EU, Brazil to propose farm subsidies overhaul to appease developing nations

European Commissioner for Agriculture Phil Hogan, along with his trade counterpart Cecilia Malmström, will announce a joint proposal with Brasília on Monday to limit “market distortions” | Jacques Demarthon/AFP via Getty Images

The European Union and Brazil will tell the World Trade Organization on Monday they are ready to shake up generous farm subsidies to reform a global trade landscape widely seen as stacked against emerging countries.

The WTO’s attempts to create an overarching architecture for international trade networks have stumbled repeatedly over the politically inflammatory topic of agricultural subsidies. The EU has a broadly liberalizing trade agenda and wants to slash subsidies that obstruct the efficient flow of goods around the world and block big free-trade deals.

Brussels, however, is also a big farm subsidizer and lavishes 40 percent of its budget on agricultural payments, sparking complaints from poorer nations that they simply cannot compete. Developing countries also protest that they are consistently advised to avoid paying subsidies themselves by global financial institutions.

Such frustrations boiled over earlier this year when former U.N. Secretary-General Kofi Annan quipped “the European Union pays enough subsidies to fly each cow in Europe around the world first-class and still have money left over.”

Officials briefed on the EU plan said that European Commissioner for Agriculture Phil Hogan and his trade counterpart Cecilia Malmström would announce their joint proposal with Brasília on Monday to limit “market distortions.” They added it was supported by Colombia, Uruguay and Peru. This proposal will be discussed at a major ministerial meeting of the WTO in Buenos Aires in December.

The officials said the EU would aim to eliminate the most “trade-distorting” support measures inside the Common Agricultural Policy (CAP). This could affect cash allocated to stabilize markets, but would not touch subsidies such as coupled payments, which directly support the production of key products such as beef and milk.

The EU’s proposal to slice market-stabilizing payments would not kick in until the next budget cycle. That means that Brussels would not start to change the way it distributes money…