EFTA-SACU Trade in Agricultural Products

1. EFTA-SACUTrade in Agricultural Products Present myself: Willy Tinner, after retirement working as Senior Consultant for the State Secretariat for Economic Affairs (SECO) in Berne. Before retirement as from 1st April 2008: Responsible in the SECO for international Trade in Goods (Industrial and agricultural, including processed agricultural products). I was a part of the negotiations of the FTA I have been at least two time in Pretoria. I will talk about how agriculture is included in the FTA Agreement. In general, agriculture seems to be the �hot potato� or the �breaking point� in Trade talks. Be it negotiations in the WTO (World Trade organization) or bilateral free trade agreements. However, EFTA and SACU were able to finalize an FTA including agriculture. I believe this was due to the fact that SACU and EFTA have complementary productions, mainly due to different climate and geographical positions, and especially different seasons. [As shown earlier today, the trade between EFTA and SACU has steadily increased since the FTA entered into force. However, it is clear that that SACU has several high quality products that you already are, or have potential to, export to the EFTA States. Be it from basic products like fruit and vegetables, to more refined products like wine.] I, together with my Colleagues, especially in tomorrows presentations, will try to show that there is a great potential for SACU export of agricultural products to the EFTA StatesPresent myself: Willy Tinner, after retirement working as Senior Consultant for the State Secretariat for Economic Affairs (SECO) in Berne. Before retirement as from 1st April 2008: Responsible in the SECO for international Trade in Goods (Industrial and agricultural, including processed agricultural products). I was a part of the negotiations of the FTA I have been at least two time in Pretoria. I will talk about how agriculture is included in the FTA Agreement. In general, agriculture seems to be the �hot potato� or the �breaking point� in Trade talks. Be it negotiations in the WTO (World Trade organization) or bilateral free trade agreements. However, EFTA and SACU were able to finalize an FTA including agriculture. I believe this was due to the fact that SACU and EFTA have complementary productions, mainly due to different climate and geographical positions, and especially different seasons. [As shown earlier today, the trade between EFTA and SACU has steadily increased since the FTA entered into force. However, it is clear that that SACU has several high quality products that you already are, or have potential to, export to the EFTA States. Be it from basic products like fruit and vegetables, to more refined products like wine.] I, together with my Colleagues, especially in tomorrows presentations, will try to show that there is a great potential for SACU export of agricultural products to the EFTA States

2. Outline Agriculture policy in the EFTA States EFTA imports of agricultural goods Agriculture goods covered in the SACU � EFTA FTA (and the WTO) Useful information links Examples of exports to the EFTA States I would like to give you a short overview of the topics I will cover in my presentation. First, I will give a short introduction to the agricultural production and policy in the EFTA States. Secondly, look into EFTA�s import patterns and trade flows for agricultural products. This to see which products the EFTA States import, and what countries their current imports are coming from. Then, I will explain how agricultural goods are covered and treated in the EFTA-SACU Free Trade Agreement. Briefly touch upon how the WTO sets the overall framework for trade in agricultural goods. I have some useful links to information regarding the agreement. And finally, I hope we have some time for some practical examples, and possible questions. Of course, there are many other aspects impacting exportation of products. I will mainly cover those that concern the import duties. [Topics like SPS and origin rules, that have been discussed earlier today. And not the least all the practical aspects of the actual sale, like contact persons, logistics, distributors and retailers. These areas will be covered in detail tomorrow.] I would like to give you a short overview of the topics I will cover in my presentation. First, I will give a short introduction to the agricultural production and policy in the EFTA States. Secondly, look into EFTA�s import patterns and trade flows for agricultural products. This to see which products the EFTA States import, and what countries their current imports are coming from. Then, I will explain how agricultural goods are covered and treated in the EFTA-SACU Free Trade Agreement. Briefly touch upon how the WTO sets the overall framework for trade in agricultural goods. I have some useful links to information regarding the agreement. And finally, I hope we have some time for some practical examples, and possible questions. Of course, there are many other aspects impacting exportation of products. I will mainly cover those that concern the import duties. [Topics like SPS and origin rules, that have been discussed earlier today. And not the least all the practical aspects of the actual sale, like contact persons, logistics, distributors and retailers. These areas will be covered in detail tomorrow.]

