I recently had a chance to ask U.S. Trade Representative Rob Portman about the trade loophole that the U.S. is trying to negotiate for one of its farm-subsidy programs, which I wrote about here. Here’s the exchange:
ME: Is it still a US priority for any final agreement to have included in it changes to the blue box so that our counter-cyclical payments fit there?
MR. PORTMAN: In the US proposal, as you know, there is a reduction in our trade distorting support in the amber box, which is the most trade distorting subsidy programs of about 60 percent. Well it is 60 percent. When you take out all the water, meaning the amount between what we’re allowed to do under the bound rate and what we actually do under our applied rate, it’s closer to a 47 percent cut. That’s a deep cut because it would make it very difficult for us to continue to have the programs in place.
In particular, I’ll let the Secretary speak to this, but our marketing loan program could not operate within those same numbers, so it would have to be reformed. This is why we are getting a lot of heat from Congress, as someone talked about earlier, on these programs. This is why market access is critical to go along with these cuts.
The second most trade distorting area is called blue box. If you look at the July 2004 framework agreement of the WTO, it explicitly references what’s called our counter-cyclical program, which is not production-related, therefore less trade distorting, but it is price- related. And it was provided for in the 2004 framework, as part of the blue box, and the blue box was to be limited to 5 percent of your production. Right now it’s unlimited. And the European Union has, I think, 33 billion dollars worth of aid in the blue box. The European Union, as you know, has the ability to use 4 1/2 times more support than we do, and uses 3 times more.
So what we have said in our proposal is, the blue box instead of being limited from unlimited to 5 percent of production, should go down to 2 1/2 percent of production. Which further squeezes what can be in the blue box and provides the ultimate discipline on blue box, which is less aid, less support. So that would be our proposal, that the current 5 percent number is about 5 billion. The counter-cyclical program is at 7.6 billion, authorized. So it would require reforms in that program as well. Hope that answers your questions.
Not really, but in Portman’s defense, I didn’t ask the right question. I knew it was still priority to build a loophole for counter-cyclical payments into the new agreement. I actually wanted to know what justification we have for doing it. I was able to ask a senior USDA official later, and he told me this: The U.S. doesn’t currently use the “Blue Box” — a category that was created to exempt certain farm subsidies from WTO agreements. It’s primarily used by the EU, and they’re not giving it up. So then it’s only fair, this official argued, that the WTO expand the definition of the Blue Box to let some other countries fit their programs in, too.
This is a step backward. The solution to the Blue Box problem is to demand that the EU reduce its bad subsidies, not to create some kind of Frankenstein category that allows us to keep our bad subsidies too.