JITAP Workshop on Agriculture

Transcription

1 United Nations Conference on Trade and Development JITAP Workshop on Agriculture Dakar, Senegal June 2005 Ralf Peters Trade Negotiations and Commercial Diplomacy Branch Division on International Trade in Goods and Services, and Commodities UNCTAD, Geneva

2 Presentation Overview Background to the agriculture negotiations: mandate and scope Analysis and implications of the July package Modalities, framework, and state of play of the negotiations (market access) Practical simulation exercise on quantitative methods (partial equilibrium models, WITS, ATPSM)

3 Importance of Agricultural Sector Value added of agricultural sector in LDCs 32 per cent, in Sub-Saharan Africa 18 per cent Employment share is much higher 71 per cent (LDC) Countries Value added in agriculture (% of GDP) Employment in agriculture (% of total) High 2 3 income Midle 9 38 income Leastdeveloped World 5 38

4 Outline of the Agreement on Agriculture Three Pillars Market Access Tariffication Tariff reduction Minimum access Special Safeguard Domestic Support AMS reduction Green Box de minimis Export Subsidies Reduction Prohibition of new subsidies Special and Differential (S&D) Treatment for DCs and LDCs Related Agreements, e.g. Marrakesh Decision Establishment of a Committee on Agriculture Continuation of the reform process

5 Market Access: Current Tariffs Agricultu re Non- Agricultu re B ound A pplied High-incom e countries M iddle-incom e countries Low -incom e countries High-incom e countries 4 3 Low & M iddle-incom e countries Source: UNCTAD TRAINS, WTO Specific Problems: Tariff escalation Tariff peaks

6 Market Access: Tariff Escalation United States bound and applied MFN tariff rates on cotton products Description Tariffs (%) Cotton, not carded or combed and waste 1 Cotton, carded or combed 5 Cotton, yarn and sewing thread 8 Knitted or crocheted fabrics 14 Knitted or crocheted articles of apparel and clothing 11 EU most favoured nation, out-of-quota bound tariff rates Product Ad valorem equivalent tariff rates (%) Live bovine animals 61 Bovine meat 138 Tobacco leaves 14 Cigars 38 Cacao beans 0 Cacao powder 8 Degree of processing Source: UNCTAD TRAINS, AMAD, WTO

7 Support to Producers in OECD Countries Total support to agriculture in the OECD amounted to $350 billion in 2003 (TSE) Total agricultural production of $681 billion (2003) Mainly: Milk, meat, sugar and grains Various forms of support to producers - Border protection (e.g. tariffs): $160 bill. - Domestic support payments: $96 billion - General Services (Research, )

8 SUPPORT TO PRODUCERS % of the total farm receipt OECD EU Japan Switzerland Source: OCDE, Politiques agricoles des pays de l OCDE, 2001

9 Measures for reduction commitments De minimis Amber Box Product specific support Market price support Payment on output Input subsidies Amber Box Investment subsidies Non-product specific support Development Blue Box Exempted measures Research Training Extension Infrastructure Pest & disease control Public stockholding Domestic food aid Decoupled income support Support to structural adjustment etc. Green Box

10 Support to Producers: WTO definition Notified Domestic Support in 1995 and 2000 US$ mill. Amber box (AMS) de minimis (AMBER) Blue box Green box Total '570 4'019 35' ' ' '727 9'313 21' ' '486 Source: ERS / USDA calculation from WTO notifications

11 Dom estic Support by US Dom estic Support by EU 60,000 70,000 50,000 60,000 M ill. U S $ 40,000 30,000 20,000 M ill. U S $ 50,000 40,000 30,000 20,000 10,000 10, Dom estic Support by Japan Other countries* M ill. U S $ 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 M ill. U S $ 30,000 25,000 20,000 15,000 10,000 5,000 0 AM S de m inim is Blue Box Green Box Source: USDA from WTO notifications * Number of included countries changes

12 Export Subsidies by Country Direct Export Subsidies: $6.2 bill EU 89% State Trading Enterprises: Canada, Australia, Ukraine, Cuba, Switzerland 5% Norway 1% USA 1% Others 4% Mill.U S$ members have commitments US 258 EU Export Credits: Subsidy component C anada Austra lia Korea