3. Agriculture in the EFTA States 1 % of GDP and 4 % of employment Difficult climatic and geographical conditions Key employer in rural areas Small scale structure agriculture High production costs High SPS standards The EFTA States are maybe not most famous for their agricultural products. However their landscape; mountains, fjords and green fields, are closely linked to their agricultural production. The EFTA States have similar climatic and geographic conditions; short growing seasons and relatively cold temperatures. These conditions favors grass and livestock production and production of only certain fruits and vegetables. Needless to say, in addition to the general high cost level in the countries, the production costs are relatively high and the competition level is low for many products. The EFTA States are fairly small countries and markets, but the consumers are willing to pay relatively high prices for high quality products, which I know you have plenty of.The EFTA States are maybe not most famous for their agricultural products. However their landscape; mountains, fjords and green fields, are closely linked to their agricultural production. The EFTA States have similar climatic and geographic conditions; short growing seasons and relatively cold temperatures. These conditions favors grass and livestock production and production of only certain fruits and vegetables. Needless to say, in addition to the general high cost level in the countries, the production costs are relatively high and the competition level is low for many products. The EFTA States are fairly small countries and markets, but the consumers are willing to pay relatively high prices for high quality products, which I know you have plenty of.

4. Main agricultural productions Iceland Bovine and sheep, especially tender highland lamb of high quality Icelandic horses Norway Meat and dairy Grain and some vegetables Switzerland Meat, dairy, fruit and wine Famous cheese In Iceland, the agricultural sector plays an important part especially in the rural areas. Bovine animals (milk and Meat) (48 %) and sheep meat ( 23%) are the main productions Especially Icelandic tender lamb meat is also famous outside their borders. I am not sure if you have them in SACU, but the Icelandic horses are also an famous Icelandic export article (but not for their meat) Also for Norway, agriculture is a key sector for employment and settlement in most rural areas in Norway. Meat and dairy are the main production, and there are also produced grain and some vegetables and fruits. Environmental issues, organic farming and business development related to new products are also important areas for the Norwegian agricultural sector. Switzerland is the largest, and also most well known, of the EFTA States. The main productions in Switzerland are in the dairy and meat sectors, and also grapes for cereals, wine, apples and also some other vegetables. Probably most famous for its cheeses. But, Switzerland is also famous for its food processing industry (chocolate), being the home country of Nestle. In Iceland, the agricultural sector plays an important part especially in the rural areas. Bovine animals (milk and Meat) (48 %) and sheep meat ( 23%) are the main productions Especially Icelandic tender lamb meat is also famous outside their borders. I am not sure if you have them in SACU, but the Icelandic horses are also an famous Icelandic export article (but not for their meat) Also for Norway, agriculture is a key sector for employment and settlement in most rural areas in Norway. Meat and dairy are the main production, and there are also produced grain and some vegetables and fruits. Environmental issues, organic farming and business development related to new products are also important areas for the Norwegian agricultural sector. Switzerland is the largest, and also most well known, of the EFTA States. The main productions in Switzerland are in the dairy and meat sectors, and also grapes for cereals, wine, apples and also some other vegetables. Probably most famous for its cheeses. But, Switzerland is also famous for its food processing industry (chocolate), being the home country of Nestle.

5. Agricultural policy in the EFTA States Not a common agricultural policy, but similar Active policy to maintain a certain level of agricultural production High tariffs on goods from sensitive sectors; meat and dairy Not self-sufficient, large net-importers of agricultural products (Import ca. 50 % of consumption) The EFTA States do, unlike the EU, NOT have a common agricultural policy. The EFTA States have their separate customs duties, and separate agricultural policies which takes into the specific sensitivities of each EFTA State. All the EFTA States have active agricultural policies, where one of the goals are to maintain a certain level of agricultural production spread throughout the countries. Included in the Swiss constitution! STILL, the EFTA States are major net-importers of agricultural products, and import approximately 50 % of their consumption.The EFTA States do, unlike the EU, NOT have a common agricultural policy. The EFTA States have their separate customs duties, and separate agricultural policies which takes into the specific sensitivities of each EFTA State. All the EFTA States have active agricultural policies, where one of the goals are to maintain a certain level of agricultural production spread throughout the countries. Included in the Swiss constitution! STILL, the EFTA States are major net-importers of agricultural products, and import approximately 50 % of their consumption.

