AMBASSADOR BHATIA:  I'll be brief.  Those of you who were at the plenary this morning heard Ambassador Portman's remarks, including his commitment on behalf of the United States to more than double its contributions to global aid for trade from US$1.3 billion this year to US$2.7 billion in grants annually by 2010.  This is consistent with the priority that the United States has given to providing developing countries with the tools needed to benefit from the global trading system.

The U.S. today is the leading single country provider of aid for trade.  It has been the leader in providing aid for trade in the past.  And with today's announcement, I think, it is safe to say the United States is going to remain the aid leader and at the forefront of providing aid for trade in the future. We are delighted by the commitments that have been made by others in this area.  We think it is an important part of the development round, and we are looking for others to step up in this area as well.

I should finally mention that while we believe aid for trade to be a critically important component of the Doha Development Agenda -- and an area where we are delighted to see the progress that has been made this week -- we also must recognize that perhaps the most important part of development, the greatest thing that can done to contribute to the development, is to have a successful trade-liberalizing round.  And to that extent, we have put forward some ambitious proposals in the Doha round, including in the area of agriculture, the sector in which the bulk of the world's poor are actually employed.  We remain optimistic that we will have a successful outcome to the Doha round.  We do need to see some more forward progress in the agriculture and in other areas.

But in a nutshell, it is critically important to the success of a development agenda that we not only undertake important measures like the ones that the U.S. has put forward today with its pledge to double aid for trade by 2010.  It is also important that we have a successful completion to the trade-liberalizing portion of the Doha development agenda as well.

With that, I'll stop and have Administrator Natsios make any comment that he would like to make.

ADMINISTRATOR NATSIOS:  I would like to make some comments with respect to food assistance, food aid.  There are now 852 million people around the world who are hungry, according to the United Nation's statistics.  Hunger and malnutrition are still the greatest threats to health worldwide.  They claim 10 millions lives each year. And acute malnutrition is growing, particularly in the sub-Sahara Africa, where agricultural productivity has been in decline for a decade.

The United States provides nearly 60% of all global food aid at the World Food Program -- which is the United Nations World Food Program, the food aid agency of the United Nations --gets nearly 60% of its total food resources from the United States government from AID.

We provide nearly half of all emergency food aid donations in all emergencies around the world.  This is about three times the level of food assistance provided by the European Union and all European aid agencies, donor aid agencies bilaterally.  So we are three times larger than all of Europe put together.

The average value of global food aid between 2002 and 2004 was about US$2.5 billion a year.  This means that food aid only accounted for about 0.7% of total agricultural trade in 2004.  Total trade is valued about US$360 billion.

In the United States in 2004, the last year we had data for, U.S. food aid accounted for less than 2% of U.S. agricultural trade.  So it does not have any effect in global prices, food aid.

Food aid contributions remain woefully short of even of even emergency needs.  Ninety percent, for example, of the food aid provided by the United Nations World Food Program is for emergency requirements, for famines and for war.  In 2005, the United Nations expects to experience a US$1 billion shortfall in total food aid contributions.

If you look at the chart we passed out -- I don't know if any of you have this in front of you -- this shows what's happened since the Europeans went entirely to a local purchase option.  You can see that in 1995, both the United States and the European Union were at about the same level of about 4 million tons of food a year in food assistance.  The European Union is now down to around just under 1.5 million tons a year.  We're at about the same level we were in 1995, and you can see the Europeans have dropped.

And so there is a direct relationship, we believe -- and there is a lot of analysis that has been done on this -- that as the European Union in 1995 went to local purchase of food aid, their food budget declined really significantly from 4 million tons a year to 1.4 million tons a year.  This has had a significant consequence for emergency relief operations around the world.  I think it's an unfortunate thing that people who have no expertise at all in food assistance, in famine relief and emergencies, or in food aid for development are making decisions at this trade round.  The European Ministers of Development were not consulted.  In fact, I brought this up to them when I heard the European Union position, and I said, "Why did you take a position like this?  You know what the circumstances are."  They weren't even aware that the European Commission had taken such a position.  This was [inaudible] last summer.

So the European Commission has not involved their food aid experts -- and they have them -- in their donor aid agencies in Europe -- bilaterally and within the EEC -- in these negotiations.  I think they went to one meeting at our request.  We've repeatedly requested that experts in food assistance and nutrition be in attendance at these negotiations, and they haven't been.

