The Fischler reform of the CAP, the WTO negotiations on agriculture and the Cancun fiasco

Transcription

1 The Fischler reform of the CAP, the WTO negotiations on agriculture and the Cancun fiasco Where are we heading? Giovanni Anania Department of Economics and Statistics University of Calabria, Italy 1 the Cancun fiasco not the first failure in WTO negotiations but it is different from the previous ones: a turning point in international multilateral relations? agriculture was one of the main areas of conflict and, possibly, one of the major deadlocks driving to the failure strong short term implications for agricultural trade relations relevant implications for the CAP 2 1

2 the presentation the negotiations on agriculture from Marrakech to Cancun the implications of the June 2003 Fischler reform of the CAP for the EU position in the negotiations what happened (and what did not happen) in the agricultural negotiations in Cancun why did the EU offer what it offered, what was, and what was not, in a position to accept and why where are we heading? 3 from Marrakech to Cancun: the Uruguay round the negotiation: September 1987 December 1993 the agreement signed on April 15, 1994 the Agreement on agriculture (1 of 15 ) the Agreement on the sanitary and phytosanitary measures the new dispute settlement mechanism 4 2

3 from Marrakech to Cancun: the Uruguay round the Agreement on agriculture implementation: three areas of commitments: market access export subsidies domestic support Special and differential treatment for developing countries the peace clause (expires on Dec 31, 2003) a commitment to start a new negotiation by the end of year III WTO Ministerial Conference [Seattle, Nov. 30 Dec 3, 1999] meant to launch the new round failure! no agreement emerges from Marrakech to Cancun: Seattle agriculture was not the reason of the failure Seattle (pressure from civil society/special interests) or Geneva (poor preparation): where does the responsibility for the failure stand? 6 3

4 from Marrakech to Cancun: after Seattle, before Doha only negotiations on agriculture and services started, early in 2000, with a very limited agenda until the IV Ministerial Conference in Doha (Nov 2001) nothing really happened in the negotiations on agriculture. this because of several factors, including the need to wait for the new Farm Bill in the U.S. and for the MTR of Agenda 2000 in the EU 7 from Marrakech to Cancun: Doha (November 2001) Agreement to start a new round! but with a very limited agenda agriculture services market access for non-agricultural products trade-related aspects of intellectual property rights (TRIPS): notification and registration of geographical indications declaration on intellectual property rights and access to medicines 8 4

5 from Marrakech to Cancun: Doha negotiations on the Singapore issues to take place after the V Ministerial Conference trade and investment (a framework to secure transparent, stable and predictable conditions for long-term cross-border investment) trade and competition policy transparency in government procurement trade facilitation (to further expedite the movement, release and clearance of goods) 9 from Marrakech to Cancun: the Doha declaration and the negotiations on agriculture Commitment to a negotiation aimed at: substantial improvements in market access reduction, with a view to phasing out, all forms of export subsidization substantial reductions in trade-distorting domestic support taking into account non trade concerns and the need for the agreement to include a special and differential treatment for developing countries 10 5

6 from Marrakech to Cancun: the Doha declaration and the timing of the negotiations on agriculture agreement on the commitments ( modalities ): by March 31, 2003 country-specific detailed commitments ( schedules ): by the 5th Ministerial Conference (Cancun), September 2003 [ peace clause expires December 31, 2003] round ends January 1st 2005 ( single undertaking ) 11 from Marrakech to Cancun: post-doha developments slowly, the real negotiation starts Agenda 2000 MTR (Communication: July 2002) EU proposal for the modalities (January 2003) Harbinson s draft of modalities (March 2003) March 31 deadline for modalities unmet August 2003: US-EU joint proposal G-16 joint proposal 12 6

7 U.S. EU Japan Cancun: the actors Cairns [Argentina, Australia, Brazil, Canada, Chile, Colombia, Hungary, Indonesia, Malaysia, New Zealand, Philippines, Thailand, Uruguay] G-22 [Argentina, Brazil, Bolivia, Chile, China, Colombia, Costa Rica, Ecuador, Guatemala, India, Mexico, Paraguay, Peru, Philippines, Thailand, South Africa, ] ACP-AU-LDCs 13 Cancun: the positions EU (January) the MTR (June) joint EU-US (August 13) G (August 20) 14 7

