Cuts In Farm Subsides And Tariffs Are Long Overdue...

Farm subsides are as much about politics as they are about economics, maybe even more-so. Farm subsides have been the in the political landscape for generations since farmers in many countries have lots of political clout. For example, in Japan, due the districting methods that they use for representation in the Diet, farmers have an inordinate amount of power. Additionally, Narita airport that serves Tokyo, has been hamstrung by farmers that do not want the needed 2nd runway built and this has been held up for years. Irrespective of ones opinion on development, its just an illustration on how a few people can affect the lives of the many.

Recent statements by US trade representative, Portman, offers that the US is willing to reduce and eliminate tariffs and subsidies if Europe and Japan also make significant concessions.

U.S. Trade Representative Rob Portman (news, bio, voting record) gave negotiations a boost early Monday when he laid out a new proposal on agricultural tariffs and subsidies, saying the EU and Japan must now promise to do more to cut aid to their own farmers.

The EU responded with a proposal to make deeper cuts in subsidies to its own farmers. But the necessary reforms are expected to be a tough sell to farmers on both sides of the Atlantic who have profited from generous government handouts.

The US is taking the lead on this initiative now since their are several salient points that need to be addressed. First, the damage that is being done by protecting local markets hurts poor farmers in the developing world the most. The beneficiaries are the large industrial farmers with political clout. Secondly, a country that is protecting less efficient producers should be migrating their assets to more productive uses. This is the benefit of international trade, that resources are freed up to more efficient and profitable uses. Without concessions by others, the US will bear the costs of the reductions and pickup the necessary offsetting gains.

Europe and Japan along with the US have gigantic subsidy programs that have cost taxpayers extraordinary amounts of money through taxes and higher costs of products. There is a tremendous amount of resistance from all three parties to changes due to potential political costs.

Europe and Japan maintain high farm tariffs and want to protect some products from cuts.

"The US proposals are likely to be seen as excessively ambitious by a vast majority of WTO members," an EU official said. Japan said the US offer was "not a basis for negotiation".

Though much of the public focus is on farm subsidies, World Bank economists calculate that 92 per cent of the benefit of rich nations' agricultural liberalisation to the developing world will come from tariff cuts.

No one is innocent, but the US has taken a bold step with potential political ramifications.

And I love Tom at Daai Tou Laam, he is sees the grey cloud in everything when it involves anything that Bush says or does. When one looks through the grease covered glasses of Bush haters, one cannot get a sensible picture of what can be achieved and what has to be achieved.

Typically it's the Bushevik exponents of "Free Trade" who have their heels dug in and demanding other people have to give in first.

He is definitely missing the whole point on this one. One cannot make bold steps without defining what the other parties have to achieve along with the US. It is not digging one heels in but having a sensible strategy so that US isn't forced once again to unilaterally make moves for the benefit of many while Europe and Japan make no concessions what-so-ever. Tom, I guess that you aren't involved in negotiations too frequently.