13 Export Subsidies by Commodity Group Mill. US$ 5 0 Dairy Meat Cereals Inc. Prod. Sugar Alcohol Fruit, Veg. Other Prod.

14 Presentation Overview Background to the agriculture negotiations: mandate and scope Analysis and implications of the July package Modalities, framework, and state of play of the negotiations (market access) Practical simulation exercise on quantitative methods (partial equilibrium models, WITS, ATPSM)

15 State of Play: Doha Negotiations on Agriculture have been a difficult & complex process: Agriculture is a politically sensitive sector in both developed & developing countries. Countries (developed or developing) have widely divergent views on the optimal speed and/or the extent of agricultural liberalization. Deadlines to agree on modalities were already missed twice (March 2003 and at the Cancun Ministerial Conference, September 2003). The Framework Agreement brought the negotiation back on track, but the modalities are still left for further negotiations.

16 Alliances and interests Degree of special and differential treatment Special and differential treatment Japan Switzerland Norway Korea Multifunctionality Moderate, flexible tariff cuts and flexible domestic support Reduce export credits EU Developing countries Level of ambition Eliminate export subsidies USA Cuts in domestic support Substantial tariff cuts

17 Offensive interest To clear the backlog of agricultural liberalization by developed countries in: Market Access, Domestic Support and Export Competition Overall Objective Make the WTO agricultural reform complementary to: Poverty alleviation and rural development Food security Efficiency in the domestic market Competitiveness in the world market Defensive interest Interim: To protect domestic producers from unfair competition Mid/long term: To ensure that developing countries will have enough policy space when selecting appropriate measures to meet their goals

18 Market Access Tariff cut formula: A tiered formula (tariff bands) with a single approach Progressivity: Deeper cuts in higher tariffs Sensitive Products: A selected number of tariff lines will receive a flexibility in tariff cuts, provided that access is improved for all products To be negotiated: Number of tariff bands and thresholds Formula for each tariff band Potential use of tariff capping Ways to address tariff escalation Tariff simplification Cuts in in-quota tariffs and TRQ administration Whether to eliminate SSG Fullest liberalization of all tropical products and products for diversification from growing illicit narcotic crops S&D for developing countries: Proportionality in tariff cuts, lesser tariff reduction or TRQ expansion commitments Longer implementation periods Special Products (SP) Products essential to achieve food security, livelihood security and rural development Flexible treatment, to be negotiated Special Safeguard Measures (SSM) Details to be negotiated Preferences Importance of long-standing preferences is recognised Details to be negotiated Reference to Harbinson text is made Least-developed countries Full access to all SDT provisions No reduction commitments Duty and quota-free access for LDCs in developed and members in a position to do so

19 Offensive Preferences Objective/Measures To enhance export opportunities and export diversification Substantive tariff cuts Eliminate SSG Expand TRQs Remain extra income from preferential market access Avoid extreme adjustments Deepen and/or widen preferential access (Trade solution) Receive assistance and compensation for erosion Market Access Watch Points Tariff cut formula applicable to developed countries should eliminate tariff peaks and tariff escalation Tariff cap Formula to eliminate tariff escalation Flexibility given to sensitive products of developed countries (product selection, degree of flexibility) should be restrained e.g. exclude products of export interests? BUT what about preference erosion Market access improvement should lead to improvement in market entry conditions Harbinson proposal is reference for preference issue: tariffs on certain products could be reduced slower if some DCs highly benefit from preferences on that product Technical assistant programmes to diversify Is the 20 per cent threshold too high? However, preferences would be eroded to a certain degree. Some form of compensation possible?

20 Defensive Objective/Measures Gradual pace for liberalization Limit short-term adjustment costs Proportionality in tariff cuts and sensitive products SP SSM Market Access Watch Points Find a single approach that is beneficial to DCs by setting appropriate tariff bands, given different tariff structure What will be the appropriate degree of proportionality Sequencing no tariff cuts until domestic support and export subsidies are reduced? SSM mechanism to selected products? Or only subject to volume/price triggers? SP self designation or common product criteria? Degree of flexibility?