We don't think these kinds of situations, these sorts of negotiations, should be the place that life or death issues should be decided on assistance issues dealing with food aid, unless experts are at the table, and they are not.

So I really think the facts should be put on the table.  The fact of the matter is the European Union does some very good work in development, but in terms of food assistance, they are missing in action.

Thank you very much.

QUESTION:  If your food aid program is so perfect, why don't you give clear conditions?

ADMINISTRATOR NATSIOS:  One, I did not say that it was the most perfect system in the whole world.  You said that, Sir.  Two, President Bush has proposed that 25% of our Title II program -- which is the program AID manages – go to local purchase.  If we went to an entirely local purchase food aid protocol, we would have a collapse of total food assistance in the world, and there would be hungry people, and we would not be able to deal with humanitarian response.  The evidence is, I think, unchallengeable on that question.

I might also add that famines are of different kinds, but the principal cause of famine in the last several decades has been a collapse of production, usually caused by war or drought or some kind of locust infestation, where the crop collapses.  If you go in and do local purchase on regional markets, you drive food prices up.

Amartya Sen -- who spoke at AID just last week, as a matter of fact, and won the Nobel Prize in economics for his entitlement theory in famine, has an explanation for famine -- argues in his writings that access to food is the principal cause of famine.  If you look at most famines, the ones I've been involved in the last 16 years and responding to, food prices dramatically rise because production has collapsed, and that's why people die.  They cannot buy food, even if they had money, because the price is so high.

During the Somali famine of 1992, where 300,000 people died and there was military intervention to stop it, -- if you remember back at 1992 -- the food aid program, or the cost of food, went up 700% to 1200% over a four-month period.  That was the principal cause of the famine.  If we had gone in and bought food locally, we would have killed more people doing that.  It is in fact a very dangerous intervention in a famine to go in and buy food in the middle of an emergency, which is caused by a collapse of supply.

QUESTION:  Two questions:  Is there an effort to bridge the difference between the U.S. and EU?  Have efforts progressed on the trade party of the development efforts – duty-free/quota-free access, has that progressed?

AMBASSADOR BHATIA: I'll take the questions in turn. First of all, with respect to whether there are efforts this week to bridge gaps, there are. There have been discussions between U.S. and EU negotiators, and there will continue to be.  But we're early in the week here still. There are more discussions obviously to be had.  I don't want to create false expectations here.  But if your question is, "Are there efforts underway to bridge gaps?" the answer is, "Sure."

QUESTION:  On food aid, specifically?

AMBASSADOR BHATIA: I'll leave the food aid subject to my colleague, but let me then turn to --.

ADMINISTRATOR NATSIOS:  Let me just answer the food aid issue. We're willing to establish protocols that avoid market distortions locally in [inaudible], other things, if the Europeans would drop their insistence that we go to 100% local purchase, which I personally think as a food aid expert is an irresponsible position. I wish the European Union would move away from that position for themselves from a humanitarian and developmental perspective, not from a trade perspective. But we made that offer and they have not accepted it, so . . .

Q: So the sticking point still remains: At what point would there be in kind, and at what point would there be a local purchase option? That remains the difference?

U.S. TRADE OFFICIAL:  Let me give you a little background on that. We have had a number of meetings with Europeans and with other delegations on export competition, one of the three pillars that we're talking about here.  We have agreed to rules that would address concerns about commercial displacement.

Now, there has not been a lot of progress on this issue because of the preoccupation with transformation to cash systems. That has really blocked our progress.  But we've met with a broad group of countries, we've met bilaterally with countries to try and find a way forward on this. And certainly we are very prepared to be reasonable, as Administrator Natsios said.

AMBASSADOR BHATIA: With respect to efforts underway on duty-free/quota-free, I can tell you this is a topic that's taking up -- that people are very much focused on.  There are a number of issues at play in this discussion, and it's our hope and expectation that this can be resolved successfully by the end of this week.  I don't have a lot more specifics to tell you there.

I would say if I can – I'd wanted to point to a part of Ambassador Portman's speech that also goes outside of the aid for trade context and does deal more broadly with what we should expect out of Hong Kong, consistent with your question.  The Ambassador set forth four challenges for the WTO members to meet this week. And I think it's important that we not lose sight of those.

