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A revised proposal on agriculture in the world trade liberalising talks was released in February, in a bid to get an agreement in the trade round, but it came under fire from a majority of EU Agriculture and Foreign Ministers.
The new proposal on agriculture, which includes formulas for cutting agricultural tariffs and trade-distorting subsidies, was prepared by the World Trade Organisation (WTO) Chairman of the agricultural negotiations Crawford Falconer in Geneva. The paper reflects progress that has been made from the intensive negotiations involving all 151 WTO members since July of last year. Members' views are reflected in the revised negotiating text on agriculture which outlines possible areas of agreement in order to get a deal on a comprehensive set of modalities in the talks. A revised negotiating text on non-agricultural market access (NAMA) by Chairman Don Stephenson was also released in February.
Agriculture Proposal
The revised agriculture proposal sets out a range of reductions in agricultural import tariffs to open markets, which many member states find unacceptable. The paper introduces a minimum average tariff cut of 54%, including products classified as sensitive such as beef, which EU experts warn goes beyond the Commission's negotiating mandate. This figure compares to the Commission's offer of 46%. For cereals, the paper suggests an average tariff cut of 62%, compared to the Commission's offer of a 40% reduction for soft wheat and a 50% decrease for barley, EU experts said. The fact that sensitive products, which would face a lower tariff cut, are included in the overall calculation could however mean that tariff cuts for other products including cereals would have to rise further.
In addition, the paper offers a 70-75% cut in trade-distorting domestic support which the EU can accept as it has already offered to reduce it by 70%. The Commission is also pleased with the definition of the 'green box', which protects farmers CAP income aid payments, in the revised paper. But Ms Fischer Boel would like better disciplines on US domestic support to be imposed. On export competition, the EU has already offered to eliminate agricultural export subsidies by 2013, provided other trade partners do the same. The Commission argues that full parallelism is still needed in the paper as it does not treat other forms of export subsidy programmes, such as US export credits or State Trade Enterprises, in the same manner.
EU Views
The majority of the EU Agriculture and Foreign Ministers, excluding the UK, warned that the proposals are unbalanced and threaten the EU agriculture sector. Southern member states were especially worried about the fact that regional specialities, covered by EU legislation on geographical indications (GIs) to protect against imitation products, were not mentioned in the paper and consequently will not receive sufficient protection. The EU Agriculture Group COPA warned that the Commission's own calculations show that the EU risks having a WTO deal which will result in losses of up to EUR40 bn to farmers, job losses and which could put at risk most of the EU's food production and processing sectors, notably for meat.
Although the Commission believes that the papers are a basis to work on, the EU Agriculture Commissioner agreed that they are unbalanced and much more progress must be made on. She insisted that the 2003 CAP reform constitutes the limits of the Commission's negotiating mandate. She also stressed that GI's remain firmly on the EU agenda, together with full parallelism in the export competition pillar and adequate disciplines on US agricultural support. The UK government, backed by Sweden, Denmark, the Czech Republic, support the Commission's position in the talks and want to move forward in the Doha round of trade liberalising talks.
Trade Partners Views
The US Trade Representative emphasised the need to get an agreement in 2008, pointing out that in 2009 the US will be going through its transition period after the US elections; the Commission and EU Parliament turn over; Canada, Germany, India and Indonesia may well face elections and the current term of the WTO Director-General expires. Officials also warned that without an agreement, more trade disputes can be expected in the WTO.
Ministers from India and Brazil also emphasised in February the need for a deal, saying that this can only be achieved if the EU and US agree to cut their agricultural subsidies and open up their agricultural markets more. The EU and US argue however that Brazil and India need to reduce industrial tariffs further to open markets.
Next Steps
Intensive discussions are consequently continuing on the texts in the negotiating groups in Geneva, before a Ministerial meeting is convened, in the hope that an agreement on a comprehensive set of modalities on agriculture can be reached in the coming months. But this will be hard to achieve.
New EU Market Access Strategy
Euro-MPs meanwhile welcomed in February the reinforced market access strategy launched by the Commission in 2007 and urged the Commission to continue to reinforce efforts to tackle trade barriers in the EU's most important markets. In its first year, the reinforced Market Access Strategy has removed trade barriers in some non-EU countries, such as Argentina, the Commission said. The EU negotiated with Argentina a system of export authorisations for agricultural goods which enables EU exporting companies to export without the need of a prior Argentine veterinary compliance inspection. This reduces costs and delays for EU companies. It is particularly important as Argentina is a growing economy, with a large potential for EU high quality agriculture produce, the Commission claimed. MEPs nevertheless urged the Commission to ensure that the EU reacts more rapidly and firmly when non-EU countries unjustifiably restrict EU companies access to their markets. MEPs also insisted that Free Trade Agreements (FTA's) with the EU's target countries will be meaningless unless they secure significant market access and real progress in reducing non-tariff barriers.
EU / Ukraine
Following the finalisation of Ukraine's WTO accession process in February, the EU Commission and Ukraine formally launched negotiations on February 18 for a free trade agreement (FTA) between the EU and Ukraine, which could hurt the EU cereals sector. The FTA will be a core part of the New Enhanced Agreement being negotiated between the EU and Ukraine which covers all areas of their relationship (see hgca.com/markets for details).
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