The fischler reform of the cap and the wto negotiations
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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

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needed for dairy products (lower intervention prices, increase in production quotas and stringent constraints on volume withdrawn from the market at intervention prices all put downward pressure on domestic prices)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)


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 from the EU viewpoint?

  • 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


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