21 Developed countries: bound and applied tariff rates EU bound tariffs Tariffs in per cent Olive oil, refined Sugar, raw Tea Number of tariff lines

22 European Union: bound and applied tariff rates Note: Five products with tariffs above 500% not plotted.

23 United States: bound and applied tariff rates

24 Japan: bound and applied tariff rates Note: Eight tariffs above 1000 per cent not plotted.

25 Canada: bound and applied tariff rates Note: Two tariff lines above 600 per cent not plotted.

26 Norway: bound and applied tariff rates Note: Three tariff lines above 700 per cent not plotted.

27 Switzerland: bound and applied tariff rates Note: Three tariff lines above 1500 per cent not plotted.

28 Developing countries: bound and applied tariff rates 120 Kenya bound and applied tariffs Bound at ceiling level Tariffs in per cent Lower applied rates bound applied Number of tariff lines

29 Tariff Bands & Tariff Structure Tariff Bands & Tariff Structure Nigeria AppliedRate BoundRate Cameroon AppliedRate BoundRate Tanzania AppliedRate BoundRate Zimbabwe AppliedRate BoundRate

30 Tariff Bands & Tariff Structure Tariff Bands & Tariff Structure Ghana AppliedRate BoundRate Senegal AppliedRate BoundRate Tunisia AppliedRate BoundRate Egypt AppliedRate BoundRate

31 Preferences: EU Market - ACP exports Value of preferences fo r ACP countries (year 2002) U SD (000) Totalimport received Totalvalue of pref

32 Value change Change in Pref value (P 1 = P o ; ES=0.38; MFN cuts 36% ) (e q u ivalent to som e USD 650 Millions USD) % % 80.00% 60.00% Initial final 40.00% 20.00% 0.00%

33 Preference Erosion: Quota rents before and after liberalization in selected SSA countries $m Initial Final 20 Mauritius Zimbabwe Botswana Namibia Ivory Coast South Africa Cameroon Swaziland Malawi Congo Tanzania Source: ATPSM 0

34 JULY PACKAGE on Domestic Support Overall Reduction Target Overall cut = AMS + de minimis + Blue Box capping The total value should not exceed 80% of the combination of the three in the final AMS cuts Tiered approach Greater cuts by countries using higher levels of AMS Capping of product-specific AMS Green Box Revision of the criteria implementation year. De minimis cuts By all countries (except LDCs) Blue Box Capping at 5% of the agricultural production value Revision of the definition and criteria S&D Longer implementation period Lower reduction rates Continued access to the Development Programme (Article 6.2) Exemption from the de minimis cuts if almost all support is for subsistence and resourcepoor farmers No reduction commitments by LDCs 34

35 Domestic Support Offensive Eliminate unfair advantages given to OECD producers Objective/Measures AMS (cuts and capping of product-specific support) Blue (capping, reduction, tighten up rules) Green (review rules) Watch Points Overall cut by at least 20% - will it lead to real reductions? The applied-bound gap in AMS Underutilization of de minimis Which formula will achieve progressive and substantial cuts in AMS for all products of interest to developing countries? Set stringent criteria to the Blue Box and Green Box to prevent box shifting B. Box ensure that it is less trade distorting G. Box need to evaluate actual impact on trade and on targeted areas (e.g. environment protection) Defensive Policy space to meet food security S&D (6.2) Fiscal constraint Article 6.2 to be enhanced? (e.g. support to marketing and transport cost) Identify the type of de minimis support that qualifies as being given to subsistence farmers and resource-poor farmers 35

36 AMS Commitments and Utilization Bound Total AMS % of World Total AMS AMS as % of agricultural ($ million, 2000) value-added EC Japan The US Poland Canada Mexico Switzerland Korea Norway Venezuela Brazil The AMS Utilization Rate (2000) The US EC-15 Japan 88% 62% 17%

37 Blue Box Capping JULY PACKAGE Blue Box Capping at 5% of the agricultural production value Revision of the definition and criteria QUESTIONS Will the capping effective? Users of the Blue Box: EC-15 US$ M illion 10'000 27'720 Notifie d B lue B ox Paym ents 27'345 22'765 23'012 20'638 20'239 (Estonia, Slovak Republic, Slovenia,) Iceland 8'000 6'000 Japan 4'000 Norway 2'000 US US EU Ja p a n O ther countries Source: USDA/ERS 37

38 Effectiveness of Blue Box Capping US$ Million Year Blue Box Payment Blue Box Capping* Reduction rate EC / % Norway % Japan US Source: ERS/USDA, World Bank (WDI) 2001, calculated by UNCTAD Blue Box Capping is a rough estimate, calculated as the 5% of each country s agricultural value-added in the year 2000.

