Hostility between EU and US trade negotiators is reaching unprecedented levels following the indefinite suspension of global trade talks
The United States currently has lower agricultural tariffs than the EU or advanced developing economies:
- US average bound tariff = 12%
- EU average bound tariff = 23%
- Global average bound tariff = 62%
- India’s average bound tariff = 114%
The US accuses the EU of blocking market access to developing countries and using sensitive products to counterbalance the level of new market access it is offering.
The EU responds, saying it is already the most open market in the world for agricultural exports from the developing world. Through its Everything But Arms system, the EU provides tariff and quota free access to all agricultural imports from the 50 Least Developed Countries (LDCs). And the EU absorbs more agricultural imports from the LDCs than the rest of the developed world combined, taking in 70% of agricultural exports from the LDCs, while the US absorbs just 17%.
WTO rules identify different forms of trade distorting farm spending:
- Aggregate Measure of Support or Amber box support, which cover payments that are coupled to the price or production level,
- The de minimis box support, which is a limited farm support allowance to all WTO members
- Blue box support, which contains less trade-distorting subsidies, with reduced effects on production and prices.
The United States has fewer trade-distorting agricultural supports (AMS) than the EU:
- The Aggregate Measure of Support (AMS) in the US in 2005 was of $12.5 billion, with an WTO-allowed level of $19.1 billion
- AMS in the EU in 2005 is estimated at $33 billion with an allowed level of $88 billion
However, because by shifting payments from box to box it is possible to lower AMS levels but maintain trade-distorting payments in the other two boxes, and because the cuts proposed would be applied to the levels currently permitted by the WTO and not to the levels actually spent, the US offer would actually lead to an increase in its farm subsidies to $22.7bn.
This would still be below EU levels, but it is also worthy to note that the EU has 11 million farmers while the US has only 2 million.