The Benefits of a New WTO Agreement for Agri-food Trade Shiferaw Adilu Alberta Agriculture and Food

1. The Benefits of a New WTO Agreement for Agri-food Trade Shiferaw AdiluAlberta Agriculture and Food

2. Background • Alberta accounts for 10 percent of Canada’s population and 16 percent of its GDP (2006). • The agri-food industry is a significant contributor of the province’s GDP and employment. • Food and beverage manufacturing shipments account for 15% of the province’s total manufactured goods. • Alberta accounts for over a fifth of Canada’s agri-food sector. • The largest cattle population (39%) • The majority of slaughtering (60%) • Over 36% of grain production (wheat, barley and canola seed)

3. The Importance of Trade • The majority of Alberta’s agri-food sectors are highly trade dependent. • Alberta accounts for over a fifth of Canada’s agri-food exports. • Primary agriculture exports $3.1 billion (2006) or 45% of market cash receipts • Value added processed $2.8 billion (2006) or 31% of total market cash receipts • While the US is the largest trading partner, 55% of Alberta’s agri-food exports go to over 140 countries around the world.

4. The Importance of Trade, Cont’d • Canada is a trading nation –Trade and investment are the main drivers of the economy. • Export value equivalent of 34% of GDP (2005). • Fifth largest exporter and importer of merchandize trade after the EU, US, China and Japan • The fourth largest exporter and fifth largest importer of agri-food products • Has one of the lowest tariffs overall.

5. The Benefits of Trade Liberalization • CUSTA (1989): • Canada’s agri-food exports to the US grew by 347% or 9% per year. • Canada’s exports to the ROW grew by 88% or 3.8% per year. • NAFTA (1994): • Canada’s agri-food exports to Mexico grew by 364% or 13% per year. • Canada’s exports to the ROW grew by 84% or 4.8% per year. • Results for Alberta are as impressive.

6. The Benefits, Cont’d • Currently, Alberta’s major agri-food exports face some of the highest tariffs around the world. • Frozen meat: 91%, Fresh meat: 85%, Prepared meat:80% • Grain products: 76% • Certain grains and their products such as barley and malt face tariffs rates in the hundreds in some important markets. • Substantial reduction in tariffs and trade distorting agricultural support and elimination of export subsidies is estimated to bring billions of dollars benefit for Canada’s agri-food economy.

7. The DDA • The Uruguay Round was more important in bringing agriculture to the multilateral rules based system than the actual discipline it put on agricultural subsidies and tariffs. • The Doha Round is historically destined to deliver on actual agricultural trade liberalization. • This round, if concluded successfully, will also deliver on significant trade liberalization on services and manufactured products.

8. What is in the Chair’s Modalities text? • The proposed tariff and domestic support reduction could provide a sound basis for negotiating an ambitious outcome. • Global average bound agricultural tariff was around 80% when the Uruguay Round agreement was signed. It was brought down to 62% at the end of the implementation period. • Under Falconer’s modalities it could be lowered to roughly 34%. • Significant even though a long way from catching up with industrial tariffs.

9. The Chair’s Modalities text, Cont’d • The elimination of export subsidies for good. • Substantial reduction in trade distorting support. • EU OTDS lowered to 16.5 – 27.5 billion euro • US OTDS lowered to 13 - 16 billion dollars • Despite significant reforms of the CAP in the past, the proposed modalities would require the EU to make further reforms. • The proposed limit for US overall trade distorting support would put significant constraints on its amber and overall trade distorting support.

10. The Chair’s Modalities text, Cont’d • Ambition depends not only on the tariff and domestic support reduction formulas, but also on restricting exemptions and exceptions. • Sensitive products, SPs, SSG and SSM in market access. • Product-specific disciplines in domestic support • Study by the WB shows that an exemption of even a small fraction of tariff lines or products from tariff reduction commitment would shrink potential gains significantly.

11. Challenges • The benefits of trade are not under question mark. So cannot be the benefits of trade liberalization. • Varying projections about the benefits of trade liberalization but the conclusion is the same. • Trade creates opportunities for many and pose adjustment challenges for some. • Benefits are diffused among a larger population while adjustment challenges are concentrated.

12. Challenges, Cont’d • Agricultural support and protectionism is a political problem requiring a political solution. • The need for political commitment • Recent APEC Statement on the WTO. • Canada’s Prime Minister recent remark on the Doha round negotiations: Aim high so that the winners are obvious in every country • The role of senior officials and negotiators • What is on the table is substantial; differences appear bridgeable.

13. Challenges, Cont’d • Single undertaking? • Time factor?

14. Alternative to Success? • Bilateral/regional FTAs? • Dispute settlement?

15. Thank You