US embassy cable - 05PARIS7223

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-B 
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