Balanced Trade, Not Unilateral Disarmament. U.S. Dairy Industry Principles of Trade Objectives for the WTO Doha Round

Transcription

1 Balanced Trade, Not Unilateral Disarmament U.S. Dairy Industry Principles of Trade Objectives for the WTO Doha Round

2 This document reflects the principles adopted by the five major U.S. dairy industry organizations and submitted to the U.S. government in May

3 Introduction The U.S. dairy industry must continue to develop new markets outside its borders if it is to grow. However, current rules governing international dairy trade continue to produce inequities and severe distortions that blunt U.S. export opportunities. These inequities and distortions are a consequence of the initial step to address agricultural trade distortions in the Uruguay Round of world trade talks that concluded in That work is far from complete. The map of world dairy trade remains riddled with wide disparities due to the extensive level of government support of so many countries dairy sectors prior to the Uruguay Round. These inequities have left the U.S. market relatively open to subsidized competition from abroad, while denying our dairy industry the same opportunities to develop new markets overseas. In 2001, the WTO launched the Doha Round with a mandate to negotiate further reforms in the agricultural sector. In 2002, the U.S. government submitted a proposal developed with substantial input from the U.S. dairy industry calling for the elimination of export subsidies, and for the correction of the inequities in market access and domestic support. The Three Pillars The U.S. dairy industry has built its trade priorities around the proposition that the playing field must be leveled and inequities eliminated. The U.S. dairy industry proposal rests on three "pillars": export subsidies, market access and domestic supports. All three elements are interrelated; success requires balanced progress on all three fronts. With existing disparities left over from the Uruguay Round, the United States must be committed not to unilaterally disarm by giving more than it gets in the Doha Round. 1

4 Export Subsidies Export subsidies continue to pose the biggest impediment not only to expanding U.S. dairy exports by depressing world prices, but also to hindering steady demand increases from pushing world prices into convergence with U.S. prices. Each year, the European Union provides in excess of $1 billion in dairy export subsidies, more than 100 times what the United States is allowed to spend. New Zealand has increased its share of the world market by running an export monopoly, which has also contributed to distortion of global prices and market share. The U.S. dairy industry proposes elimination of all export subsidies no later than 3 years from the date the agreement enters into force. It is also important to require a "down payment" from heavily subsidized countries, and to establish disciplines on state trading and private monopolies to remove their ability to distort world trading markets. Share of World Agricultural Export Subsidies Problem: EU export subsidies disadvantage U.S. Exports Current EU limit is about $8.5 billion in export subsidies Current U.S. limit is about $1.1 billion in export subsidies EU 90.3% U.S. 2.2% Norway 1.2% Switzerland 4.4% All other 1.9% 2

5 Market Access Since the Uruguay Round, market access in dairy is controlled largely by quotas, in-quota tariffs and over-quota tariffs. Unfortunately, many trading partners, such as Europe, Japan, and Canada still maintain triple-digit tariff rates that effectively bar imports from their markets. On the other hand, the United States relatively low tariffs facilitate larger volumes of imports beyond our respective minimum market access quotas (see chart). This causes double-damage to the United States: it denies us entry into these high tariff markets, and it leaves the U.S. relatively open to attract imports that might otherwise be sold elsewhere. The U.S. dairy industry has proposed a formula to harmonize all tariffs. Over-quota tariffs would be reduced in a manner that ensures reciprocal and equal obligations among WTO members. Nations with high import tariffs even those where dairy is an import-sensitive commodity must reduce their rates faster than nations (such as the United States) with lower tariffs. In fact, we need to see significant reductions in high tariffs and export subsidies before lowering our own import duties. Over-Quota Tariffs Problem: U.S. tariffs are low compared to other major international markets Percent 3

6 Tariffs: Imports over-quota (Beyond Minimum Market Access) Problem: U.S. tariffs are not protecting against over-quota imports Comparison of Approaches Problem: Straight cut maintains current disparities on global tariffs Straight Cut Percent Harmonization Initial Final Initial Final 4

7 Once tariffs and quotas are on an equal footing, U.S. dairy products will have greater access to higher priced markets around the world, and our own domestic market will not stand out as disproportionately attractive to foreign dairy exporters. Domestic Support The Uruguay Round agreement provided the European Union access to unlimited trade distorting domestic support (Blue box + Amber box) when compared to the U.S. Despite having similar agricultural revenues of around $200 billion (U.S. and EU) available, support for agriculture in both countries is hugely disproportionate. The EU presently has access to more than $60 billion on Amber box subsidies, while the U.S. has access to $19.1 billion. In addition, the EU has unlimited usage of the Blue box trade distorting programs. The U.S. dairy industry supports the continuation of the Green box as well as the Amber box, but agrees with capping Amber box payments by placing equitable limits on how much each nation can provide to its agriculture. The U.S. dairy industry also feels strongly that allowing countries to maintain levels of support (through combined Amber box and Blue box spending) that are higher than that provided in the U.S. would be extremely detrimental for U.S. dairy as well as U.S. agriculture. Reduce Disparities in Domestic Support Problem: Disparities in domestic support are untenable Local Currency Units All non-exempt support (Amber and Blue) would count against the ceiling commitment. AMS stands for Aggregate Measures of Support. 5

