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External negotiations affecting regulated trade in sugar. TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIM E Marc ROSIERS 09.06.05. Table of contents. Non preferential Trade Multilateral agreements Uruguay Round Agreement on Agriculture Doha Development Agenda WTO Panel on the Sugar CMO

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external negotiations affecting regulated trade in sugar

External negotiations affecting regulated trade in sugar

TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME

Marc ROSIERS

09.06.05

table of contents
Table of contents
  • Non preferential Trade
    • Multilateral agreements
      • Uruguay Round Agreement on Agriculture
      • Doha Development Agenda
      • WTO Panel on the Sugar CMO
  • Preferential Trade
    • Bilateral Agreements
      • EU-ACP
      • EU-Mercosur
      • EU-Euromed
    • Unilateral Agreements
      • Generalised System of Preferences
    • Rules of Origin
  • Conclusion
non preferential trade
Non Preferential Trade
  • Multilateral Agreements
    • Uruguay Round Agreement on Agriculture
    • Doha Development Agenda
    • WTO Panel no the Sugar CMO
dda calender
DDA – Calender
  • Doha Agenda 14.11.01
  • Modalities
    • Cancun – 5th Ministerial Conference 10-14.09.03  failure
    • Geneva – Framework agreement of 31.07.04
    • Hong Kong – 6th Ministerial Conference 13-18.12.05 “approximation”
  • Definition of the lists by product
    • Agreement on the lists by product (31.12.06)
  • Ratification by the member states– 2007
    • USA Trade Promotion Authority (TPA) end of 30.06.07
  • Implementation starting 01.01.08
dda domestic support
DDA – Domestic Support
  • Framework Agreement of July 2004
    • Domestic Support - general
      • Amber Box
        • Amber Box = guaranteed minimal price
        • Substantial reduction of the «Average Measure of Support » (AMS)
      • Blue Box
        • Blue Box = support linked to production
        • Limited at 5% of the average total value of the agricultural production for the historic reference period
      • Green Box
        • Green Box = support decoupled of the production
        • Integration of “non-trade concerns”, revision of the criteria ?
dda domestic support6
DDA – Domestic Support
  • Framework Agreement of July 2004
    • Domestic Support - sugar
      • EU Commission : Proposals for sugar CMO
        • Domestic EU price is not guaranteed anymore (reference price) and drops by 40 % = 385 €/t sugar (25,05 €/t beet + decoupled support)
        • Absolute reduction of amber box
        • Shift from amber box to the blue and green boxes
dda export competition
DDA – export competition
  • Framework Agreement of July 2004
    • Export competition – in general
      • Elimination of export subsidies in parallel with the abolition of comparable practices such as export credits, food aid and “state trading enterprises”
    • Export competition - sugar
      • Elimination of export subsidies
        • Sugar
          • 1.273.500t -> 0 t
          • period : ?
        • Transformed Sugar (Sugar outside Annex 1)
          • The export subsidies for high-value added products are maintained
dda market access
DDA – Market Access
  • Framework Agreement of July 2004
    • Market Access – in general
      • reduction of fixed import tariffs (specific)
        • On the basis of “bound rates”
        • Tiered formula distribution in ranges according to ‘Equivalents Ad Valorem’ (EAV)
        •  much needs still to be defined
        • Sensitive products
      • Maintenance of additional import tariffs (safeguard clause) still to be negotiated
dda market access9
DDA – Market Access
  • Framework Agreement of July 2004
    • Market Access - sugar
      • reduction in fixed tariffs (specific)
        • AVE on the basis of world market prices (Paris agreement)
          • 419/200 = 209 %
        • Sugar in the largest tier (Hypothesis > 90%)
          • Average reduction : - 60%- 200 €/t + 168 €/t (419 - 60%) = 368 €/t 385 €/t
          • Without additional rights, the community preference is meaningless
          • - 200 €/t + 168 €/t (419 - 60%) = 368 €/t + 17 €/t = 385 €/t 385 €/t
          • Alternative : sugar as a sensitive product
dda market access10
DDA – Market Access
  • Framework Agreement of July 2004
    • Market Access - sugar
      • reduction in fixed tariffs (specific)
        • Sugar = sensitive product
          • Minimal reduction : - 45%- 200 €/t + 231 €/t (419 - 45%) = 431 €/t 385 €/t
          • Without additional rights, the community preference is meaningless - prevision €/$ =1,45 en 2006 (€/$ =1,60 en 2007/08)- 200 $/t / 1,45 = 138 €/t (200 $/t / 1,60 = 125 €/t)- 138 €/t + 231 €/t(419 - 45%) = 369 €/t + 17 €/t = 385 €/t 385 €/t
          • TRQ (MFN) = imports with O tariff for at least 10% of the EU consumption (= 1.600.000t)
dda market access11

