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In a hugely disappointing outcome, International trade negotiators made so little progress in Geneva this past weekend that they gave up and went home early. The lack of leadership was stunning and blame can be spread widely. Despite the great gains that India has reaped in recent years from globalization, its trade negotiator decided that a World Cup game was more important than arriving at a key negotiating session on time. European Union negotiators indicated a willingness to accept larger average tariff cuts on farm products, but insisted on extensive exceptions for "sensitive" products that would substantially undercut the potential for increased access to its markets.
Perhaps most surprising of all was the refusal of the American negotiators to show any flexibility on cutting agricultural subsidies, even when doing so would have cost them little or nothing. The US proposal to cut its ceiling for overall trade-distorting support by half, to $22 billion, was harshly criticized for being above current spending levels of around $19 billion. US Trade Representative Sue Schwab could have addressed this criticism by offering to eliminate the so-called "product-specific de minimis" category, which under the US proposal theoretically allows US spending of up to $5 billion. According to the most recent available data, however, the US has never spent as much as $250 million in this category. More ambitiously, Schwab might have accepted the EU proposal to also cap the non-product-specific de minimis category at 1 percent of the value of farm production, which would bring the ceiling for this category down from $5 billion to $2 billion for the US, about the level of actual spending in recent years. (Both de minimis categories are for subsidies that would otherwise be allocated to the most trade-distorting "amber box" category, but which are exempted as long as they remain below a given level.)
Together, these "concessions" would have brought the US ceiling several billion dollars below $19 billion with little if any pain for US farmers. But the US proposal would not have been meaningless. Eliminating and reducing the two de minimis categories would keep Congress from approving ad hoc emergency payments to farmers, as it has done in the past. And the separate cuts in the most trade-distorting category (the Aggregate Measurement of Support), would require changes in programs for major crops. The failure by US and other negotiators to show any leadership in Geneva this weekend makes it unlikely that a deal can be completed this year.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.