The first is in the area of agriculture, which is, as I think we all know, the key area that's preventing further progress right now.  He challenged the WTO to set a date for the agreement that we've already made to eliminate all forms of export subsidies.

Secondly, in the area of NAMA or industrial products, he challenged the members to agree to a structure that adheres to the principle that benefits from cutting higher tariffs the most; effectively, the Swiss formula with two coefficients.

Third, in the area of trade and services, he urged that we set a new deadline for tabling revised and improved offers.

And finally, he urged that we set a date early next year to come together again to break the deadlock, so that our negotiators can complete work by the end of 2006.

This is in addition, of course, to the aid for trade package, but it's consistent with the theme that I'm trying to stress, that development here and the development gains to be obtained from this round are going to be obtained only once we can break these deadlocks on agriculture, and move forward progress in that area as well as in NAMA and services, the core trade areas.

QUESTION:  Two questions on NAMA:  Yesterday, nine developing countries set up a core group on NAMA and wrote a letter saying the flexibilities under para eight should be a stand-alone provision and should not be a part of any formula.  What is your response to that?  Secondly, India has said that irrespective of what formula you use, give us the specific percentage that you are willing to cut and India will be willing to do two-thirds of that.  Your response to that?

AMBASSADOR BHATIA: Unfortunately I'm not going to give you a very satisfactory response. I have been totally focused on a number of other development issues. I am aware that India and the G9 put forward this proposal.  Perhaps I could suggest that we get the lady hooked up with some of our NAMA experts.

MODERATOR: And in addition, another U.S. official will be briefing at 4:30 and can probably address that point.  We're going to be focused more on development and food aid in this briefing. Thank you.

QUESTION:  Now we understand a little better what happened yesterday on the story on the ad in the Financial Times.  Could you tell us a little bit about what is behind the tensions between the Americans and the Europeans?  It looks a little bit strange.  Mr. Mandelson is walking in the EU meeting room in the morning, with a newspaper, trying to stir up anti-American feelings, pushing people of the European Union to want this letter they are sending to the Financial Times asking for clarification.  In the afternoon, he was trying to do the same stunt during his press conference here in this place, trying to put the media behind his view of things.  What is exactly is going on?  It looks like – as the Germans suspected last evening during their press briefing – that Mr. Mandleson, instead of reaching out and building bridges to move things ahead, is in the business of fostering and managing hostility and tensions.  What is your reading on it?  And what kind of explanation would you attach on that one?

ADMINISTRATOR NATSIOS: First, the United States did not put in any ad or article in the Financial Times. That was the United Nations agencies that did it. There were some NGOs that did a similar ad in the Washington Post, I think, earlier last week. It's a free world.  If people want to put ads in the newspaper, they can do that. We didn't put any ads in anywhere.

I think the notion that this food aid debate is primarily an issue around commercial displacement is disproved by the fact these ads have appeared. The fact is that the experts in humanitarian assistance and disaster response have not been consulted by the European Commission in taking this position.

And the reason those ads have appeared, I think, is people in the United Nations and the NGO community are very alarmed by the prospect of a significant decline in food aid, should we accept the European proposal, which we of course are unprepared to do. I think that's why that happened.

QUESTION: My question was where does this hostility come from?  What is behind it?

ADMINISTRATOR NATSIOS: It's not a matter of hostility, personal hostility. It's a matter of the effect that a trade protocol would have on humanitarian relief operations. We don't have enough food now to respond to the emergencies we're facing, and I think the NGOs and the United Nations are concerned about it, and that's what it's about.

U.S. TRADE OFFICIAL: Let me try to give you a perspective on this as well. We have been troubled by the focus on food aid disciplines in these negotiations. Certainly, in the export competition pillar, the need to rein in export subsidies has been long recognized and is an important objective of these negotiations.

The parallelism that has also been identified as a priority is something we're willing to talk about, but it certainly is very different from the core trade issues that we're doing here.

And to answer your question of "Why has this become so important?" I think the best answer is to ask the folks who are raising this, the demandeurs, particularly in the European Union. Our position is, we're prepared for reasonable disciplines that have appropriate levels of precaution in terms of meeting food aid needs in order to allow this whole package to move forward.