96

231

DDA – Market Access

Import Price €/t

1.000

Intervention price+ storage costs+ regional support

700 €/t

800

600

Fixed Tarifs

Additional Rights

400

385 €/t

200

World market price

0

0

50

100

150

200

250

300

350

400

450

500

World Market Price

non preferential trade12
Non Preferential Trade
  • Multilateral Agreements
    • Uruguay Round Agreement on Agriculture
    • Doha Development Agenda
    • WTO Panel on the Sugar CMO
wto panel on the sugar cmo
WTO Panel on the Sugar CMO
  • Three elements of the dispute
    • The footnote regarding the reexports of ACP sugar is not valid
    • The C sugar is produced under the cost of production
    • The C sugar exports = subsidized exports
  • One requirement
    • Immediate stop of EU exports after condemnation
wto panel on the sugar cmo14
WTO Panel on the Sugar CMO
  • Four answers
    • Yes
      • The footnote has no legal value and does not influence the legal EU commitments
    • Yes
      • The C beet producers receive an export subsidy as a result of a governmental measure that allows the sale of C beet to C sugar producers under the average cost of production
    • Yes
      • The C sugar producers receive an export subsidy as a result of a governmental measure in the form of a transfer of financial means via cross subsidising in the sugar CMO
    • Yes
      • The EU has between 14 and 18 months to implement the WTO panel decisions
wto panel on the sugar cmo15
WTO Panel on the Sugar CMO
  • Impact on the Sugar CMO
    • The EU confirms its obligations vis-vis ACP countries
      • Export subsidies for quantities imported from ACP/India sugar becomes impossible in the existing CMO commitments. The internal market has to absorb it.
      • 1,600 million of tons  0 t
    • The C sugar exports is subject to the limitations for the quota sugar
      • The July framework foresees the elimination of export subsidies for sugar
      • 3,000 millions of tons  0 t
wto panel on the sugar cmo16
WTO Panel on the Sugar CMO
  • Impact on the Sugar CMO
    • reduction of the quotas (-16%)
      • Current Quotas (UE 25) 17.400
        • Elimination of export subsidies -1.273
        • Elimination of ACP re-exports -1.600
        • Sub total -2.873

14.827

    • reduction of production (-29%)
      • Current Production (UE 25) 20.400
        • Elimination of export subsidies -1.273
        • Elimination of ACP re-exports -1.600
        • Elimination of C sugar exports -3.000
        • Sub total -5.873