8 market access URAA brought a very limited expansion of market access ( water in the tariffs, dirty tariffication, implementation mechanisms of TRQs ) 15 market access: the EU proposal (January 2003) tariff reduction average reduction of 36% in six years, with a minimum reduction of 15% Tariff Rate Quotas (TRQs) volumes: no change in quota tariffs: no change better discipline 16 8

9 EBA the Everything But Arms (EBA) Regulation (2001) duty-free and quota-free access to imports of all products but arms and ammunitions from least developed countries (49) immediate implementation for all goods but fresh bananas (full implementation by 2006), rice and sugar (2009) 17 market access: the EU proposal (January 2003) Market access to Least Developed Countries duty-free and quota-free access for least developed countries exports to developed and advanced developing countries duty-free access for developing countries agricultural exports to developed countries should represent no less than 50% of their total imports from developing countries 18 9

10 market access: the EU-US joint proposal (August 2003) Market access to Least Developed Countries duty-free access for developing countries agricultural exports to developed countries should represent no less than [?]% of their total imports from developing countries 19 market access & the Fischler reform lower protection needed for dairy products (lower intervention prices, increase in production quotas and stringent constraints on volume withdrawn from the market at intervention prices all put downward pressure on domestic prices) lower protection needed for rice (but need to renegotiate bound tariffs) 20 10

11 market access: the EU-US joint proposal (August 2003) tariff reduction [?]% of tariff lines subject to a [?]% average tariff cut and a minimum of [?]% ; [?]% of tariff lines subject to a Swiss formula coefficient [?] [?]% of tariff lines shall be duty-free tariff lines that exceed a maximum of [?]% to be reduced to that maximum, or additional market access to be assured through a request:offer process that could include TRQs 21 tariff reduction market access: the G-22 proposal (August 2003) (i) [?]% of tariff lines subject to a [?]% average tariff cut and a minimum of [?]% (ii) [?]% of tariff lines subject to a Swiss formula coefficient [?]% (iii) [?]% of tariff lines shall be duty-free - total average tariff cut deriving from (i) and (ii) shall be equal at least [?]% - tariff lines that exceed a maximum of [?]% shall be reduced to that maximum - a tariff escalation correction factor 22 11

12 market access: the G-22 proposal (August 2003) TRQs should be expanded by [?]% of domestic consumption and in quota tariff rates shall be reduced to zero developed countries should provide duty free access to all tropical products as well as other agricultural products representing at least [?]% of imports from developing countries 23 however, not very far apart market access: how far apart? the trade liberalization power of the two frameworks cannot be comparatively assessed possibly, positions far apart when starting negotiating the numbers to be inserted in the brackets and define the actual commitments (little value of the blended formula, apart from being a negotiation intermediate proposal able to allow consensus to materialize?) 24 12

13 export competition EU actual export subsidy expenditure accounts for 4/5 of the total (across all countries) EU export subsidy expenditure allowed by the URAA equals 75% of the total (across all countries) 25 export competition: where are the subsidies? EU - Export subsidy expenditure by group of products (95-01) Wheat and coarse grain 14,5% Sugar 12,2% Other products 10,4% Dairy products 31,5% Beef meat 19,3% Processed products 12,0% 26 13

14 export competition: where are the subsidies? EU - Export subsidy expenditure by group of products (95-01) Wheat and coarse grain 14,5% Sugar 12,2% Other products 10,4% Dairy products 31,5% Beef meat 19,3% Processed products 12,0% 27 export competition: where are the subsidies? EU - Export subsidy expenditure by group of products (95-01) Wheat and coarse grain 14,5% Sugar 12,2% Other products 10,4% Dairy products 31,5% Beef meat 19,3% Processed products 12,0% 28 14

15 export competition: where are the subsidies? EU - Export subsidy expenditure by group of products (95-01) Wheat and coarse grain 14,5% Sugar 12,2% Other products 10,4% Dairy products 31,5% Beef meat 19,3% Processed products 12,0% 29 export competition: where are the subsidies? EU - Export subsidy expenditure by group of products (95-01) Wheat and coarse grain 14,5% Sugar 12,2% Other products 10,4% Dairy products 31,5% Beef meat 19,3% Processed products 12,0% 30 15

