WTO, Bilaterals and Mediterranean product policyWTO, Bilaterals and Mediterranean product policy

Pierluigi Londero – Dangiris NekrasiusAgricultural Trade Policy AnalysisDG for Agriculture and Rural DevelopmentEuropean Commission

CAL/MED Consortium Workshop IICAL/MED Consortium Workshop IIWashington DCWashington DC7 December 20067 December 2006

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 2

OutlineOutline

Introduction

WTO negotiations: market access and Mediterranean products

Free Trade Areas, Regional Trade Agreements: where are we?

An example: the EU-South Africa Trade Agreement

Conclusions

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 3

OutlineOutline

Introduction– Current state of play in DDA

WTO negotiations: market access and Mediterranean products– Fruit and vegetables: tariff structure and trade pattern– Market access and sensitive products: steps of the analysis

Free Trade Areas, Regional Trade Agreements– Ongoing negotiations and new areas of interest

An example: lessons to be learned from the EU-South Africa Trade Agreement (TDCA)

Conclusions

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 4

Current state of play in market access / sensitive productsCurrent state of play in market access / sensitive products

Market access remains one of the main areas of contention in DDA

– Different interests in approach of exporters and importers logical– Lack of any objective basis for discussion more problematic

TRQ expansion: differences in approach are fundamental – Exporters opt for a general link of TRQ expansion to consumption– Importers insist on relevance of current trade parameters– The result is lack of transparency on potential product coverage

Formula for TRQ expansion is the key– Percentage of sensitive tariff lines directly linked to their treatment – Percentage of Special Product indirectly linked to Sensitive Products

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 5

Fruit and Vegetables: Fruit and Vegetables: Tariff structure and recent trade developmentsTariff structure and recent trade developments

EU Tariffs (AVEs) concentrate in the lower tariff bands– Tariff peaks for garlic and mushrooms

Entry price system

Most traded (non tropical) fruits show remarkable world trade growth – Grapes trade doubled since early 90’s– Oranges essential for US and MED countries– Apples most traded fruit, China has joined the export club

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 6

World grape exports and importsWorld grape exports and imports

Exports (million mt)

0.0

0.5

1.0

1.5

2.0

1990 1992 1994 1996 1998 2000 2002 2004

EU Chile USA

South Africa Mexico Turkey

Imports (million mt)

0.0

0.5

1.0

1.5

2.0

1992 1994 1996 1998 2000 2002 2004

EU USA Russia China Canada

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 7

World orange exports and importsWorld orange exports and imports

Exports (million mt)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990 1992 1994 1996 1998 2000 2002 2004

EU South Africa USA

Morocco Egypt Turkey

Imports (million mt)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1992 1994 1996 1998 2000 2002 2004

EU Russia China Saudi Arabia Canada

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 8

World apple exports and importsWorld apple exports and imports

Exports (million mt)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1990 1992 1994 1996 1998 2000 2002 2004

EU South Africa USA

Chile New Zealand China

Imports (million mt)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1992 1994 1996 1998 2000 2002 2004

EU Russia China USA Mexico

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 9

Methodological choices for impact analysisMethodological choices for impact analysis

The 4 stages of market access analysis – estimate static-price gap (world/internal price) for all EU tariff lines– analyse impact of incremental changes by thresholds– apply econometric analysis to estimate impact on sectors– refine analysis based on market expertise

The limitations of the 3rd stage– CGE models cannot provide the detail and reliability needed for policy

decisions – PE models have more policy and market detail; but do not cover all sectors – choice of limiting liberalisation only on EU driven by policy questions

The analytical choice– OECD’s AGLINK in-house model used – improvements in import demand implemented (subsequently verified by OECD) – no change in parameters, no adjustment in results– caveats of the model clearly identified (no sugar, f&v, problems in poultry)

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 10

Ad-hoc analysis for fruit and vegetablesAd-hoc analysis for fruit and vegetables

Identify sensitive products– As a result of a tariff line per tariff line analysis– Taking into account potential preference erosion– Assessing the importance of certain products for the economy for certain

regions/Member States

With some specific questions for this sector– What assumptions for the Entry Price System?– What strategy for tariff lines with low tariffs?– Which approach for products which enter the EU market at prices above the entry

price level?