39 Box-Shifting Reduce tradedistorting support AMS Blue Green Source: ABARE Facilitate movement to less distorting forms of support At the Uruguay Round, box shifting was considered a key objective of the AoA commitments on domestic support. But, unless the scope of the Blue Box and the Green Box is limited, it can dilute the effectiveness of the AMS reduction commitments.

40 EU: 2000/01 Possible outcome after new blue box provisions As notified After new provisions Billion EUR AM S Limit -- AM S + de minimis water de m inim is blue box green box water 20% downpayment tra n s fe r new blue box Blue box limit new green box Source: ABARE

41 U S $ b illio n water de m in. AM S As notified US: 1999 After new blue box provision Lim it -- AM S + de m inim is a Total Am ber New water b After new provision de m in. AM S a Non product specific de minimis only. b Allowable additional non exempt payments em ergency paym ents n o w c o u n te rc y c lic a l paym ents water blue box Blue Box limit Source: ABARE

42 Export Competition Elimination formula Parallelelimination of export subsidies trade-distorting element of export credits, certain activities by STEs bilateral food aid Elimination by annual installments, taking into account coherence with internal reform steps of members Disciplines on export prohibitions and export restrictions (to be negotiated) S&D for developing countries: Longer implementation period Article for a reasonable period to be negotiated after all forms of export subsidies are eliminated Provisions for LDCs and NFIDCs concerning disciplines on export credits STEs in DCs acting for domestic consumer price stability and food security receive special consideration to keep monopoly

43 Export Competition Offensive Defensive Objective/Measures Elimination of all export subsidies, and improve domestic supply capacity to capture new trading opportunities (in domestic and world market) Do DCs want to use export subsidies to promote exports of their products? Interim: Protect domestic market from subsidized products S&D on export credits and STEs Flexibilities in tariff cuts and/or SSM Measures to support agricultural production and exports Watch Points Credible end date for the elimination Parallelism good or bad? In order to allow early elimination on products of interests to developing countries, can we use the concept of SP offensively? What will be new S&D, given the role of export credit and STE in development strategies? Appropriate provisions for differential treatment in favour of LDCs w.r.t. credits Flexibility for DCs w.r.t. STEs if important for development Continue to allow genuine food aid (emergency and non-emergency food aid) Food aid only in cash payment? Policy space for production-oriented measures (Article 6.2, SP, SSM)

44 Change in world prices as a result of eliminating export subsidies % Basic Elim ination Source: UNCTAD calculation based on ATPSM simulation

45 Additional change in producer surplus Developed Developing LDC W orld Cairns DC ex.c airns 15'000 10'000 5'000 $m 0-5 ' ' '0 0 0 E lim in ation

46 Additional change in consumer surplus Developed Developing LDC W orld Cairns DC ex.c airns 10'000 5'000 0 $m -5 ' ' ' '0 0 0 E lim in ation

47 Additional welfare gains from eliminating export subsidies ($m) Bovine meat Sugar Wheat Developed Developing LDC World SSA Beef: Winner: EU, Norway Australia, New Zealand, Brazil, Botswana, Mali and Namibia Loser: Japan, the US, Korea R. Sugar Winner: EU, Brazil, Mauritius, India, Australia, Thailand, Fiji and Cuba Loser: US, Russia, Japan, China, Indonesia, Pakistan, Iran, Korea R., Algeria Wheat Winner: EU, the US, Canada, Australia and Argentina Loser: 88 per cent of the developing countries

48 Presentation Overview Background to the agriculture negotiations: mandate and scope Analysis and implications of the July package Modalities, framework, and state of play of the negotiations (market access) Practical simulation exercise on quantitative methods (partial equilibrium models, WITS, ATPSM)

