Tensions rise over US dairy subsidies

By Chris Mercer

- Last updated on GMT

Related tags: United states congress, European union

America's dairy industry has ripped into the Bush administration's
'ineffective' spending plans for the sector, warning the proposals
will not help domestic farmers or improve prospects of a world
trade deal.

The US-based International Dairy Foods Association (IDFA) said the government had missed a chance to modernise the sector, despite announcing bold reforms in several other agricultural markets.

It has been a tense two weeks in US agriculture, after the 2007 Farm Bill announced last week and the Bush administration's 2008 budget unveiled on Wednesday.

Dairy officials in Europe and beyond will be watching developments closely. Policy in the US, a leading dairy producer, may affect markets and could make or break revived talks on a world trade deal.

Mariann Fischer Boel, European agriculture commissioner, will visit Washington on Thursday for talks with US agriculture and trade representatives.

The IDFA warned US government plans to maintain the status quo in dairy would prop up trade-distorting subsidies in the sector, a major point of contention in world trade talks.

"The administration's [Farm Bill] proposal keeps dairy policies stuck in the 1930s and '40s,"​ said Chip Kunde, IDFA senior vice president.

He said it was a "glaring omission"​ to keep the current Milk Price Support Program, which he claimed makes up around 30 per cent of the most trade-distorting subsidies.

Before world trade talks collapsed last year, Europe's dairy industry leaders said progress would require more subsidy cuts on the US side.

Fischer Boel this week repeated the call on her new blog. She praised "some positive efforts"​ in the US Farm Bill, but warned "the US will need to propose more ambitious cuts and disciplines in trade-distorting domestic farm subsidies"​.

The 2007 Farm Bill must still be endorsed by the US Congress before it can be implemented, and amendments are expected.

IDFA officials are hoping to push through more forward-looking reforms to better compete with the likes of Europe in added value markets.

"Over five decades of new technologies, transportation efficiencies and global trading prospects have greatly improved opportunities for today's dairy industry,"​ said IDFA president Connie Tipton.

She highlighted an International Trade Commission report that accused the current dairy price support programme of stifling the development of higher value products, which have been in growing demand from consumers.

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