U.S. offers farm subsidy cut but is asked for more

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By Doug Palmer and William Schomberg

GENEVA (Reuters) - The United States sought to kickstartefforts to rescue a global trade deal on Tuesday by offering tocut a ceiling on its contested farm subsidies, but leadingdeveloping countries said it was not enough.

U.S. Trade Representative Susan Schwab announced Washingtonwas ready to cap its trade-distorting farm subsidies at $15billion (7.5 billion pounds) a year, on condition countrieslike Brazil and India also make concessions to save the WorldTrade Organisation talks.

"This is a major move, taken in good faith with theexpectation that others will reciprocate and step forward withimproved offers in market access," Schwab told reporters.

The long-awaited U.S. move came on the second day of aweek-long push by ministers for a breakthrough on farming andmanufacturing -- core trade issues that have dogged the WTO'snearly seven-year-old Doha round of world trade talks.

Developing countries have long complained that huge U.S.subsidies squeeze their farmers out of the market, reducingfood supplies and contributing to the recent spike in globalprices.

But high prices have lowered U.S. spending on farmprogrammes that encourage production -- which distort trade --to about $7 billion last year, well below the $48.2 billionallowed under existing WTO rules.

Schwab said Tuesday's offer would require the U.S. Congressto rewrite new farm legislation. President George W. Bushvetoed a 2008 law that boosts subsidies but was overridden byCongress.

Tom Harkin, head of the Senate's Agriculture Committeewelcomed the U.S. move, saying in a statement it showed theUnited States was ready to negotiate in good faith and completethe round but other countries now had to make concessions too.

Stressing the value of the new offer, Schwab said U.S.trade-distorting support was $18.9 billion in 2005 and close to$25 billion in both 1999 and 2000, before the food price surge.

But the move failed to impress some WTO players key to thecomplex trade-offs needed this week to prevent the Doha roundbeing put on hold, possibly for a couple of years.

Supporters of a WTO deal say it could send amorale-boosting signal to the slowing global economy.

OFFER FAILS INDIA'S "LAUGH TEST"

"My immediate response is it doesn't pass the 'laughtest'," a senior Indian official told Reuters.

Brazil said it wanted deeper cuts. "This is only the secondday of the talks here, so we imagine there is room formanoeuvre to reduce them further," a Brazilian diplomat said.

Brazil and India are key to the negotiations because theUnited States and the European Union want big developingeconomies to open up their markets in industrial goods as wellas farm products in return for their agriculture reforms.

The EU said the U.S. offer was reasonable but could godeeper depending on how this week's trade talks progress.

After around 30 ministers met to discuss the U.S. proposaland other areas of the talks, European trade chief PeterMandelson said the emphasis was shifting to industrial goodswhere "there is a lot of disagreement, a lot of heat but wherewe have to find an outcome in order to get a deal".

Costa Rican Trade Minister Marco Vinicio Ruiz saidministers would split into small groups on Wednesday to try tofind a breakthrough. Senior trade officials said the talks werelikely to overshoot their original end date of Saturday.

Proposals by a WTO mediator proposed capping U.S. spendingon farm subsidies at between $13 billion and $16.4 billion.

India, Brazil and many other developing countries havepreviously called for cuts deeper than that to prevent U.S.outlays rising sharply again if crop prices fall back.

"Anyone who is suggesting a number outside the range thatis in the text is not engaged in a serious effort to concludethe Doha round," Schwab said.

U.S. farm groups complain they stand to get few new exportopportunities under proposals being discussed at the WTO.

U.S. officials said they stood by a 2005 commitment to makedeeper and faster cuts in payments to U.S. cotton farmers.

West African cotton farmers say they are hurt by the U.S.cotton subsidies. They want a 25 percent cut in the first yearof any WTO deal to about $600 million, falling to $143 million.

U.S. officials said how deeply the United States cutscotton payments depends on how much major cotton importer Chinaand other countries agree to cut their import tariffs.

(Additional reporting by Jonathan Lynn and Laura MacInnis;Editing by Catherine Evans)