49 WTO Negotiations on Agriculture Negotiation Process Three stage process First reading: General statements Second reading (Room D): Technical consultations; open to all interested members Third reading (Room F): Expert meeting, only by invitation; drafting modalities

50 Post-July Package Negotiations Market Access 1 TRQ Administration Draft is based on Harbinson text Focus on low quota-fill rates: Quotas limited to particular seasons, imports under free-trade or preferential agreements counted as quota imports, quotas non-discriminatory, apply new disciplines on new and expanded quotas or also on existing quotas Ad valorem equivalents Calculations of unit value based on WTO s integrated database Some too high (leading to low percentage equivalents) -> compared with other sources: UN Comtrade 40/20 Filter: Difference in unit value lower than 40% or difference in AVE lower than 20% pass through; otherwise apply other tests/methods

51 Complex Tariff Structures Example for a compound tariffs European Union Live bovine animals, domestic species, steers (bullocks) of a weight exceeding 220 kg (HS: ) 10.2 per cent Euro/Tonnes Specific tariff

52 Convert 10.2 per cent Euro/Tonnes into its ad valorem equivalent (AVE) General formula AVE = Specific tariff (Import unit value* Quantity conversion factor * Exchange rate) *100 Import Unit Value in 1999 = Euro / Kg AVE = 931Euro/Tonnes (1.281Euro/Kg *1000*1) * = = 82.9

53 Calculate average Unite Values (UV) for both IDB and Comtrade Calculate AVEs based on (1) IDB-UV and (2) Comtrade-UV «Paris-Method» 40/20 Filter Is IDB-UV greater than Comtrade-UV by 40%? YES Calculate X = (Comtrade-AVE)-(IDB-AVE) Is X greater 20? NO Use IDB-UV for calculating AVEs NO YES (1) For HS 01 16: Use 82.5/17.5 (Com/IDB) weighting to calculate UV (2) For HS 17-24: Use 60/40 (Com/IDB) weighting to calculate UV

54 Post-July Package Negotiations Market Access 2 Reduction Formula Swiss formula or Uruguay Round formula in tiers Type of formula linked to number of tiers Special and differential treatment Sensitive Products Separate formula Number of sensitive products Tropical Products Full liberalization

55 Post-July Package Negotiations Market Access 4 Special Safeguard Mechanism SSM Easier to use than current general safeguard and SSG Open to all products; price and volume trigger Others: Hamper south-south trade Special Products How many products to be selected Reduction commitments

56 Post-July Package Negotiations Negotiate at all? Issues of Interest not Yet Sectoral Initiatives Agreed Cut duties to zero for products in a specific sector, perhaps with S&D; Also domestic support? Colombia: Cut flowers; US: pork, oilseeds, beef, barley, fruit and vegetables, some processed products, distilled spirits, whey and poultry Some interested but preferred to focus on reduction formula Opposition: undermines S&D; not all have equal abilities Geographical Indicators GI Should be discussed in intellectual property (TRIPS) council EU: gives in on many issues and expects something in return Differential Export Taxes Eliminate or allowed but not differentiated

57 Post-July Package Negotiations Other Issues Other issues Tariff escalation Tariff simplification Special safeguard SSG Free access for Least-developed countries

58 WTO Negotiations on Agriculture Way Forward Negotiations will focus on technical elements and translates parameters (JP) into modalities Modalities by December 2005? First draft by July 2005 ( Framework plus ) Inputs of country-specific needs and concerns, e.g. in selecting SP products, formula, are awaited

59 Presentation Overview Background to the agriculture negotiations: mandate and scope Analysis and implications of the July package Modalities, framework, and state of play of the negotiations (market access) Practical simulation exercise on quantitative methods (partial equilibrium models, WITS, ATPSM)

60 Agricultural Trade Policy Simulation Model (1) Computable global trade model (UNCTAD, FAO, DFID) Analyse agricultural trade policy issues Impact of possible WTO agreements on - world market prices - trade flows - producers, consumers, government revenues Partial equilibrium model with Armington structure

