CAP/WTO Success: A Global Perspective Alan Matthews Trinity College Dublin Presentation to the Agricultural Science Association National Conference, 23

CAP/WTO Success: A Global Perspective

Alan MatthewsTrinity College DublinPresentation to the Agricultural Science AssociationNational Conference, 23 September 2005

The support of the Advisory Board for Development Cooperation Ireland for this work is acknowledged.

CAP/WTO Success: Global Perspective Alan Matthews

Outline

The Doha timetable The July 2004 Framework Agreement The development dimension EU implications of a Doha Round What are the prospects?

Doha timetable

Framework Agreement

Development Dimension

EU implications

Doha prospects


Why focus on Doha?Composition of operating surplus in agriculture

Premia and arable aid

Market returns

Rural development payments

0

500

1000

1500

2000

2500

Premia and arable aid

€ m

illi

on

Decoupling

WTO reduced protection

Rural development

Doha timetable

Framework Agreement


EU implications

Doha prospects


Some Key Stages:

Article 20 negotiations: e.g. the EU’s Comprehensive Negotiating Proposal, December 2000

Doha Mandate, November 2001 EU’s Specific Drafting Input, January 2003 Adoption of the Fischler Reforms, June 2003 EU/US Joint Initiative, August 2003 Cancún Ministerial, September 2003 EU’s offer to eliminate export subsidies, May 2004 Framework Agreement, July 2004 Paris May 2005 agreement on AVEs Dalien July 2005 G20 proposal on market access Trade Negotiation Committee, 28 July 2005 Hong Kong Ministerial, December 2005

Doha timetable

Framework Agreement


EU implications

Doha prospects


Market access

Tariffs will be reduced using a ‘tiered formula’ Deeper cuts in higher tariffs Cuts applied to bound rates Each country to designate appropriate number of

sensitive products (lower than otherwise tariff reductions will apply, but TRQ will be expanded)

Tariff escalation will be addressed Future of the special safeguard to be negotiated Special and differential treatment for developing

countries, including addressing preference erosion

Doha timetable

Framework Agreement


EU implications

Doha prospects


Market access – what needs to be decided?

The tiers (how many? Which thresholds?) G20 proposal at Dalien accepted as basis for

discussion The tariff reduction formula within each tier

Linear cut, progressive linear cut, Swiss formula, Uruguay Round approach (allows for flexibility)

Sensitive products Negotiations not yet started

Crucial – the overall level of ambition

Doha timetable

Framework Agreement


EU implications

Doha prospects


Domestic support

Higher levels of trade distorting support subject to deeper cuts, using a tiered formula

Each of total (amber box + blue box + de minimis), amber box and de minimis trade distorting support will be subject to a specific reduction commitment

Product-specific caps on amber box support Expansion of blue box but capped at 5% of total

value of production (with some flexibility for larger users)

Review and clarification of green box to ensure at most minimal trade distorting impact

Doha timetable

Framework Agreement


EU implications

Doha prospects


Export competition

The following to be eliminated, in parallel, “by a credible end date”, to be agreed: Export subsidies Subsidised export credits Trade distorting practices of exporting State

Trading Enterprises Improper forms of food aid which displace

commercial purchases Flexibility - ”phasing will take into account internal

reform steps of members”

Doha timetable

Framework Agreement


EU implications

Doha prospects


Non-trade concerns (raised by EU)

Food safety, and Article 5(7) of the SPS Agreement Mandatory labelling (presumably with respect to

GMOs and animal welfare) and Geographical Indications

Food security for developing countries (Development Box)

Protecting the environment (but no specific demands – multifunctionality yesterday’s game)

Rural development – but no specific demands Animal welfare : specific demand for inclusion of

support payments in the Green Box

Doha timetable

Framework Agreement


EU implications

Doha prospects


The Doha Development Round

A visible ‘development return’ crucial to success of the Round

Successful agricultural negotiations are key to this perception

But assessing the agricultural outcome of the Round for developing countries is not easy….