6. EFTA imports of agricultural goods Major net-importers of agricultural goods Main trading partner is the European Union (ca. 70%) Major product groups that are imported from SACU: Fruits and nuts Beverages Meat Processed agricultural products As already mentioned, all the EFTA States are major net-importers of agricultural goods. Mainly due to historical and geographical proximity, the main trading partner is by far the EU, with around 70% of all agricultural imports to the EFTA States. However, I believe the kitchen in the EFTA States have increasingly opened their eyes on more exotic food over the last years, and you will for instance find restaurants with South American food in all the EFTA Countries. The agricultural products that are imported are of course somewhat dependent on what is already being produced in the EFTA country, and on the import duties you will have to pay for the importation of the different products. The main groups of imports from SACU are: Fruits and vegetables. The variety of fruits and vegetables that can be produced in the EFTA States are obviously limited. So these products represents a great part of the imports. The population is increasingly consuming more prefabricated food and some of this demand is being met by imports. This product group also generally represents high value products. There are also great imports of beverages (SACU and South America). Especially Norway is a large importer of meat from Namibia and Botswana.As already mentioned, all the EFTA States are major net-importers of agricultural goods. Mainly due to historical and geographical proximity, the main trading partner is by far the EU, with around 70% of all agricultural imports to the EFTA States. However, I believe the kitchen in the EFTA States have increasingly opened their eyes on more exotic food over the last years, and you will for instance find restaurants with South American food in all the EFTA Countries. The agricultural products that are imported are of course somewhat dependent on what is already being produced in the EFTA country, and on the import duties you will have to pay for the importation of the different products. The main groups of imports from SACU are: Fruits and vegetables. The variety of fruits and vegetables that can be produced in the EFTA States are obviously limited. So these products represents a great part of the imports. The population is increasingly consuming more prefabricated food and some of this demand is being met by imports. This product group also generally represents high value products. There are also great imports of beverages (SACU and South America). Especially Norway is a large importer of meat from Namibia and Botswana.

7. EFTA trade with agricultural goods (Agricultural goods HS 01-24, excluding 03 fish) In 2008 the EFTA states imported agricultural goods for almost 18 billion US dollar As you can see, both imports and exports have doubled from 2002 to 2008. 2/3 of the imports come from the EU.(Agricultural goods HS 01-24, excluding 03 fish) In 2008 the EFTA states imported agricultural goods for almost 18 billion US dollar As you can see, both imports and exports have doubled from 2002 to 2008. 2/3 of the imports come from the EU.

8. Framework for trade in agricultural goods between EFTA and SACU WTO EFTA - SACU Free Trade Agreement World Trade Organisation Bilateral EFTA SACU � deepens the bilateral relationshipWorld Trade Organisation Bilateral EFTA SACU � deepens the bilateral relationship

9. Structure of the FTA 1+3 and not four, due to the customs union between Switzerland and Lichtenstein. These countries have the same regimes (the Swiss regime)!1+3 and not four, due to the customs union between Switzerland and Lichtenstein. These countries have the same regimes (the Swiss regime)!

10. Agriculture in the SACU � EFTA FTA ARTICLE 1 Establishment of a free trade area 1. The Parties hereby establish a free trade area in accordance with the provisions of this Agreement, which is based on trade relations between market economies. Now I would like to look into how agricultural products are included and treated in the SACU � EFTA FTA. I gave a general overview of the Free Trade Agreement this morning. I will now, not surprisingly, focus on the part of the agreement that covers agriculture. First, I would like to draw your attention to the first article of the Free Trade Agreement. This article Establishes the free trade area between EFTA and SACU. This implies that the free trade area is actually established by a set of agreements, as I briefly touch upon this morning. Now I would like to look into how agricultural products are included and treated in the SACU � EFTA FTA. I gave a general overview of the Free Trade Agreement this morning. I will now, not surprisingly, focus on the part of the agreement that covers agriculture. First, I would like to draw your attention to the first article of the Free Trade Agreement. This article Establishes the free trade area between EFTA and SACU. This implies that the free trade area is actually established by a set of agreements, as I briefly touch upon this morning.

