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The Fischler reform of the CAP and the WTO negotiations. Giovanni Anania Department of Economics and Statistics University of Calabria, Italy. the presentation. the (main elements of the) EU proposals for the WTO negotiations on agriculture ( January, July, and August 2003 ).
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The Fischler reform of the CAP and the WTO negotiations Giovanni Anania Department of Economics and Statistics University of Calabria, Italy
the presentation • the (main elements of the) EU proposals for the WTO negotiations on agriculture (January, July, and August 2003) • the implications of the June 2003 Fischler reform of the CAP for the EU position in the negotiations …why did the EU offer what it offered in January, what is ready to offer now and why, what may be able to agree upon by the end of the negotiation…… all in 12 minutes
market access • tariff reduction average reduction of 36% in six years, with a minimum reduction of 15% • Tariff Rate Quotas (TRQs) volumes: no change (increase volumes) in-quota tariffs: no change better discipline
EBA • the “Everything But Arms” (EBA) Regulation (2001) granted 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)
market access • 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
market access • Market access to Least Developed Countries EU&USduty-free access for developing countries’ agricultural exports to developed countries should represent no less than [?]% of their total imports from developing countries
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needed for dairy products (lower intervention prices, increase in production quotas and stringent constraints on volume withdrawn from the market at intervention prices all put downward pressure on domestic prices) • lower protection needed for rice (but need to renegotiate bound tariffs)
tariff reduction market access EU&US [?]% 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 [?]% shall be reduced to that maximum, or additional market access shall be assured through a request:offer process that could include TRQs
export competition • 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)
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
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
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 likely, increased pressure on volume of subsidized exports
export competition in the 1995-2001 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
export competition • 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
export competition • after the Fischler reform, and assuming no further cuts to producer support, • the CAP still needs export subsidies for • dairy products • meats • cereals (coarse grains) • ...the EU can reduce export subsidies by a large amount, but needs some “flexibility” to be allowed
export competition • export subsidy reduction UE&USeliminate 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
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
domestic support & the Fischler reform “modulation” (small) support reduction, coupled and decoupled
domestic support • domestic support reduction[“amber”box] WTO 60% reduction in five years UE (55% reduction in six years) 60% reduction
domestic support • the “blue” box WTO eliminated, or maintained but support reduced by 50% in five years UE maintained and support reduced by 60% (i.e., the “blue” box is eliminated…) the strongest of the two domestic support reduction options proposed by Harbinson
the Fischler reform and the EU AMS the EU’s AMS in 99/00 was47.9bill € the July 2003 EU proposal: 60% support reduction (“amber” and “blue” boxes), corresponding to a maximum allowed AMS after 6 years equal to 34.8bill € (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 Fishler 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 equals32.5bill € !
domestic support • domestic support reduction EU&US[?]% reduction of support in the“amber”box “blue” boxmaintained (and modified…) and support capped at 5% of value of domestic production “de minimis” exemption made less generous
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 ….it is unlikely that there will be any deal on agriculture before a satisfactory agreement is reached on the protection of “geographical indications”
which are the most sensitive areas of negotiation from the EU viewpoint? Market access Tariff reduction TRQs Special Safeguard Clause Export competition Export subsidy reduction Domestic support Support reduction (amber box) Blue box Geographical indications
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 • immediate reactions notwithstanding, the EU-US joint proposal appears like an important step forward and a credible framework (with the possible exception of the market access component…) for the final stages of the negotiations on agriculture
