U.S. farm bill proposals come under fire in Europe

BRUSSELS (Reuters) - U.S. government proposals for a new farm bill came under attack in Europe on Thursday for not cutting subsidies enough to ensure success at a crucial stage in world free trade talks.

U.S. domestic farm supports have been a sticking point in the World Trade Organization (WTO) negotiations -- known as the Doha Round -- for developing nations, which say they preclude true global competition.

Critics say subsidies drive down prices and lock out poor farmers in the developing world. But Washington says it can only cut so much until others -- particularly the European Union -- roll back import duties and let its farmers export more.

On Wednesday, U.S. officials unveiled a plan to shield farm subsidies from legal battles, shuffling some of the $87 billion they want to spend over the next decade into programs that they hope will not run foul of WTO rules.

U.S. cotton programs have already been successfully attacked by Brazil at the WTO, and Canada has recently launched a case against U.S. subsidies on corn and other crops.

Washington's trade partners have warned of further legal challenges unless new farm trade rules can be agreed in the Doha round.

The European Commission, the EU's executive arm, was quick to point out what it saw as a series of shortcomings in the U.S. administration's proposal for the 2007 farm bill -- the umbrella law that sets subsidy, environment and nutrition spending.

"If we are to have a successful outcome to the Doha Round, the U.S. will need to propose more ambitious cuts and disciplines in trade-distorting domestic farm subsidies," said Michael Mann, the Commission's agriculture spokesman.

"So far as Doha is concerned, it is not possible for us to form a clear view from this proposal of what the (U.S.) Administration's negotiating approach will be," he said.

"Key trade distorting programs for dairy and sugar remain virtually untouched," Mann told a daily news briefing.

In Geneva, home to the WTO, trade negotiators agreed that it was not immediately clear what the implications were for the U.S. stance in the round.

"People will need to figure out these numbers align with what has been proposed (by the United States) at the WTO," said New Zealand's ambassador Crawford Falconer, who chairs the round's farm talks.

Proposed cuts in loan deficiency payments, the basic safety-net of the 2002 U.S. farm bill, were extremely modest, Mann said. But the Commission noted a modest shift toward more "green" direct payments, he said.

The U.S. proposal assumed that commodity prices would remain at their current high levels, he said. If this was so, domestic farm support would fall, he added -- but if price trends changed, then trade-distorting farm support would rise.

The Doha negotiations on lowering barriers to commerce have resumed after a six-month halt called by WTO chief Pascal Lamy after major powers failed to break a long-running deadlock over farm trade last July.

(Additional reporting by Richard Waddington in Geneva)