16 European Union. "Bindingness" of the WTO export competition commitments ( ) Wheat Coarse grains Rice Rapeseeds Olive oil Sugar Butter Skim milk powder Cheeses Other milk products Beef meats Pigmeat Poultry meat Eggs Wine Fruit and vegetables, fresh Fruit and vegetables, procsd Tobacco Alcohol export competition: the EU proposal (January 2003) export subsidy reduction volume of subsidized exports: average substantial cut (all forms of export subsidization) export subsidy expenditure: 45% reduction in six years (all forms of export subsidization) 32 16

17 export competition: wheat Wheat and wheat flour. Subsidised exports and maximum subsidised exports commitment 25 (Million t) Subsidised exports Maximum commitment 33 export competition & the Fischler reform (cereals) Commission s proposal to reduce intervention price by 5,9% has been rejected by the Council of Ministers of Agriculture it would have probably lowered domestic prices, and certainly lowered per unit export subsidies and made, under normal market and exchange rate conditions, export subsidies for wheat unneeded 34 17

18 Common wheat. Maximum export subsidy or tax (Euro/t; open tenders; January July 2003) export competition export competition 80 Common wheat. Maximum export subsidy or tax (Euro/t; open tenders; January July 2003) likely impact of the reduction of the intervention price for cereals in the Commission proposal for the MTR

19 export competition Sugar. Subsidised exports and maximum subsidised exports commitment 2000 (000 t) Subsidised exports Maximum commitment 37 export competition Sugar. Export subsidy expenditure and maximum subsidy expenditure commitment 1000 (mill Euros) Subsidy expenditure Maximum commitment 38 19

20 Rice and Sugar: the Everything But Arms Regulation EBA expectations are that domestic prices will approach those prevailing on the world market export subsidies will become an unfeasible policy instrument Rice (Fischler reform): 50% cut of the intervention price Sugar: to be reformed soon 39 export competition Cheeses. Subsidised exports and maximum subsidised exports commitment. 500 (000 t) Subsidised exports Maximum commitment 40 20

21 export competition Cheeses. Subsidised and unsubsidised exports and maximum subsidised exports commitment. (000 t) Subsidised exports Maximum commitment Unsubsidised exports 41 export competition Other milk products. Subsidised and unsubsidised exports and maximum subsidised exports commitment (000 t) Subsidised exports Maximum commitment Unsubsidised exports 42 21

22 Dairy intervention stocks (January July 2003) (000 t) export competition Butter, public Butter, private SMP, public 43 export competition & the Fischler reform (dairy) 25% (butter) / 15% (SMP) intervention price reduction, small quota increase, limits to intervention for butter lower per unit export subsidies but, likely, increased pressure on volume of subsidized exports 44 22

23 export competition & the EU in the period EU export subsidy expenditure was 47,8% of the maximum allowed under the URAA (47,2% in the last three years, 34,5% in 2001/2002) if we consider the last three years and we ignore the export subsidy expenditure for rice and sugar (because of EBA) the percentage drops to 41,1% (27,7% in 2001/2002).and then we have to take into account the effects of the Fischler reform on the subsidy expenditure for dairy products 45 export competition & the EU the EU does not use export subsidies for oilseeds the URAA allows the EU to use export subsidies, but the EU has not been using them for: rapeseed, olive oil and tobacco the EU, as a result of EBA, likely will soon end up not using export subsidies for rice and sugar 46 23

24 after the Fischler reform, and assuming no further cuts to producer support, the current CAP still needs export subsidies for dairy products meats cereals (coarse grains) export competition & the EU...the EU can reduce export subsidies by a large amount, but needs some flexibility to be allowed 47 export competition: the EU-US joint proposal (August 2003) export subsidy reduction eliminate export subsidies for certain products (of importance for LDCs) reduce subsidized exports and export subsidy expenditure for other products trade distorting elements of export credit treated as export subsidy disciplines for exporting STEs, including ending single desk export privileges, prohibition of special financing privileges, and disciplines on pricing practices 48 24

