the help of subsidies, and could be particularly harmful to unsubsidised farmers in developing countries, hurting their agricultural production, food security and their most competitive export sectors, Grey said. 

 

The Office of the US Trade Representative said the payments were necessary to protect American dairy farmers from being artificially displaced by EU products as a result of EU subsidies.

 

USTR spokeswoman Nefeterius McPherson said the EU's action threatens the competitiveness of US dairy products, thereby forcing the US to respond.

 

McPherson said the EU should reconsider its dairy export subsidy programme and the US is prepared to discuss with EU representatives on the deactivation of the dairy export subsidy programmes.

 

But EU agriculture spokesman Michael Mann said the US should not use the EU subsidies as an excuse, as the bloc is not undercutting the world market or affecting international prices, compared to the US having other subsidies that already allow them to place their products on the world market.

 

US Agriculture Secretary Tom Vilsack over the weekend said the US remains strongly committed to the pledge of refraining from protectionist measures, and that the subsidies were fully consistent with WTO commitments.

 

But Grey argued that if other countries follow the example set by the US and the EU to raise tariffs, domestic support and export subsidies to their maximum WTO commitment levels, it would undermine the effectiveness and credibility of the WTO system.

 

Accusing the US and the EU of showing poor leadership, Grey urged them to promptly remove the subsidies.