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Friday, 3 May, 2002, 11:01 GMT 12:01 UK
US farm aid threatens new trade row
Kansas corn field
Farm states matter in mid-term elections
United States lawmakers have approved a package of agricultural subsidies which could increase global tensions over trade.

The European Union has said it is considering whether to file a complaint to the World Trade Organisation (WTO) if the bill is signed into law by President George W Bush.

Australia has also protested against the measures, while Canada's agriculture minister described them as a "serious blow to US credibility" in global free trade negotiations.

The bill proposes increasing state payouts to US farmers by 70% and authorises the spending of $180bn (123bn) in farm subsidies over the next 10 years.

Mid-term vote looms

US relations with its main trading partners have been strained by President Bush's decision to levy tariffs of up to 30% on steel imports, a move which is being investigated by the WTO.

But President Bush indicated he would sign the subsidy bill if it passed the final hurdle of the Senate vote on 7 May. He said it protected the "long-term vitality" of US agriculture.

As well as increasing aid to wheat and cotton farmers, the package diversifies farm aid to cover producers of milk, lentils, honey, chickpeas, mohair and other products.

Higher farm subsidies will provide a welcome boost to the economies of key mid-Western states which President Bush needs to retain to win re-election in two years time.

Mid-term elections in November will decide which party controls the two houses of Congress.

Observers say the new measures could alienate key US allies in international trade talks.

In the past, Australia and Canada have backed US opposition to the European Union's system of agricultural subsidies.

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Larry Mitchell, US Corn Growers Association
"The profitability's still not there, we're still at least 40% below what our cost of production is"
Gregor Kreuzhuber, EU farm commissioners spokesman
"They (the US) are now deciding on more support which will harm especially developing countries"
See also:

02 May 02 | Business
EU-US trade tensions rise
29 Apr 02 | Business
US farm bill raises trade tensions
14 Jan 02 | Business
Q&A: US-EU trade war
05 Dec 01 | Middle East
Mid-East splits Europe and US
13 Jun 01 | Europe
Analysis: France fights US vision
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