Bush angers EU over farm subsidies

US President George W Bush today angered the European Union by expanding subsidies to American farmers in apparent defiance of global free trade agreements.

The six year farm bill is worth up to $190bn in subsidies over the next decade and boosts spending on US farm subsidies by up to 80%.

It aids agricultural US states that are expected to be campaign battlegrounds in Mr Bush’s quest to win back control of the Senate for the Republicans this autumn, and could also be crucial in his own 2004 re-election effort.

Mr Bush said the bill was ‘‘essential to the success of the American economy’’.

He added: ‘‘This bill is generous and provides a safety net for farmers. It will do so without encouraging overproduction and depressing prices.’’

But the legislation enraged the European Union which has said it may challenge the subsidies before the World Trade Organisation.

Under WTO limits, certain US farm subsidies cannot exceed $19bn annually. However the bill authorises the US Agriculture Department to adjust subsidies to stay within the cap.

Environment Secretary Margaret Beckett had earlier condemned the move as ‘‘disappointing’’ at a time when the world should be moving towards less protectionist measures.

‘‘Bringing in this bill is very much the wrong signal to give,’’ she said.

Poor nations are also expected to suffer from the subsidies because their crop prices are pushed down on global markets when relatively prosperous farmers receive government incentives to increase production.

US relations with its main trading partners are already 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.

The bill guarantees annual payments to growers, and allows them to keep the difference between their selling price and the federally set minimum crop prices.

Many members of Mr Bush’s Republican party urged him to veto the legislation.

Senator Don Nickles said the bill, which increases spending by nearly 80% at a time when the US government is predicting a deficit of $100bn, was a ‘‘budget buster’’.

The bill gives farmers incentive to overproduce which will eventually force farm prices down, he said.

‘‘I don’t think that helps farmers in the long run.’’