It's really not at our insistence that this has become such an emotive issue.

QUESTION:  The hostility that my colleague mentioned seems to preclude reaching an agreement.  Mr. Portman said this morning that reducing tariffs is the only way to break the deadlock.  The Europeans are saying that without strong progress on NAMA, there won't be a break in the current deadlock.  Could one of you give me at least one reason to believe that it's possible in the five days until the end of this conference to break the deadlock that has lasted 18 months at least.

AMBASSADOR BHATIA: I'm not going to predict whether there will be a breaking of the deadlock here or not.  I think that the comments, not only in today's plenary but in yesterday's plenary session, by a number of speakers including Director-General Lamy focused us all on what's really at stake here -- the development goals, the importance of economic growth for the economy writ large.

So I think the one thing that Hong Kong has done is it has managed to focus not just the trade community, but the global community, on what is at issue here. And I think that this isn't just the U.S. perspective.  This is the perspective of many different countries including I believe, your country [Brazil], Sir, and others -- that the key to breaking the deadlock in this round is resolving agriculture.  That has been the position that has been conceived of, frankly, for years. That was acknowledged that that was going to need to happen.

And so, we can, and we the United States have been vigorously engaged in all of the different areas -- in services, in NAMA, and this week in development.  It is our strongest hope that there be progress in all of those areas, and I can tell you everybody here and the entire delegation is working very hard to try and make sure that those pieces are moved forward and they are lined up.

But I also, and I think Ambassador Portman's remarks reflect this, the reality is that we're going to have to resolve agriculture to have a successful round.  The United States has put forward a very bold, ambitious proposal.  One that would have dramatic effects on not only the welfare of the poorest people in the world, but frankly the welfare of the global economy.

We put the proposal forward in October.  The G20 countries, the developing countries, came forward with a constructive proposal. We've been awaiting a closure of this issue by looking for other, more constructive proposals by other developed country partners.  We're hoping that that will come forward.

QUESTION:  Agricultural issue is focused on food aid, not development issue of agricultural subsidies, which has been marginalized.  Why is discussion only on food aid?  Why not on the reduction of subsidies?  And why no timeline for elimination of subsidies?

AMBASSADOR BHATIA: The question, Sir, frankly, is an excellent one.  There has been a lot of attention to the food aid issue.  But frankly, I think, for the exact reasons that you set forward, the importance of making progress in the agricultural discussions for the welfare of the hundreds of millions of farmers that exist and people whose livelihood depends upon agriculture -- as well as the many consumers of agricultural products -- it's critical that we focus on the three pillars of agriculture that remain to be addressed.

In the area of export subsidies, the United States has put forward a very bold proposal that would eliminate export subsidies for agriculture by 2010.  In the area of domestic supports, we've proposed, again, a very ambitious proposal that would substantially reduce and then ultimately eliminate export domestic supports as well.  To be honest with you, I think perhaps the most critical area and one that we need to turn our attention to here is in the area of market access.  The estimate is that the greatest, the World Bank and others have put forward, is that the greatest gains to welfare to be derived from a trade-liberalizing round is going to be the reduction of tariffs that currently block free trade in agricultural goods flowing.

So if there is one core area in which I think we must focus it's that area, and that's what Ambassador Portman was stressing this morning.  I don't know if, do you have thoughts to add?  OK thank you.

QUESTION:  I overheard African countries saying that they should be able to buy food from any cheap source in the food aid programs?

ADMINISTRATOR NATSIOS: I think, Sir, there are several objectives in humanitarian relief operations.  The bulk of food that we're providing now is for relief operations.  There is some development food, but the majority of it is for relief operations and emergencies.

The argument for local purchase is that if you purchase food close to where the emergency is, you can reduce shipping costs and time.  That's a legitimate argument, but that's only one argument.  What we must have is a large tonnage of reliable food of high quality that we can get into the pipeline, the food assistance pipelines.  The system that we have in the United States has worked very well for a long period of time to do that.  It is responsive to the needs of the humanitarian relief operations that the NGOs and the World Food Program and the ICRC and other UN agencies are dependent on.  So we don't think we should fool around with something by completely undermining it with a new way of doing this.

When the Europeans went to local purchase, which is what you're proposing, the total amount of support -- but perhaps it's because of political support with the European Union -- declined for food aid enough that they went from 4 million tons a year to 1.4 million tons a year.  The gap has either been made up by the United States or hasn't been made up at all, and people have been hungry.