11. Agriculture in the SACU � EFTA FTA ARTICLE 6 Scope (of trade in goods chapter) This Chapter shall apply to: (a) products falling within Chapters 25 to 98 of the Harmonized Commodity Description and Coding System (HS), except as provided for in Annex II; (b) products specified in Annex III, with due regard to the arrangements provided for in that Annex; and (c) fish and other marine products as provided for in Annex IV. Products in HS chapters 25 � 97. These are industrial goods, like machines and textiles Processed agricultural goods. These are agricultural products that have gone through some kind of industrial processing. Fish Harmonized Commodity Description and Coding System, or HS- an international classification system of all goods for trade purpose. It starts with chapter 1 � live animals, ch2 dead animals (meat), fish, dairy products, vegetables, more processed products , chemicals, industrial goods 1-97 Products in HS chapters 25 � 97. These are industrial goods, like machines and textiles Processed agricultural goods. These are agricultural products that have gone through some kind of industrial processing. Fish Harmonized Commodity Description and Coding System, or HS- an international classification system of all goods for trade purpose. It starts with chapter 1 � live animals, ch2 dead animals (meat), fish, dairy products, vegetables, more processed products , chemicals, industrial goods 1-97

12. Agriculture in the SACU � EFTA FTA Processed agricultural products Included in the Main Free Trade Agreement in Annex III Basic agricultural products Bilateral complementary agricultural agreements between each of the EFTA States and SACU To summarize: Processed agricultural products are included in a Protocol to the Free Trade Agreement � Annex III Basic agricultural products are covered in bilateral agricultural agreements. The reason for this structure with the bilateral agreements is that the EFTA States have different national agricultural policies and different import duties for agricultural goods. By having separate agreements each of the EFTA States are able to give SACU the best possible concessions they can into their country. Example; Norway and Iceland can offer duty free access for wine, while Switzerland can not. However, Switzerland might be able to give more concessions for meat than for instance Norway is able to. However it is important to note that the bilateral agreements form together with the Main Free Trade Agreement, the instruments creating the Free Trade Area between SACU and EFTA. One of the agreements can not be implemented or terminated without the others. They are all a part of one package, strongly linked together.To summarize: Processed agricultural products are included in a Protocol to the Free Trade Agreement � Annex III Basic agricultural products are covered in bilateral agricultural agreements. The reason for this structure with the bilateral agreements is that the EFTA States have different national agricultural policies and different import duties for agricultural goods. By having separate agreements each of the EFTA States are able to give SACU the best possible concessions they can into their country. Example; Norway and Iceland can offer duty free access for wine, while Switzerland can not. However, Switzerland might be able to give more concessions for meat than for instance Norway is able to. However it is important to note that the bilateral agreements form together with the Main Free Trade Agreement, the instruments creating the Free Trade Area between SACU and EFTA. One of the agreements can not be implemented or terminated without the others. They are all a part of one package, strongly linked together.

13. Annex III - Processed agricultural products Covers products like; bread, soups, chocolate, preserved fruits and vegetables, prefabricated food�. EFTA offers SACU the same treatment as EFTA offers the EU for these products No industrial protection. Duty based on content of certain raw materials (mainly dairy and cereal products) I would like to explain Annex III further: The Annex covers processed agricultural products like; bread, soups, chocolate, preserved fruits, vegetables and nuts and other prefabricated foods. For these products the EFTA States grant SACU the same treatment as EFTA offers the EU for these products. This means that SACU has the same preferential treatment as the EU, and compete on the same level as the EU. For these products the principal is that there is no duty protecting the processing industry. This duty is terminated. The only duty that is levied on these products are based on the actual content of the raw materials contained in the product. And there are only duties on the raw materials that are sensitive in the agricultural production in the respective EFTA State. For example, take chocolate exported to Norway. To make it simple, lets say chocolate is made of sugar, milk and cocoa. Sugar and cocoa are not sensitive products for Norway, so there is only a duty on the milk component of the chocolate. In general the main sensitive ingredients for the EFTA States are dairy products, meat, grain and some vegetables.I would like to explain Annex III further: The Annex covers processed agricultural products like; bread, soups, chocolate, preserved fruits, vegetables and nuts and other prefabricated foods. For these products the EFTA States grant SACU the same treatment as EFTA offers the EU for these products. This means that SACU has the same preferential treatment as the EU, and compete on the same level as the EU. For these products the principal is that there is no duty protecting the processing industry. This duty is terminated. The only duty that is levied on these products are based on the actual content of the raw materials contained in the product. And there are only duties on the raw materials that are sensitive in the agricultural production in the respective EFTA State. For example, take chocolate exported to Norway. To make it simple, lets say chocolate is made of sugar, milk and cocoa. Sugar and cocoa are not sensitive products for Norway, so there is only a duty on the milk component of the chocolate. In general the main sensitive ingredients for the EFTA States are dairy products, meat, grain and some vegetables.