25 export competition: the G-22 proposal (August 2003) export subsidy reduction eliminate over [?] years export subsidies for certain products (of importance for LDCs) eliminate over [?] years export subsidies for all other products export credits subject to discipline; subsidy component identified and eliminated 49 export competition: how far apart? the EU is not in a position to negotiate a date for the elimination of export subsidies in the short run, very far apart as long as this request from the G-21 remains nonnegotiable 50 25

26 domestic support no country has been forced to modify its domestic policies as a result of the need to satisfy the commitments in this component of the URAA 51 domestic support European Union. Domestic support reduction commitments: notified AMS, support falling in the "blue box" and margin left with respect to the maximum allowed AMS. 100 (Bill Euros) /96 96/97 97/98 98/99 99/00 00/01. Notified AMS "Blue box" support Margin Maximum AMS 52 26

27 domestic support U.S.. Domestic support reduction commitments: notified AMS and support exempt from reduction commitments ("de minimis" and "green" box) (1999 and 2000: estimates). (Bill $) 35 WTO commitment AMS "de minimis" other exempt support 53 domestic support & the Fischler reform decoupling most of the EU support currently in the blue box and part of that currently in the amber box [certain payments for beef producers; support for milk and (soon to be decided) for sugar producers] will move into the green box 54 27

28 domestic support & the Fischler reform modulation (small) support reduction, coupled and decoupled 55 domestic support reduction [ amber box] 60% reduction in six years the blue box maintained domestic support: the EU proposal (January 2003) 56 28

29 domestic support reduction [ amber box] 60% reduction in six years the blue box domestic support: the EU proposal (July 2003) maintained and support reduced by 60% (i.e., the blue box is eliminated ) 57 domestic support reduction [ amber box] 60% reduction in six years the blue box domestic support: the EU proposal (July 2003) maintained and support reduced by 60% (i.e., the blue box is eliminated ) the strongest of the two domestic support reduction options proposed in the Harbinson s draft! 58 29

30 the EU s AMS in 99/00 was 47.9 bill the Fischler reform and the EU AMS the July 2003 EU proposal: 60% support reduction ( amber and blue boxes), corresponding to a maximum allowed AMS after 6 years equal to 34.8 bill (for the blue box, the base considered is 99/00).. if we apply to 99/00 data current intervention prices for cereals and beef, those agreed with the Fischler reform for dairy products, we equal rice and sugar domestic and world prices (because of EBA ) and we add 25% of current blue box support, domestic support equals 32.5 bill! 59 domestic support: the EU-US joint proposal (August 2003) domestic support reduction [?]% reduction of support in the amber box blue box maintained (and modified ) and support capped at 5% of value of domestic production de minimis exemption made less generous 60 30

31 domestic support reduction reduce all trade-distorting domestic support measures on a product specific basis by a percentage between [?]% and [?]% [highest percentage cut applied to products which enjoyed above average support and to products exported which account for more than [?]% of total world exports (in this case with a view to eliminate the support)] blue box eliminated domestic support: the G-22 proposal (August 2003) 61 domestic support: the G-22 proposal (August 2003) domestic support reduction de minimis exemption made less generous for developed countries sum of AMS and de minimis support reduced by [?]% green box payments by developed countries capped or reduced 62 31

32 domestic support: how far apart? for the EU, the blue box could be canceled the EU is not in a position to agree a product specific reduction of support ( dairy, sugar, meats) the EU is not in a position to agree a reduction of the support in the green box positions are very far apart is this confrontation ideologically based? (different trade distorting effects of domestic policy instruments neglected by G-21 ) 63 international protection of geographical indications (TRIPS) a negotiation priority for the EU! the EU considers the negotiation on the protection of the denominations of origin as part of the negotiation on agriculture Cancun: attempt to have a (very unlikely) agreement on protection for 41 denominations (outside negotiations on TRIPs) confuse strategy? pressure (and rumor ) on the issue out of proportion and counterproductive? 64 32