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Bilateral trade agreementsBilateral trade agreements

New impetus after the suspension of DDA talks Ongoing bilateral negotiations

– MEDA

– MERCOSUR

– ACP (including pending question of integration of South Africa)

– Gulf Cooperation Countries New impetus/areas of interest

– South Korea

– ASEAN

– India

– Russia

– Ukraine

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Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable sector /1

Share of horticulture in ZA agriculture (ave. 2001-03)

Horticulture27%

Livestock40%

Field crops33%

Source: OECD

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 13

Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable sector /2

ZA: share of F&V in total agricultural exports

26% 23% 24% 28% 33%

73% 76% 75% 70% 66%

1,2%1,4%1,2%1,1%1,0%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004

Sh

are

in v

alu

e

Fruits Vegetables Other products

Source: COMTRADE

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 14

Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable sector /3

Production of fruits in ZA (share in quantity, ave. 2003-05)

Bananas5%Peaches and

nectarines4%

Grapefruit4%

Pears and quinces6%

Apples13%

Mandarins and clementines

2%

Lemons and limes4%

Grapes29%

Oranges20%

Other fruits10%

Pineapples3%

Source: FAOSTAT

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Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable sector /4

Share of production being exported in ZA (ave. 2002-04)

73% 71%66%

48% 44% 41%

13%

56%

0%

20%

40%

60%

80%

100%

Plums Grapefruit Mandarinsand

clementines

Oranges Lemons andlimes

Apples Pears Grapes

Sh

are

in q

uan

tity

Source: FAOSTAT

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 16

Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable sector /5

Breakdown of ZA fruit exports (av. share, 2002-04)

15%

6%4% 4%

18%

38%

11%

7%4%

9%

23%23%

6%10%

16%

5%

0%

10%

20%

30%

40%

Oranges Grapes Apples Grapefruit Pears Lemons andlimes

Mandarinsand

clementines

Other fruits

in Value in Quantity

Source: FAOSTAT

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 17

Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Trade, Development and Cooperation Agreement (TDCA) Trade “liberalisation” starting in 2000 Annex IV of the TDCA sets the pace for access to EU market and

classifies between 8 lists:

– List 1 to 4: trade liberalized already or will be liberalized in 2010 at the latest (e.g.: avocados, grapefruit, mandarins and clementines, apricots, peaches, plums, etc.).

– List 6: Introduction of TRQs (strawberries, pears, apricot, peaches, tropical fruit (20089272), mixed fruits (20089258/74/78/98), orange, apple and pineapple juices)

– List 7: no trade liberalisation (oranges, lemons, table grapes, apples, pears and quinces, tomatoes, other veg. (20049010, 200560/80), etc.

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Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable trade /1

ZA exports of fruits: Share of EU

0%

25%

50%

75%

100%

2000 2001 2002 2003 2004

Sh

are

in V

AL

UE

Apples

Lemons

Fresh grapes

Oranges

Pears

Mandarins andclementinesPlums

ALL FRUITS

Source: COMTRADE

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Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable trade /2

EU-25 import of fruits: Share of ZA

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005

Sh

are

in v

alu

e

Apples

Lemons

Grapes

Oranges

Pears andquincesMandarins andclemetinesPlums

ALL FRUITS

Source: COMEXT

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 20

Lessons from the EU-South Africa Trade AgreementLessons from the EU-South Africa Trade Agreement

Main features of South African Fruit and Vegetable trade /3

TOTAL EU-25 import of ZA fruits

0

200.000

400.000

600.000

800.000

1.000.000

2000 2001 2002 2003 2004 2005

Val

ue

('00

0 E

UR

)

Other fruits

Lemons

Plums

Mandarins andclementinesAvocados

Grapefruit

Pears

Apples

Oranges

Table grapes

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 21

Some tentative conclusionsSome tentative conclusions

WTO negotiations: Market access parameters (in particular sensitive products) far from reaching an agreement

The suspension of WTO talks has brought a new impetus to bilateral and regional trade negotiations

It is difficult to assess the impact of past trade agreement if they have not yet come into full implementation

Pierluigi Londero – Dangiris Nekrasius CAL/MED Consortium Workshop II 7 December 2006 22

For further informationFor further information

EU agriculture and CAP reformhttp://europa.eu.int/comm/agriculture/index_en.htm

EU agriculture and tradehttp://europa.eu.int/comm/agriculture/external/wto/index_en.htm

Agricultural Trade Policy Analysishttp://europa.eu.int/comm/agriculture/publi/map/index_en.htm