So I think we should not be debating this issue divorced from the realities of what the NGO community, the ICRC and the UN agencies face during these emergency relief operations.  The fact is we know what happened to the European participation in the food system once they went to local purchase.  It declined precipitously.

QUESTION:  Bilateral talks between U.S. and Vietnam about Vietnam's accession to the WTO.  The U.S. has been criticized for lack of goodwill during the talks.  What do you think and when do you expect the talks to be concluded?

AMBASSADOR BHATIA:  I can tell you that I met with Vietnamese Minister of Trade in the recent APEC Summit in Pusan.  I thought we had good discussions -- and constructive discussions -- and agreed to, I think on both sides, put forward a very strong effort to try and complete Vietnam's accession agreement.  There are some issues that need to be worked out.  These are not issues that are going to be overcome through some political fix.  They are important economic issues.

As you know, for Vietnam to accede to the WTO -- and the agreement will have to pass our Congress, there'll have to be a NTR vote and it is going to be looked at very closely.  So there needs to be clear, demonstrable commitment in the details of the agreement to undertake some of the reforms that others have made and that will need to be undertaken to make sure that accession process can happen.

That said, again I felt that we had very good talks in Pusan.  I'm looking forward to having similar bilateral discussion here this week, and I can commit -- as I committed to the Minister when I met with him a few weeks ago -- that this is a very high priority for us.  So it's our hope that this will proceed expeditiously.

QUESTION:  Can you give any date, like in the next year sometime?  And also there was criticism that the U.S. put a lot of political pressure on issues like human rights and religious freedom.  Will this play a role?

AMBASSADOR BHATIA:  No, I think there's been some degree of misinformation that I've seen floating around in some of the press on this.  The United States is working through core, traditional trade issues with Vietnam, issues that are undertaken in any sort of accession agreement process.

Frankly, the pace on this is going to be affected as much by how quickly Vietnam and Vietnamese officials can get back to us with some of the core information that's needed.  But again there has been a very good dialogue here, and I look forward to that continuing.

QUESTION:  Do you mean 2006?

AMBASSADOR BHATIA:  I don't have a date.

QUESTION:  Relief issues – isn't it more about infrastructure rather than food production?  Why isn't the U.S. providing money for infrastructure construction rather than sending food aid?  And U.S. sales of oil to CARE International in countries such as Ethiopia have led to collapse of small-scale oil companies there.  Isn't it the case of starving John, as someone said this morning, to feed Paul?

ADMINISTRATOR NATSIOS:  First, let me say that we are very troubled, the donor governments -- and I'm sure the Ethiopian people are very troubled -- that famines that used to occur every 20 years then started occurring every 10 years, then every five years, and now it's every two years.  That's a result of bad agricultural practices and policies within Ethiopia.

We cannot force governments, anywhere in the world, to change policies.  There are trade limits in East Africa, unfortunately -- or trade barriers in East Africa -- so that Ethiopian farmers cannot trade easily with Kenyan, Ugandan farmers.  We believe if there was a free trading system -- I believe, as a development person -- if there was a free trade system in the Horn of Africa, there would be a reduction in the level of emergency requirements in Ethiopia, which would be good for the Ethiopian people and it would be good for the donors.

There has been a reluctance, I think, to negotiate lower trade barriers in agriculture because people are afraid it will affect certain interests.  There was, for example, in Ethiopia in 2002, I believe it was -- I may have my years mixed up -- such a large production of food that prices went down to 20% of the normal level.  In the neighboring country of Kenya, there was a food emergency the same year.  They desperately needed food, and they would have bought it on the commercial markets. They didn't need donors to buy it.  They were willing to purchase it.  But there were trade barriers and infrastructure barriers between Ethiopia and neighboring countries so that that food could not be sold.  So the next year, farmers in Ethiopia grew less food because they had lost so much money buying the inputs -- and the price had collapsed -- that there was no incentive for them to produce a surplus the next year.  And the next year, there was a food emergency in Ethiopia.