8 Other Issues Sanitary and Phytosanitary (SPS) measures: The U.S. dairy industry opposes efforts to change the SPS agreement, which deals with food safety and animal and plant health standards. The present system of basing rules on scientific evidence serves well to prevent discrimination between countries by disguising restrictions to trade. Non-trade concerns: The U.S. dairy industry opposes efforts to address non-trade concerns such as food safety, food labeling and consumer attitudes (precautionary principle) in a WTO agreement on agriculture. The clear result would be further trade barriers. However, support for other issues such as the environment, animal welfare, and multifunctionality could receive consideration in Green box programs. Geographical indications: The U.S. dairy industry opposes EU efforts to include virtually all foods in the range of products given special protection based on their geographical origin. This issue is being duscussed in the TRIPS Council, thus it certainly does not belong in the agriculture negotiations. Dispute settlement: The U.S. dairy industry encourages negotiators to promulgate tighter rules on time frames and deadlines to facilitate more timely dispute settlement resolutions and to prevent governments from dragging out the settlement process. Timeline November 2001: The Doha Development Round is launched, with a mandate to negotiate liberalized rules on trade in agriculture, services, investment and intellectual property. March 2003: The WTO Agriculture Committee fails to complete a draft text with specific trade reform goals ("modalities") for agriculture, but continues the negotiating process. September 2003: The agriculture "modalities" paper is to be presented and debated at the Fifth Ministerial Conference in Cancun, Mexico. September 2003-December 2004: WTO members continue negotiating to establish new global trade rules by January 1,

9 U.S. Dairy Industry Facts The United States is the largest cows milk producing nation in the world, with annual production of about 170 billion lbs., worth $20 billion at the farmgate and over $60 billion in products it sends to market. Of this, over $1 billion is exported each year in the form of cheese, ice cream, milk, butter and dairy ingredients. Almost 85% of U.S. dairy exports are commercial, unsubsidized sales a real turnaround from the mid-1990s when exports were often relegated to surplus disposal and most sales took place only with the benefit of government subsidies. From 1995 (the year the Uruguay Round Agreement on Agriculture was implemented) to 2002, U.S. exports of cheese increased 85%, exports of whey gained 75% and exports of lactose rose 114%. The United States supplies about 30% of the world s whey exports and 42% of all lactose exports, and holds the leading market share of both ingredients in most major markets. The United States produces twice as much lactose and 50% more whey than the domestic market can absorb; the export market provides a profitable outlet. Although the U.S. is respectively the second and third largest producer of non-fat dry milk and butter, with world trade market shares of only 11 percent for non-fat dry milk and less than one percent for butter, it actually exports only a small amount of those products due to the disastrous impact export subsidies and market access barriers have on world prices. U.S. Cheese Exports Million lbs. 7

10 U.S. Whey and Lactose Exports U.S. Dairy Exports Subsidized vs. Unsubsidized ($) $ Millions Million lbs. Whey Lactose Subsidized Unsubsidized 8 Source: USDEC - USDA

11 The National Milk Producers Federation and the U.S. Dairy Export Council have created this brochure in order to educate U.S. policy makers about the needs and desires of the U.S. dairy industry regarding the ongoing World Trade Organization negotiations on agriculture. While these negotiations offer the prospect for significant growth and job creation related to dairy exports, the industry stands to suffer great losses if the existing disparities in the levels of government support for dairy persist. It is vital that the WTO member countries agree to eliminate export subsidies, as well as to correct the inequities in market access and domestic support, so as to avoid inequitable trading conditions that will undermine U.S. dairy producers and processors. Most importantly, given the existing severe trade disparities, the U.S. must not concede ground in the trade negotiations before other countries commit to major reforms. An American dairy processing plant, supplied by U.S. producers from rural communities. 9

12 This brochure was produced by the National Milk Producers Federation under contract to the U.S. Dairy Export Council. National Milk Producers Federation 2101 Wilson Blvd., Suite 400 Arlington, VA Phone: (703) Fax: (703) Website: U.S. Dairy Export Council 2101 Wilson Blvd., Suite 400 Arlington, VA Phone: (703) Fax: (703) website: 10