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Review - Topics
• Graphical analysis of world market effects of protection
• Uruguay Round framework
• Uruguay Round implementation
• Doha Round negotiations and endgame
• Developing country interests
• Quantification of impacts
The ‘landing zone’
• Export competition disciplines essentially agreed after Hong Kong
• EU to accept G20 proposal on market access (54% cut in average tariff compared to own proposal of 39%)– Mandelson Davos speech “ready to add more than 10
percentage points”• US to bring domestic support down by around 70% to
$15 billion and accept product-specific caps (compared to own proposal of 53% cut in OTDS implying non-green support of $23 billion).
• Messy details on tariff caps, sensitive products, special agricultural safeguards, Special Products and Special Safeguard Mechanism
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
• Hong Kong 2005 agreed to end date of 2013, with substantial progress in early years
• Only important now for dairy and sugar exports, but implications for Non-Annex I goods, i.e. the food industry?
The EU’s AVEs (ad valorem equivalents of specific rates), excluding sugar
Bands TariffLines
>100% 7480-99% 5160-79% 8240-59% 16620-39% 2800-19% 350Agra Europe, 22 July 2005
Note many of the highest tariffs are actually on processed foods (e.g. yogurt, whey) rather than bulk commodities
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%
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%
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%
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
Possible tariff cut which does not impact on EU market price (tariff overhang )
55% 64%
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
Possible tariff cut which does not impact on EU market price (tariff overhang )
63%
Domestic support - EU situation 2001 (end Uruguay Round, before Mid-Term Review)
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%
Fischler reforms (EU15):
• Switch 90%? of existing blue box expenditure into the green box
• Shift €4.2 billion (cotton, tobacco, etc.) from amber to blue/green
• Milk reforms strip €1.9 billion from amber box, and add (dairy premium) €0.4 billion to blue/green
• Sugar reforms strip €3.5 billion from amber box, and add €1.3 billion to blue/green (EU15 income support)
• Rice, fruit and vegetables…..
Commitments on blue and amber boxes:
• EU will make the biggest AMS cuts under the tiered formula – could afford up to 70%
• Blue box limited to 5% of value of agricultural production– achievable, provided most of the Single Payment is in
the green box
• Overall limit on all trade-distorting support (80% of base entitlement): achievable for EU15
• Product specific AMS limits
Politics of the endgame - EU
• Mandelson and the mandate– Can the French/Irish block a deal?
• Timing – Incentives for an early deal– German presidency
• Its acceptable deal– Looking for concessions on NAMA, services
and rules (anti-dumping, trade facilitation and Geographical Indications)
Politics of the endgame - US
• The US position– Bush and political will– Timing - Trade Promotion Authority
• Attitudes of the new US Congress
– The new Farm Bill– The biofuels factor– Its acceptable deal
Politics of the endgame – G20
• Context of strengthening world market prices
• Brazil – now experiencing exchange rate appreciation
• China – accepted tight restraints on trade policy on accession in 2001
• India – concerned to protect its defensive interests
Doha fails to conclude?
• URAA lives on, without the protection of the Peace Clause
• Regional integration agreements– e.g. Mercosur
• It would be wrong to conclude that the mosaic of agricultural policies across the world, post-1995, is a stable set– policies are being challenged, and changed
• This would continue even if there was no conclusion to the Doha Round
Litigation as a source of pressure for changes in rules
• The significance of the WTO Dispute Settlement Understanding
• The WTO panel process
• Some important agricultural cases– EU sugar– EU bananas– US cotton– EU GSP
Panel Findings on Sugar and Cotton
• US Upland Cotton (Brazil)– Production flexibility contract payments (1996
Farm Bill) and Direct payments (2002 Farm Bill) are not eligible for the green box because fruit & vegetables cannot be grown on the land
• EU Sugar (Australia, Brazil, Thailand)– C sugar exports are subsidised– ACP and Indian re-exports are wrongly
excluded from EU totals
Does the Single Payment fit in the green box?
• Restrictions on fruit and vegetables: see Upland Cotton
• Annex 2, 6(d): ‘The amount of such payments in any given year shall not be related to, or based on, the factors of production employed in any year after the base period’– But an annual claim on farmland in agricultural
production or kept in good environmental condition
Doha concludes 2007?
• Implementation into early 2010s, when export subsidies finally eliminated
• Further CAP reform before end of the decade?