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The Doha Endgame

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The Doha Endgame

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  1. The Doha Endgame SS Economics of Food Markets Alan Matthews

  2. 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

  3. 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

  4. Implications of a Doha Agreement for the CAP

  5. 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?

  6. The EU’s AVEs (ad valorem equivalents of specific rates), excluding sugar Note many of the highest tariffs are actually on processed foods (e.g. yogurt, whey) rather than bulk commodities

  7. Comparison of EU banded offer with Swiss 60 formula

  8. Market accessEffect on tariff cut on beef price

  9. Market accessEffect on tariff cut on beef price

  10. Market accessEffect of tariff cuts on butter prices, €/tonne

  11. Market accessEffect of tariff cuts on SMP prices, €/tonne

  12. Effect of tariff cuts on white sugar price

  13. Domestic support - EU situation 2001 (end Uruguay Round, before Mid-Term Review)

  14. 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…..

  15. 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

  16. Source: Kutas, G. EU Negotiating Room in Domestic Support after the 2003 CAP Reform and Enlargement

  17. Source: Kutas, G. EU Negotiating Room in Domestic Support after the 2003 CAP Reform and Enlargement

  18. Source: Kutas, G. EU Negotiating Room in Domestic Support after the 2003 CAP Reform and Enlargement

  19. 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)

  20. 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

  21. 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

  22. Alternatives to Doha

  23. 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

  24. 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

  25. 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

  26. 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

  27. Doha concludes 2007? • Implementation into early 2010s, when export subsidies finally eliminated • Further CAP reform before end of the decade?

  28. Rural development WTO reduced protection Decoupling Future challenges for Irish agriculture