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EU Proposes Cuts in Tariffs Protecting Farmers

By SCOTT MILLER and JULIANE VON REPPERT-BISMARCK in Brussels, and GREG HITT in Washington
Staff Reporters of THE WALL STREET JOURNAL
October 29, 2005; Page A4

Global trade talks gained some momentum after the European Union proposed a package of tariff cuts that would expose highly protected European farmers to greater foreign competition.

U.S. Trade Representative Rob Portman described the EU proposal as "a modest step in the right direction," and vowed to press forward with negotiations aimed at reducing farm supports ahead of the planned World Trade Organization gathering in Hong Kong in December.

"We will not quit," Mr. Portman said.

Yet the EU overture, sketched Friday by Europe's top trade negotiator, Peter Mandelson, left considerable room for disagreement among major players in the broader set of negotiations. The package calls for reducing the highest farm tariffs imposed by developed countries by 60% and capping tariffs at 100%. By contrast, the U.S. has proposed a 90% cut in the highest tariffs -- a level the EU insists is "implausible" -- and a tariff cap of 75%.

"We're disappointed," said Mr. Portman, voicing added concern with EU-proposed exceptions that would exempt a wide number of products from the tariff reductions. "This is a big loophole that concerns us."

The EU is proposing to allow countries to classify 8% of all products -- such as rice in Japan and poultry and beef in Europe -- as "sensitive" and subject to higher tariff rates. The U.S. is proposing only 1% of products be exempted.

Mr. Mandelson defended the EU initiative, made public after several days of wrangling within the 25-nation trading bloc over French objections to any further farm concessions. "By any measure, what we are putting forward is a very deep cut," Mr. Mandelson said, adding that it was "Europe's bottom line."

Disputes over farm trade have held up companion WTO negotiations aimed at lowering barriers to trade in services and manufactured goods. The EU made its offer contingent on other countries opening up industrial and service sectors -- a message Mr. Portman endorsed. "We couldn't agree more," he said.

The EU also demanded that the WTO set up a registry to protect geographical food names such as Parmesan cheese and Parma ham -- an issue that has never sat well with other trading partners, including the U.S., Australia and Canada.

European farm tariffs stand as one of the most difficult roadblocks holding up global trade talks. The U.S. has pushed hard for lowered tariffs, which will boost exports of U.S. commodities, as part of a trade-off for agreeing to steep cuts in domestic farm subsidies. All along, Mr. Mandelson has been forced to walk a tightrope between demands of the U.S. and other trading partners and those of some EU member countries, chief among them France, that want to limit any agriculture changes.

One French diplomat Friday underscored the pressures on Mr. Mandelson, questioning whether the latest EU offer oversteps the trade chief's authority. "We still have doubts," he said.

Write to Scott Miller at scott.miller@wsj.com, Juliane von Reppert-Bismarck at juliane.vonreppert@dowjones.com and Greg Hitt at greg.hitt@wsj.com

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