14.827

wto panel on the sugar cmo17
WTO Panel on the Sugar CMO
  • Impact on the Sugar CMO
    • Implementation of the URAA commitments on the footnote is legally defendable
      • 1.600t – 21% = 1.264t
    • What with the « accidental C sugar production »?
      • Is this part of « governmental measures »?
    • Impact of the Panel on the agricultural negotiations process
      • If domestic support : export of one kg/litre  support becomes a form of cross subsidisation forbidden to export
      • Many countries/ products are in the same situation
      • Necessity for a negotiated definition of cross-subsidising
preferential trade
Preferential Trade
  • Preferential trade
  • Bilateral agreements
  • Unilateral agreements
  • Rules of origin
preferential trade19
Preferential Trade
  • Sugar preferential imports [04/05]
    • Imports from ACP countries 1.304.700
      • 20 ACP countries
    • Imports SPS 146.606
      • 20 ACP countries
    • Imports EBA 129.750
      • 49 LDC (of which 37 ACP)
    • Imports under MFN 81.000
      • Cuba, Brazil, …
    • Imports of the Balkan countries 200.000
      • Albania, Bosnia Herzegovina, Serbia Montenegro, Fyrom
    • Total preferential imports 1.862.056
preferential trade20
Preferential Trade
  • Preferential imports
  • Bilateral agreements
  • Unilateral agreements
  • Rules of origin
preferential trade21
Preferential Trade
  • Bilateral agreements
    • EU-ACP
    • EU-SPS
    • EU-Balkan
    • EU-Mercosur
    • EU-Euromed
eu acp
EU-ACP
  • Today
    • The sugar protocol (Cotonou agreement)
    • Quota at O tariff, guaranteed price
  • In the framework of the « Economic partnership Agreements » (EPA) negotiations are ongoing with 6 groups of countries
  • Aim : creation of a free trade zone between the EU and the six regions
    • Every zone becomes a common market with an Common External Tariff
eu acp23
EU-ACP
  • Impact on sugar
    • Confirmation of the EU commitment to import 1,6 million tons
    • Action plan with measures following the EU Sugar CMO
  • Impact of the negotiations at the WTO
    • Erosion of preferences
    • Possibility to introduce a special safeguard clause for protecting against imports of third countries
      • Protection against the volatility of the world market prices stabilisation of the internal market
eu mercosur
EU-Mercosur
  • Aim of the negotiations
    • reduction of the import tariffs for almost all products and services over a period of 10 years
  • Offer Mercosur
    • 83,5% of UE imports
    • Products divided in 5 categories
      • A : immediate elimination of tariffs
      • B : progressive elimination over 8 years
      • C : progressive elimination over 10 years
      • D : progressive elimination over 10 years with different pace than C
      • E : progressive elimination over 10 years with different pace than C and D
eu mercosur25
EU-Mercosur
  • EU Offer
    • 91% of the Mercosur imports
      • E : sensitive products
        • No tariff reduction, but TRQ
        • 1.000.000 m3 bio ethanol
    • “Single pocket” negotiations
      • Explicit linkage between the preferential and multilateral trade negotiations of the DDA
      • Example : TRQ bio ethanol in 2 steps
        • Step 1 : immediately
        • Step 2 : according to the DDA negotiations
  • Calendar
    • Normally an agreement in October 2004
    • Linkage with the agricultural negotiations of the WTO
preferential trade26
Preferential Trade
  • Preferential imports
  • Bilateral agreements
  • Unilateral agreements
  • Rules of origin
preferential trade27
Preferential Trade
  • Preferential imports
  • Bilateral agreements
  • Unilateral agreements
  • Rules of origin
preferential trade28
Preferential Trade
  • Revision of the Rules of Origin
    • Calendar
      • 16.03.05 : Communication of the EU Commission
      • 28.04.05 : Project of regulation
      • Discussions in the “Customs Code Committee”
      • Agreement expected in the autumn 2005
      • Implementation
        • First GSP
        • Followed by ACP – APE negotiations
        • Followed by successive implementation of other agreements
preferential trade29
Preferential Trade
  • Revision of the Rules of Origin
    • Proposals of the EU Commission
      • Definition of preferential origin on the basis of added value approach
        • Net production costs
        • Definition of added value thresholds
        • Elimination of the list of minimal transformation
      • Modifications of customs procedures for the control of preferential origin
        • The importer takes the commercial risk
        • List of registered exporters
        • Control of economic operators and the origin of products by customs authorities
preferential trade30
Preferential Trade
  • Revision of the Rules of Origin
    • Impact on sugar : position
      • Maintaining a list of sufficient transformation
        • If impossible, definition of industrial transformation aiming at excluding simple mixing or refining
      • Ban of regional cumulation with countries that do not benefit from a preferential trade agreement
      • Thresholds for added value : as high as possible
      • Possible alternative : the only sugar produced on the basis of locally produced commodities can obtain the origin (cfr NAFTA approach)
preferential trade31
Preferential Trade
  • The UE : from net exporter to a net importer

05/06 06/07 09/10

    • Imports 1.800 2.400 3.800
      • ACP 1.400 1.400 1.400
      • LDC 200 800 2.200
      • Balkan 200 200 200
    • Exports 5.800 100 100
      • Quota 1.200 100 100
      • ACP 1.600 0 0
      • C 3.000 0 0
    • Import (-)export (+) +4.000 -2.300 -3.700
conclusion
Conclusion
  • Impact of external negotiations on a regulated sugar market
    • Liberalisation = deregulation
    • Price
      • Reduction in tariffs alignment of prices on the WMP
      • Safeguard clause reduction of uncertainty
    • Volume
      • Regulation of supply (quotas) replaced by a regulation by prices
      • EU is moving from a position of net exporter to a net importer reduction of European production