33 the cotton front Burkina Fasu, Benin, Chad and Mali elimination of all subsidies on cotton and compensation during the phasing out period (very hard to digest for the US) 65 the unrevealing of the failure September 13 1 pm: draft text by Derbez (everybody dislikes it, main concerns focus on Singapore issues and agriculture) 7 pm-1:30 am: Head of delegations meeting 1:30 am-3:30 am: green room meeting (9 countries) ( standstill on Si) September 14 8 am-3 pm: green room meeting (30 countries) focusing on Si (EU agrees to step back on competition and investments; African Union and Japan/SK say no, for opposite reasons) 4 pm: Head of delegations meeting, Derbez brings the Conference to end 66 33

34 why did the negotiations fail? agriculture could have very likely been the reason for the failure, but negotiations did not get to the point to find out if a way out for agriculture existed or not ( mixed signals exist) DCs took a strong negotiation stand on the Si (hard to understand once competition and investment had been dropped; meant to drive to the failure?) the EU could not give away on Si more than it did without loosing its face (clear to everyone) Rhetoric prevailed over pragmatism? poor preparatory work (by countries, not WTO) 67 who to blame for the failure? DCs? believed it really was a development agenda, tried to make WTO work for the poor, and asked for way too much with respect to what developed countries could be assumed to be ready to give away naïve or forward looking strategy? Developed countries? business as usual approach to negotiations, underestimation of climate, firm on rhetoric EU? on Si showed flexibility and sense of responsibility; would have been ready to give more than expected on agriculture? (I doubt.) 68 34

35 who to blame for the failure? WTO? negotiations are structurally difficult ( 146 countries with very different goals and negotiating skills) (Lamy: medieval institution ) Poorly prepared by WTO? (perhaps, in WTO?) Limited negotiating skills of many delegations? (possibly a factor, not the cause) Derbez? the negotiation was going to fail anyway, but could have been useful to negotiate one more day to give time to appreciate the implications of the failure and to see what (limited) progress could be made on agriculture (to help the restart..,) 69 who wins? who looses? everybody looses (short term vs long term assessment?) those who are likely to loose the most are developing countries with a strong export potential and enjoying limited preferences food insecures loose [Oxfam: no delight in the failure ] are farmers in developed countries the winners? deterioration of climate on international markets, export subsidies become illegal huge set back for WTO (whose fault? globalization without rules better? 70 35

36 the CAP and the Cancun failure: what the implications? peace clause expires December 31: export subsidies under fire, no defense possible export subsidies canceled (!?!? dairy, meats, coarse grains ) or compensations paid at the end of the UR the EU (co-designed and) signed an agreement which was compatible with the post-mcsharry CAP (which came late in the round) we reformed the CAP and had EBA early in the negotiations; we were able to make a decent, non rhetoric, strong proposal 71 the CAP and the Cancun failure: what the implications? everything we did will now be given for granted and we will be asked to do more and this time the agreement will likely not be designed by the US and the EU only and agriculture is one of 20+ negotiations differently from the UR, we may end up with a CAP which is not WTO-Compatible and be forced to make changes not based on domestic considerations only 72 36

37 what s ahead? failures are not uncommon in multilateral negotiations (Bruxelles in the UR, Seattle) and they are not the end of the world this one, however, seems different from the previous ones negotiations enter a vacuum (only governments can pick up the pieces of what they did, and takes time) peace clause expires! US presidential elections in November what s ahead? Scenario 1 (structural change): developed countries not willing to accept structural change in multilateral negotiations, focus shifts to BAs &RTAs, strong increase in disputes, trade conflicts, low motivation in restarting a negotiation Scenario 2 (structural change): a more democratic approach in the multilateral system prevails and a real development agenda develops Scenario 3: (business almost as usual ): negotiations slowly re-start, agreement reached with some concessions (from both sides) 74 37

38 CONCLUSIONS the January 2003 EU proposal (which was based on the 1999 Agenda 2000 CAP reform), if compared with the URAA, was already a significant step toward more liberalized trade the Fischler reform reduced producer support and made the CAP significantly less trade distorting this made the July 2003 EU offer and the August 2003 EU-US joint proposal possible post-cancun climate of multilateral negotiations difficult to predict (for me, at least) no matter what, it will be a difficult negotiation Fischler reform may not enough to meet the WTO agreement to come 75 38