French press minimizes US offer

UNCLAS PARIS 007223

SIPDIS

BRUSSELS PASS USEU FOR AGMINCOUNSELOR
STATE FOR OES; EUR/ERA;
STATE PASS USTR FOR MURPHY;
USDA/OS/JOHANNS AND PENN;
USDA/FAS FOR OA/TERPSTRA/ROBERTS;
ITP/SHEIKH/HENKE/MACKE/TOM POMEROY/MIKE
WOOLSEY/GREG YOUNG;
FAA/SEBRANEK/BLEGGI;
EU POSTS PASS TO AGRICULTURE AND ECON
GENEVA FOR USTR (ALLGEIER, SHARK) AND AGRICULTURE

E.O. 12958: N/A
TAGS: EAGR ETRD PGOV FR WTRO EUN INR
SUBJECT: French press minimizes US offer



1. SUMMARY: The French daily paper Le Figaro
dated October 19, 2005, published an article
entitled : "America supports its farmers as never
before" which asserts that despite last week's
proposal to make deep cuts in domestic support, US
agriculture would continue to be highly
distortive. END SUMMARY.


2. "America supports its farmers as never
before: While Washington is challenging the EU to
cut its subsidies, the United States is going to
beat its 2000 record.


3. US farmers are rubbing their hands. The USDA
has just increased its estimates of the volume of
2005 crops : 2% more for corn and cotton, 4% more
for soybean. In a few days, the estimates for
support expenses will logically be increased,
Three months ago, they amounted to 21.4 billion
dollars, that is 60% more than last year. 2005
subsidies could beat their record of 2000, that is
22.9 billion dollars.

Subsidies threatening African countries
--------------


3. The most embarrassing is that the two thirds
of these subsidies could be production subsidies
which encourage farmers to produce more in order
to earn more, but which also favor the drop in
world prices. In order to limit this consequence
on prices, the EU has already reformed its
agriculture subsidy system by delinking it from
production.


4. The US negotiator, Rob Portman, proposed a few
days ago, to reduce by 60% the ceiling of US
subsidies that are distorting world trade. The
category of subsidies concerned is that of the
"amber box" in the WTO jargon, those which most
influence prices. But it seems that proposed cuts
would be partly compensated for by the use of
other type of supports, of the "blue box", with
less pernicious effects because they limit
production. Up to now, the United States was
against this type of support to agricultural
prices.


5. Ralph Ichter, chairman of Euroconsultants, a
Washington agency specialized in agricultural
trade, thinks that present American proposals will
not prevent the US government from widely
subsidizing its producers.


6. So Uncle Sam could spend, with the marketing
loans, the subsidies that are most distorting
world trade, 3.4 billion dollars per year to
support its soybean producers, that is 20% of the
value of their crops. Corn producers would receive
2.2 billion dollars, that is 12% of their crops.

7. "For the particular case of cotton, adds
Ichter, authorized subsidies would reach 2.1
billion dollars, equivalent to 40% of US
production ! This is huge and is especially
threatening African countries, in direct
competition with the few producers located in the
south of the United States." Moreover, production
subsidies not defined yet would be added to this
system."

Stapleton