14. Bilateralagreements Now we have come to the bilateral agricultural agreements. As explained earlier, these are three separate agreements between SACU and each of the EFTA States. Each of the agreements have separate list where the concessions are spelled out in detail. If you have a specific interest in a product look into the concession table for the respective country Each agreement does also have their own annex with separate origin rules. These origin rules are however following the same principles as the origin rules in the main Free Trade agreements. I would also like to note that unless otherwise is stated in the agreement, the general rules applied under WTO are of course valid. Now an example of a bilateral agreement, the agreement between SACU and Norway. First comes the text, concessions into SACU in Annex 1 and concessions into Norway in Annex 2 Then comes the concessions spelled out in details (Positive list of concessions!!); HS number, Product description, the duty for SACU At last are the specific origin rules. Now we have come to the bilateral agricultural agreements. As explained earlier, these are three separate agreements between SACU and each of the EFTA States. Each of the agreements have separate list where the concessions are spelled out in detail. If you have a specific interest in a product look into the concession table for the respective country Each agreement does also have their own annex with separate origin rules. These origin rules are however following the same principles as the origin rules in the main Free Trade agreements. I would also like to note that unless otherwise is stated in the agreement, the general rules applied under WTO are of course valid. Now an example of a bilateral agreement, the agreement between SACU and Norway. First comes the text, concessions into SACU in Annex 1 and concessions into Norway in Annex 2 Then comes the concessions spelled out in details (Positive list of concessions!!); HS number, Product description, the duty for SACU At last are the specific origin rules.

15. Useful information links The SACU � EFTA Free Trade Agreement (including Annex III) and the Bilateral Agricultural Agreements:http://efta.int/ Icelandic Customs tariff: www.tollur.is Norwegian Customs tariff: www.toll.no Swiss Customs tariff: www.tares.ch When it comes to the links to the customs tariffs, I believe these are pretty self-explanatory. Just remember to push the English flag or text. You can of course also contact the customs authorities.When it comes to the links to the customs tariffs, I believe these are pretty self-explanatory. Just remember to push the English flag or text. You can of course also contact the customs authorities.

16. Examples: Dried grapes (HS 08.06) into Switzerland: Basic product, bilateral agricultural agreement Natural honey (HS 04.09) into Switzerland: Basic product, bilateral agricultural agreement Beer (HS 22.03) into Iceland: Processed product, Annex III Wine (HS 22.04) into Norway: Basic product, bilateral agricultural agreement To summarize my presentation, I would like to look at some examples of products to be exported to the EFTA States: Dried grapes into Switzerland Natural honey into Switzerland Beer into Iceland Wine into Norway To summarize my presentation, I would like to look at some examples of products to be exported to the EFTA States: Dried grapes into Switzerland Natural honey into Switzerland Beer into Iceland Wine into Norway

17. Questions ? Questions related to agriculture in the EFTA - SACU FTA:Willy Tinner, SECOwilly.tinner@seco.admin.ch Eivind Skjulestad, EFTA Secretariates@efta.int If you have any questions related to agricultural products in the SACU � EFTA FTA, you can either ask me now, or contact me later today or by e-mail. (Any questions?) (Since we have already used the time, I think it is better if we stop here and if you have any questions, I will be available after the presentation.) If you have any questions related to agricultural products in the SACU � EFTA FTA, you can either ask me now, or contact me later today or by e-mail. (Any questions?) (Since we have already used the time, I think it is better if we stop here and if you have any questions, I will be available after the presentation.)

18. Thank you!