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WTO and Agriculture: EU takes steps to move negotiations forward

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Today, the European Commission's ambitious proposals for the WTO negotiations on agriculture were unanimously supported by European Union Member States in the General Affairs Council.

The EU proposal reflects the strong commitment of the Union to further reform of the agricultural trading system while at the same time recognizing the need for special treatment for developing countries, especially the most fragile economies, and ensuring that concerns such as the environment, rural development and animal welfare are taken into account. By avoiding extremist positions and taking a realistic approach, the proposals will contribute to advancing the negotiations, offering a bridge between the polarized positions of those who seek total free trade tomorrow, and those who fear any further trade liberalization in the agricultural sector. With just two and a half months before the deadline for setting key elements of the negotiations, the EU proposal offers a constructive way forward. The key elements of the EU's proposals are that import tariffs should b e cut by 36%, that export subsidies should be slashed by 45% and that trade distorting domestic farm support should be reduced by more than half (55%) - provided that the burden is shared equally, amongst developed countries in particular. The proposal includes specific actions to give developing countries a better deal, as well as emphasizing the importance of addressing non-trade concerns such as the environment, rural development and animal welfare.

EU Farm Commissioner Franz Fischler welcomed this advance and said "The EU is determined to move the Doha process forward, and has put on the table a proposal which offers equitable burden-sharing as well very concrete actions to give developing countries real opportunities. This proposal is consistent with our steadfast commitment to substantial and progressive liberalization on a fair and balanced basis. Greater market access for all, a significant decrease in trade-distorting subsidies, clear discipline for all forms of export aid, consideration of non-trade issues and preferential, problem-oriented treatment for developing countries - these are the key elements of our negotiation proposal."

EU Trade Commissioner Pascal Lamy added: " With today's move we respond loud and clear to those who doubt the EU's real commitment to negotiate on agriculture within the Doha Development Agenda. The EU promised and now the EU has delivered. I hope that constructive discussions take place in Geneva so that we can meet the deadline of 31 March, and go on to take decisive steps towards a successful conclusion of the DDA by end 2004.."

The EU's WTO Ariculture Proposal In Detail

Opening markets for farm imports by slashing tariffs by 36%

In order to increase market access for agriculture products, the Commission defends a formula of tariff reduction, which does not shield any one developed country member from making a comparable contribution. This formula should be an overall average tariff reduction of 36 % and a minimum reduction per tariff line of 15 % as was the case in the Uruguay Round. Contrary to the so-called "Swiss Formula" the US and Cairns group suggest, the Commission approach would achieve the objective of "burden sharing" among developed countries and would also provide flexibility for developing countries.

The EU is already the world's largest importer of farm products ($ 60 bn in 2001), the world's largest food importer from developing countries ($ 38 bn in 2001) and the largest importer from poorest countries. But the sharp reductions in tariffs proposed will give third countries an even better access to the already very open EU market.

Scaling back all forms of export subsidies by 45%

The Commission proposes an average substantial cut in the volume of export subsidies and an average 45% cut in the level of budgetary outlays, on the condition that all forms of export subsidization are treated on an equal footing. Furthermore, the EU is ready to phase out export subsidies for certain products, provided that no other form of export subsidization, including export credits and deficiency payments, is given for the products in question by other WTO Members. Such products should include products of particular significance for developing countries.

Further cutting trade distorting domestic farm support by 55%

The EU is committed to further substantial reductions in trade-distorting domestic support. The Commission therefore proposes a 55% reduction in the Aggregate Measurement of Support (AMS) starting from the level of commitments made in the last round of negotiations. To allow for rapid progress within the agreed deadlines, the current definition of domestic support and the Uruguay Round reduction method should be maintained as this guarantees that all Members will be subject to effective disciplines.

A special treatment for developing countries to give them a better deal

The EU recognizes the need to ensure that developing countries fully benefit from the expansion of world trade. The key is to create opportunities for increased market access for developing countries, while recognizing the importance of food security and accepting the need for the most fragile developing countries to maintain protection in order to have adequate time for adaptation.


To this end, the Commission proposes the following:

For market access:

• A "food security box". In order to facilitate the implementation of further tariff reductions and to meet the developing countries' concerns on sensitive agricultural crops, a Special Safeguard instrument should be extended to developing countries in order to ensure food security. Substantially lower commitments should be agreed if this is necessary for developing countries to attain their legitimate objectives regarding food security and other multifunctional concerns
  
  
• No less than 50% of developed countries farm imports from developing countries at zero duty
  
  
• Duty-free and quota-free access for all imports from Least-Developed Countries (LDCs) into developed and advanced developing countries.
  
  
• A significant reduction of tariff escalation on products of particular interest to developing countries by reducing the level of tariff protection (both ad valorem and specific).

For domestic support :

• The possibility to support their agricultural sector for developmental reasons. This would imply that such support would not count as trade-distorting support.