So the absence of a free trading system in Africa in food is leading to more emergencies, more malnutrition, more hunger and more famines.  So I would urge the Africans -- I know it's not part of this trade round, because that's been taken off the table -- but we urge the Africans on their own, through the African Union, through NEPAD, to eliminate these trade barriers so the African farmers can grow more food and sell it to neighboring countries when the need arises.

The second thing:  Ethiopia is the most famine-prone country in the world.  We approached the Ethiopian Government.  We approached the European Union and the World Bank and then Canadian and Japanese Governments about a unified effort to end famine in Ethiopia.  Not through food aid.  Food aid is not the answer to Ethiopia's problems with famine.  The answer is development.  So we put together a comprehensive plan to eliminate the structural problem of food and the productivity problem of agriculture in Ethiopia.  We are implementing that now. And progress has been made.  The Ethiopian Government has changed some policies and improved some practices and policies that will lead to greater productivity agriculturally.  We are seeing some economic growth in the country -- hopefully if there's no more war in the Horn, because wars always set back growth and could be very damaging to the economy of Ethiopia -- and so we have in place a development plan to eliminate famine in Ethiopia.  That's being carried out now.  We putting a lot more money into agriculture – the Canadians are and the European Union is and the World Bank is.

QUESTION:  How do you justify that the oil-for-food assistance is shutting down about 20 oil factories?

ADMINISTRATOR NATSIOS:  I'm unaware of that.  I'll simply check on it when I get back.

QUESTION: I have a couple of questions. First while both you and the Europeans are trying hard to win hearts and minds of developing countries.  I wonder of this debate of food aid is just between the two of you, or if you are actually meeting this week with the countries that are receiving these donations here?  And if so, which one do they actually say Is working better, first of all?  Second, there is an EU paper, this fact sheet, was distributed.  It says that for the U.S., food aid accounts for up to 20% of wheat exports.  If you could confirm?

ADMINISTRATOR NATSIOS:  That's absolute nonsense.

QUESTION: Can you tell us what is the value of wheat exports that is comes from food aid? And finally, of this amount that you used -- the 4 million tons, I think -- how much goes to Iraq and Afghanistan?  Thank you.

ADMINISTRATOR NATSIOS:  Nothing goes to – well, very little goes to Iraq now, maybe 10 or 20 thousand tons, because they have their own money to purchase food.  We did do purchase of food the first few months at the beginning of the war, after the public distributions system and commercial imports through the oil-for-food program shut down.  And we provided, I think, up to one million tons of food assistance.  We didn't loan them food, we gave it to them as a transition until the Iraqi Government could take back control of their own public distribution, which they have done.

I think there may a very small amount of food for displaced people or refugees.  I don't recall the exact tonnage in Afghanistan, but it is not huge.  It has been declining.  It was up to about 300 thousand tons at the beginning of the famine that started in the summer of 2001 and into the fall of 2001.  But we are substantially below that now.  I don't recall the exact tonnage, but I could certainly give you the figure.

In terms of developing countries -- developing countries are actually meeting with us on this.  We urge them, we urge the European Union to meet with them as well, because they have a very different point of view than the European Union does on this.  They agree with us, that we should not be fooling around with protocols in a venue where there aren't technical experts from the developing world, from the World Food Program, from UNICEF, from the NGO community and from the donor aid agencies at the table discussing what the consequences would be if we went to these changes that the EU has proposed.

QUESTION:  And on the exports?  The wheat exports?

ADMINISTRATOR NATSIOS: Oh, yes, do you have the figure on the wheat exports?

U.S. TRADE OFFICIAL:  My understanding is for the last couple of years, food aid shipments have constituted something like 5% or 6% of our wheat exports, so substantially below the number you have suggested and not a big part of what we have done.

And just to follow up on our activities here, it has been a central focus of us to try and get all of the stakeholders together to make progress on this key pillar of export competition.  We have brought in the Canadians and the Australians to talk about state trading.  We are bringing in the Europeans to talk about their export subsidies.  And we have also made a big effort to get the recipient countries of food aid involved in this debate.  I think, you know, they can speak for themselves, but they have an important perspective, particularly when you consider almost half of the world food aid shipments goes to countries who are not even members of the WTO.  This just underscores the importance of the WTO not imposing new limitations on people who are going to have very serious consequences.  So we have been very strong supporters pf having a very broad-based debate on this issue.