61 Agricultural Trade Policy Simulation Model (2) Coverage: countries, EU one region - Detailed trade policy data for 141 countries - 36 agricultural commodities Special agriculture features - Tariff rates quotas - Bound vs applied tariff rates - Export subsidies and domestic support

62 ATPSM Commodity Aggregation (1) Livestock Bovine meat Sheepmeat Pigmeat Poultry Milk, fresh Milk, conc. Butter Cheese Wheat Maize Sorghum Barley Rice Sugar, raw Sugar, refined Oilseeds, temp. Oilseeds, trop. Vegetable oils Pulses Roots, tubers

63 ATPSM Commodity Aggregation (2) Tomatoes Non-tropical fruits Citrus fruits Bananas Other tropical fruits Coffee green Coffee processed Cocoa beans Cocoa, processed Tea Tobacco leaves Tobacco, processed Cotton linters Hides & Skines

64 Features of ATPSM (1): Trade Policies Specified Global import quota Bound in-quota tariff rates Bound out-of-quota tariff rates Distribution of quota rents Applied tariff rates Two tier tariff structure

65 Features of ATPSM (2): Two Tier Tariff Structure Export subsidies Domestic support Two-way trade

66 Trade Policy Questions Impact of reductions in bound out-of-quota tariff rates in all developed countries on - trade flows - export revenues - tariff revenues Impact of reductions in export subsidies on - world market prices - net food importers Impact of possible WTO agreements on developing countries

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68 Four proposals EU US Cancun (1 st rev) Harbinson Market Access From bound rate average cut 36% (24%) minimum cut 15% (10)% From applied rate Swiss formula [max = 25] From bound rate 40%: average cut (36%, 15%) 40%: Swiss 25 20%: duty free DC: Special P. linear cut (24,10) From bound rate average cut 40-60% (25-40%) minimum cut 25-45% (15-30%) Special products? Domestic Support Export Subsidies AMS cut by 55% Cut by 45% AMS reduced to 5% of GVP Total elimination AMS cut by 60% (20%) Cut by 80% (70%), eventual elimination AMS cut by 60% (20%) Cut by 80% (70%), eventual elimination

69 Comparison of Proposals EU Harbinson New Rate (% ) USA Old R ate (% )

70 Change in world prices Cancun and Harbinson % C ancun H arbinson

71 Change in world prices of temperate goods, Harbinson proposal % Bovine meat Poultry Cheese Barley Pulses Apples

72 Change in world prices of tropical goods, Harbinson proposal % Bananas Other tropical fruits Sugar Coffee green Coffee roasted Coffee extracts Cocoa beans Cocoa powder Cocoa butter Chocolate Tea Tobacco leaves Cigars Cigarettes Other mfr tobacco Oilseeds Cotton linters Vegetable oils

73 Change in producer surplus Cancun and Harbinson $m 20'000 15'000 10'000 5' ' ' ' ' '0 0 0 Developed Developing LDC W orld SSA C ancun H arbinson

74 Change in consumer surplus Cancun and Harbinson 40'000 30'000 20'000 $m 10' '0 0 0 C ancun H arbinson -2 0 '0 0 0 Developed Developing LDC W orld SSA

75 Change in welfare: Cancun and Harbinson $m 14'000 12'000 10'000 8'000 6'000 4'000 2' '0 0 0 Developed Developing LDC W orld SSA C ancun H arbinson

76 Special and differential tratment Developing countries' benefits Level of ambition in developing countries Producer Surplus Consumer Surplus Welfare Level of S&D decreases Developed countries' benefits Level of ambition in developing countries Producer Surplus Consumer Surplus Welfare

77 Limitations Complex proposals Based on assumptions Initial allocation of quota rents Aggregated to the 4 digit level Data quality

78 World Integrated Trade Solution (WITS) vs Databases WITS (UNCTAD - World Bank) is a software which is designed to integrate several trade-related databases and provide easy access Five databases are currently accessible through WITS

79 Databases of WITS TRAINS (UNCTAD) COMTRADE (UN Statistics Division) Integrated Database (IDB-WTO) Consolidated Tariff Schedule (CTS-WTO) AMAD (Agricultural Market Access Database)

80 AMAD in WITS

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82 How to Install WITS Register at Receive userid and password via Download installation file from Install