Doha timetable

Framework Agreement


EU implications

Doha prospects


Doha Round impacts on developing countries

Agricultural trade liberalisation will have contrasting effects for developing countries For middle income countries facing high

protection, liberalisation means positive prospects for competitive export sectors

For poorer countries, rising import prices, preference erosion and more onerous standards darken picture considerably, particularly under partial reforms

Doha timetable

Framework Agreement


EU implications

Doha prospects


World Bank estimates of income effects of merchandise trade liberalisation, June 2005

Doha timetable

Framework Agreement


EU implications

Doha prospects


Doha Round impacts on developing countries

Developing country gains overall from reduction in OECD agricultural protectionism in Doha are positive but have been greatly inflated

Benefits for developing country farmers (and thus poverty) are more significantly positive

Northern agricultural protectionism not a significant explanation of the problems facing the poorest countries to integrate into international trade Extensive preferential access in EU and elsewhere Technical/SPS barriers which often prevent any trade at

all (EU restrictions on fish/shellfish exports, FMD controls preventing beef exports)

Doha timetable

Framework Agreement


EU implications

Doha prospects


Export Subsidies

January 2003: EU initially offered to reduce aggregate expenditure limits by 45% but in 2001/02 only used 35% of entitlement

In July 2004 Framework Agreement, EU signed up conditionally to full elimination

Importance of ‘credible date to be agreed’ Blair has called for end by 2010

It may be that policy change will eliminate the commodity export surplus: but what about Non-Annex I goods, i.e. the food industry?

Doha timetable

Framework Agreement


EU implications

Doha prospects


Domestic support – EU situation 2001 (before Mid-Term Review)

Doha timetable

Framework Agreement


EU implications

Doha prospects

Amber Box US dollars

Bound AMS 65,383

Market Price Support 25,085

Direct Payments 12,117

less De Minimis 411

Current AMS 36,791

Degree of AMS Overhang 44%

Blue Box

$ Millions 21,262

% Value of Agricultural Production 7%

Green Box 19,452

Overall Distorting Support (ODS)

Bound ODS 87,056

Current ODS 58,464

Degree of ODS Overhang 33%


Market access – level of ambition?Harbinson proposal 2003

Doha timetable

Framework Agreement


EU implications

Doha prospects

Current tariff level

Average cut Minimum cut

< 15% 40% 25%

15% - 90% 50% 35%

>90% 60% 45%


Market accessEffect on tariff cut on beef price

EU support price (basic intervention price)

€2,224

Estimated world market price €1,200

Current EU import tariff €1,922

Possible tariff cut which does not impact on EU market price (tariff overhang)

40%

Doha timetable

Framework Agreement


EU implications

Doha prospects


Market accessEffect on tariff cut on beef price

EU market price €2,700

Estimated world market price €1,200

Current EU import tariff €1,922

Possible tariff cut which does not impact on EU market price (tariff overhang)

16%

Doha timetable

Framework Agreement


EU implications

Doha prospects


Market accessEffect of tariff cuts on butter prices, €/tonne

Unfavourable world market

Favourable world market

EU market price (2008) €2,247 €2,247

Estimated world market price

1,170 1,575

Current EU import tariff 1,896 1,896

Possible tariff cut which does not impact on EU market price (tariff overhang )

36% 54%

Doha timetable

Framework Agreement


EU implications

Doha prospects


Market accessEffect of tariff cuts on SMP prices, €/tonne

Unfavourable world market

Favourable world market

EU market price (2008) 1,782 1,782

Estimated world market price

1,650 1,800

Current EU import tariff 1,118 1,118


55% 64%

Doha timetable

Framework Agreement


EU implications

Doha prospects


Effect of tariff cuts on white sugar price

EU support price (based on Commission July 2005 reform proposal)

€386

Estimated world market price €210

Current EU import tariff €419


63%

Doha timetable

Framework Agreement


EU implications

Doha prospects


Prospects post-Hong Kong December 2005

US commitment to successful outcome doubtful despite Bush rhetoric Farm lobby and Congress deeply suspicious

(e.g. CAFTA vote) Trade Promotion Authority runs out mid 2007

Developing countries (G20) may feel no deal is better than a bad deal Concerns of weakest developing countries must

be addressed (e.g. cotton)

EU the champion of a Development Round But agriculture ministers (i.e. France) keeping

tight rein on the negotiators

Doha timetable

Framework Agreement


EU implications

Doha prospects



Failure of Doha URAA lives on, without the protection of the

Peace Clause Regional integration agreements

• e.g. Mercosur Litigation rather than negotiation?

• US upland cotton• EU sugar• EU bananas• GMOs?

Doha timetable

Framework Agreement


EU implications

Doha prospects



Doha successfully concluded 2006 Implementation into early 2010s, when export

subsidies finally eliminated Further CAP reform before end of the decade?

Doha timetable

Framework Agreement


EU implications

Doha prospects


More information

Policy coherence in Trade & Agriculture website

www.tcd.ie/iiis/policycoherence

Documents

CAP/WTO Success: A Global Perspective Alan Matthews Trinity College Dublin Presentation to the Agricultural Science Association National Conference, 23