MODERATOR:  And if I can just add one thing to that, that I think there are a number of friends from the NGO community and even some U.S. farmers here that you all may have an opportunity to speak with afterwards.

QUESTION:  The questions is what is the specific and solid offer of the United States on cotton subsidies?

AMBASSADOR BHATIA:  I'm glad you raised the topic of cotton.  We have been spending a good deal of time this week talking with our West African trading partners and indeed have been spending a lot of time, frankly, over the last several weeks and months addressing the issue.  I was recently out in Burkina Faso with Ambassador Portman and our Agriculture Secretary, Michael Johanns.  We have been meeting in Brussels and other locales, Geneva as well.

The U.S. has put forward in the context -- To step back just for a second.  The July 2004 framework made very clear how all agricultural products, including cotton, needed to addressed, which was within the confines of the overall agricultural negotiations.  Which makes a good deal of sense, frankly, because the purpose of a multi-lateral WTO round is to reduce tariff barriers, reduce subsidies across sectors.  If we start divulging into a group of sector-specific negotiations, you lose momentum, you risk breaking down into just a bunch of mini-deals.  And that is in nobody's interest, frankly.  Certainly not the interests of the many sub-Saharan producers of commodities ranging from cocoa, to palm oil, to so forth.

So we need to have broad agricultural modalities reached that is a base line across the board.  Once we do that, then there may very well be sector-specific discussions that need to occur to be even more ambitious.  In fact, the United States, which is a competitive player in the agricultural markets -- we would be delighted to engage in some more ambitious proposals with respect to specific sectors.  But we cannot allow the round to devolve into a series of sector-specific initiatives at this point in time.  It is not consistent with the July 2004 framework; it is not what is going to get us to a solution writ large.

That said, so what did we put forward?  We put forward in October, as I said, a very ambitious proposal across the board that would have, among other things, cut cotton tariffs -- like all other tariffs -- between 55 and 90 percent that would eliminate export subsidies by 2010 and that would have dramatically reduced domestic supports and then eliminated domestic supports, as well.  These are the three key pillars, frankly, of what the West African and other cotton producers have been asking for.  So, we think we have met that.

The problem, as I mentioned before, is we don't have agriculture modalities at this point.  We have put forward a very bold approach.  We were hoping that at Hong Kong this would be wrapped up and that we would be able to start dealing with cotton or other modalities.  Unfortunately, we haven't seen the response to our proposal that we would have hoped would have occurred that would have brought this together.

So where does this leave us now, is the question.  It leaves us in the situation that nobody wants to be in.  The C5, the cotton 4 countries, are frustrated at the lack of progress.  We are frustrated at the lack of progress.  We would love to be able to bring this deal together.  We – recognizing, though, that some of the needs of these countries, frankly, cannot await for the developed world to come back to us with a meaningful proposal – it is on the subject of what we can do to help address those immediate needs, the transitional needs, as it were, in the period between now and when the modalities can come together.  So we are looking that.

One of the things I would point out on the subject of cotton is there is a lot of misperception about what the nature of the problem is here.  You know, when we look at it, subsidies  -- and recognize we want to eliminate subsidies, we are supportive of that -- but eliminating subsidies will not end poverty in West Africa.  Eliminating U.S. domestic subsidies will have, to be honest with you, at best, a de minimis impact on the livelihoods of these West African farmers.

And we have to improve their livelihood.  That is what the round is about.  Improving the livelihoods of people like the poor subsistence farmers of cotton, of cocoa, of palm oil.  That is what this is about.  And so there has got to be a multi-pronged approach to that.  It has got to be  -- sure, take care of subsidies -- but we also need to do things in the development area.  We need to help make producers like that more effective, which is one of the reasons that today's aid for trade proposal is so important.  Because it is going to help build the infrastructure that these countries need to be able to get their products to market, to be able to do a better job of playing in the global trading system.  And the second thing we need to do, and I come back to this again, is lower tariff barriers in agriculture.  We have got to that, because it is only what—that is the principle distortion.  That is where, as the World Bank has estimated, overwhelming percentage of the gains to be gained out of this round are going to be from reducing tariffs in agriculture.  We have put forward a very bold proposal.  It is time for us to bring that to conclusion.

MODERATOR:  Okay, we are going to conclude. I want to remind you that at 4:30 p.m., we will be briefing again.  Thank you very much.

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