In an attempt to jump-start global trade talks, the European Union said it was prepared to end its agricultural export subsidies. But the move has infuriated France, the largest beneficiary of EU farm aid.
Agriculture subsidies consume half of the EU's budget.
The trade initiative was launched by EU Agriculture Commissioner Franz Fischler and Trade Commissioner Pascal Lamy, who said the offer to end export subsidies was conditional on reciprocity by the United States and other wealthy farming nations.
"We feel that a breakthrough is possible and the EU is ready to do its part," Fischler said at an EU agriculture meeting in Killarney, Ireland, on Monday. "This means that our international partners have to make clear that they are ready to fully match the EU on their forms of export support such as export credits, abuse of food aid or state trading enterprises."
The offer could help get World Trade Organization talks, which are months behind schedule after collapsing last September, back on track. Agricultural export subsidies are widely believed to hurt farmers in developing countries by keeping the prices for farm products artificially low on world markets.
Lamy said the EU wanted to secure a preliminary framework for WTO negotiations by July. But France, by far the largest recipient of EU farm aid, could yet try to scuttle Brussels' efforts.
French Agriculture Minister Herve Gaymard said the EU officials had gone beyond their mandate with their proposal and that it was a "massive tactical mistake" to offer to end the farm subsidies. According to the Reuters news agency, Lamy had "heated" discussions with French Finance Minister Nicolas Sarkozy on Friday night after he informed him of the plan.
Paris has been a staunch defender of the EU's much criticized agricultural aid policies, which dollop out some €40 billion ($47.4 billion) to the bloc's farmers each year. But elsewhere in Europe, the Commission's proposal met a generally positive reception.
"The initiative is good. This is an important signal," said German Agriculture Minister Renate Künast, adding that the move came just in time to help the stalled trade talks. The Dutch government also said it approved of the plan.
That sentiment was echoed in Washington and Canberra.
U.S. Trade Representative Robert Zoellick said the United States had already offered to end export subsidies and said Washington was ready to negotiate on other aspects of its farm aid. Australian Trade Minister Mark Vaile said the proposal showed the EU was committed to pushing trade talks forward.
"A clear commitment to eliminate all export subsidies would be a major improvement for the trading system," Vaile said according to the Associated Press.
Although Australia does not subsidize its agricultural exports, the EU objects to Australian export monopolies that exist for wheat, sugar and barley. Canada, which has similar export-trade system, has said its Wheat Board was not up for negotiation.