Special treatment:

• Lower reduction rates and a longer implementation period. The EU proposes that the new commitments be implemented over six years for developed countries and ten years for developing countries commencing in the year 2006.

Closing loopholes to create a level playing field for all developed countries

Under the so-called "de minimis" clause, farm subsides of developed countries below 5% of the value of production are not considered as trade distorting, and are not included in the calculation of the total amount of support allowed by WTO rules (Current Total Average Measure of Support - AMS), Experience has shown that this has been abused by some WTO members and it is now an important loophole. For example, a WTO member can spend € 20 billion in farm trade distorting farm subsidies under the "de minimis" provision and these will not subject to reduction commitments. The Commission proposes to abolish the "de minimis" clause for developed countries.

The trade-distorting elements of export credits for agricultural products used by other WTO members, should be identified and subjected to strict discipline.

Food aid in kind should be provided only for well-defined vulnerable groups or in response to well-recognized emergencies and humanitarian crisis and not, as is often the case today by some Members, as a surplus disposal mechanism. WTO members should provide whenever possible direct cash contribution for the purchase of food within the recipient country, or from other developing countries.

The EU does not at all question the granting of genuine food aid. It questions the use of food aid donations used as surplus disposal measures. Some WTO members have used food aid donations more as a production and commercial tool to dispose of surpluses and promote sales in foreign markets than as a development tool tailored to the needs of the recipient countries. It is ironic that the amount of food aid given by some countries tends to increase significantly when prices are low whereas levels are much lower when prices are high - and food aid is most needed.

In respect of the operation of State Trading Enterprises (STEs are governmental and non-governmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges in the exercise of which they influence imports/exports through their purchases or sales), the EU proposes that cross-subsidisation, price-pooling and other unfair trade practices in exports be disciplined.


Bringing consumer concerns to the fore

An essential part of the value of many agricultural products is the well-established link to the territories where they are produced. This is expressed in Geographical Indications. Examples of GIs include Italian Parma Ham, French Roquefort cheese, Indian Basmati rice or Darjeeling tea. If not protected, the value of such products is seriously eroded. The Commission suggests specific commitments be negotiated in order to guarantee fair market access opportunities for those wines, spirits and other agricultural and foodstuff products. To this end, a list of names currently used by producers other than the right-holders in the country of origin should be established so as to prohibit misleading and unfair use by other producers.

Achieving certain societal goals such as the protection of the environment, traditional landscapes and bio-diversity, rural development and animal welfare should be permitted without obstacles created by the WTO. Support granted for the achievement of such goals should therefore not be considered as trade distorting (it means support included in the green box) on the condition that such measures are well targeted, transparent, and implemented in no more than minimally trade-distorting ways.

In particular:

• The Commission proposes that measures that are aimed at protecting the environment, an issue relevant to both developed and developing countries, should be accommodated in the Agreement on Agriculture.
  
  
• As regards rural development, the Commission believes that both developed and developing countries have the right to choose to preserve or develop the economic and social environment necessary to maintain rural population. The provision of these environmental services cannot be assured by market forces alone. Measures designed to foster rural development should therefore find appropriate coverage in the Agreement on Agriculture.
  
  
• On animal welfare, the Commission proposes to exempt additional costs required to meet animal welfare standards from the consideration of trade distorting. These costs should be excluded from reduction commitments where it can be clearly shown that these costs stem directly from the adoption of higher standards and thus are not, or at most minimally, trade distorting.

Implementation Period

The Commission proposes that the new commitments be implemented over six years for developed countries and ten years for developing countries commencing in the year 2006.


Background

The WTO negotiations in agriculture started in early 2000 under Article 20 of the Agreement on Agriculture and received clear guidelines under the Doha Ministerial Declaration in November 2001. Since then, Members have submitted a large number of negotiating proposals, which has enabled a much better understanding of the various positions regarding the multilateral reform process. The EU has actively participated in this process by putting forward a comprehensive negotiating proposal in December 2000 as well as several specific papers on the key issues.

The current phase is designed to meet 31 March 2003 deadline foreseen in Doha for establishing the methodology to be followed during the negotiation (so-called modalities). A draft paper is to be prepared by the Chairman of the Special Session of the Committee on Agriculture and to be circulated in advance of the Special Session meeting of 25-31 March. This paper is expected to include proposals concerning the parts of the Agreement on Agriculture (AoA) that should be modified as well as the guidelines that are to lead to the new commitments.


Doha Declaration on agriculture

We recognize the work already undertaken in the negotiations initiated in early 2000 under Article 20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf of a total of 121 members. We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture.

Modalities for the further commitments, including provisions for special and differential treatment, shall be established no later than 31 March 2003. Participants shall submit their comprehensive draft Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference. The negotiations, including with respect to rules and disciplines and related legal texts, shall be concluded as part and at the date of conclusion of the negotiating agenda as a whole.


For more information go to:

http://europa.eu.int/comm/agriculture/external/wto/index_en.htm

http://europa.eu.int/comm/trade/goods/agri/index_en.htm

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