CAP/WTO Success: A Global Perspective Alan Matthews Trinity College Dublin Presentation to the Agricultural Science Association National Conference, 23 September 2005 The support of the Advisory Board for Development Cooperation Ireland for this work is acknowledged.

CAP/WTO Success: Global Perspective Alan Matthews Outline  The Doha timetable  The July 2004 Framework Agreement  The development dimension  EU implications of a Doha Round  What are the prospects? Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Why focus on Doha? Composition of operating surplus in agriculture Decoupling WTO reduced protection Rural development Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Some Key Stages:  Article 20 negotiations: e.g. the EU’s Comprehensive Negotiating Proposal, December 2000  Doha Mandate, November 2001  EU’s Specific Drafting Input, January 2003  Adoption of the Fischler Reforms, June 2003  EU/US Joint Initiative, August 2003  Cancún Ministerial, September 2003  EU’s offer to eliminate export subsidies, May 2004  Framework Agreement, July 2004  Paris May 2005 agreement on AVEs  Dalien July 2005 G20 proposal on market access  Trade Negotiation Committee, 28 July 2005  Hong Kong Ministerial, December 2005 Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Market access  Tariffs will be reduced using a ‘tiered formula’  Deeper cuts in higher tariffs  Cuts applied to bound rates  Each country to designate appropriate number of sensitive products (lower than otherwise tariff reductions will apply, but TRQ will be expanded)  Tariff escalation will be addressed  Future of the special safeguard to be negotiated  Special and differential treatment for developing countries, including addressing preference erosion Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Market access – what needs to be decided?  The tiers (how many? Which thresholds?)  G20 proposal at Dalien accepted as basis for discussion  The tariff reduction formula within each tier  Linear cut, progressive linear cut, Swiss formula, Uruguay Round approach (allows for flexibility)  Sensitive products  Negotiations not yet started  Crucial – the overall level of ambition Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Domestic support  Higher levels of trade distorting support subject to deeper cuts, using a tiered formula  Each of total (amber box + blue box + de minimis), amber box and de minimis trade distorting support will be subject to a specific reduction commitment  Product-specific caps on amber box support  Expansion of blue box but capped at 5% of total value of production (with some flexibility for larger users)  Review and clarification of green box to ensure at most minimal trade distorting impact Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Export competition  The following to be eliminated, in parallel, “by a credible end date”, to be agreed:  Export subsidies  Subsidised export credits  Trade distorting practices of exporting State Trading Enterprises  Improper forms of food aid which displace commercial purchases  Flexibility - ”phasing will take into account internal reform steps of members” Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Non-trade concerns (raised by EU)  Food safety, and Article 5(7) of the SPS Agreement  Mandatory labelling (presumably with respect to GMOs and animal welfare) and Geographical Indications  Food security for developing countries (Development Box)  Protecting the environment (but no specific demands – multifunctionality yesterday’s game)  Rural development – but no specific demands  Animal welfare : specific demand for inclusion of support payments in the Green Box Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews The Doha Development Round  A visible ‘development return’ crucial to success of the Round  Successful agricultural negotiations are key to this perception  But assessing the agricultural outcome of the Round for developing countries is not easy…. Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Doha Round impacts on developing countries  Agricultural trade liberalisation will have contrasting effects for developing countries  For middle income countries facing high protection, liberalisation means positive prospects for competitive export sectors  For poorer countries, rising import prices, preference erosion and more onerous standards darken picture considerably, particularly under partial reforms Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews World Bank estimates of income effects of merchandise trade liberalisation, June 2005 Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Doha Round impacts on developing countries  Developing country gains overall from reduction in OECD agricultural protectionism in Doha are positive but have been greatly inflated  Benefits for developing country farmers (and thus poverty) are more significantly positive  Northern agricultural protectionism not a significant explanation of the problems facing the poorest countries to integrate into international trade  Extensive preferential access in EU and elsewhere  Technical/SPS barriers which often prevent any trade at all ( EU restrictions on fish/shellfish exports, FMD controls preventing beef exports) Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Export Subsidies  January 2003: EU initially offered to reduce aggregate expenditure limits by 45%  but in 2001/02 only used 35% of entitlement  In July 2004 Framework Agreement, EU signed up conditionally to full elimination  Importance of ‘credible date to be agreed’  Blair has called for end by 2010  It may be that policy change will eliminate the commodity export surplus: but what about Non- Annex I goods, i.e. the food industry? Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Domestic support – EU situation 2001 (before Mid-Term Review) Doha timetable Framework Agreement Development Dimension EU implications Doha prospects Amber BoxUS dollars Bound AMS65,383 Market Price Support25,085 Direct Payments12,117 less De Minimis411 Current AMS36,791 Degree of AMS Overhang44% Blue Box $ Millions21,262 % Value of Agricultural Production7% Green Box19,452 Overall Distorting Support (ODS) Bound ODS87,056 Current ODS58,464 Degree of ODS Overhang33%

CAP/WTO Success: Global Perspective Alan Matthews Market access – level of ambition? Harbinson proposal 2003 Doha timetable Framework Agreement Development Dimension EU implications Doha prospects Current tariff level Average cutMinimum cut < 15%40%25% 15% - 90%50%35% >90%60%45%

CAP/WTO Success: Global Perspective Alan Matthews Market access Effect on tariff cut on beef price EU support price (basic intervention price) €2,224 Estimated world market price€1,200 Current EU import tariff€1,922 Possible tariff cut which does not impact on EU market price (tariff overhang) 40% Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Market access Effect on tariff cut on beef price EU market price€2,700 Estimated world market price€1,200 Current EU import tariff€1,922 Possible tariff cut which does not impact on EU market price (tariff overhang) 16% Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Market access Effect of tariff cuts on butter prices, €/tonne Unfavourable world market Favourable world market EU market price (2008)€2,247 Estimated world market price 1,1701,575 Current EU import tariff1,896 Possible tariff cut which does not impact on EU market price (tariff overhang ) 36%54% Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Market access Effect of tariff cuts on SMP prices, €/tonne Unfavourable world market Favourable world market EU market price (2008)1,782 Estimated world market price 1,6501,800 Current EU import tariff1,118 Possible tariff cut which does not impact on EU market price (tariff overhang ) 55%64% Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Effect of tariff cuts on white sugar price EU support price (based on Commission July 2005 reform proposal) €386 Estimated world market price€210 Current EU import tariff€419 Possible tariff cut which does not impact on EU market price (tariff overhang ) 63% Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Prospects post-Hong Kong December 2005  US commitment to successful outcome doubtful despite Bush rhetoric  Farm lobby and Congress deeply suspicious (e.g. CAFTA vote)  Trade Promotion Authority runs out mid 2007  Developing countries (G20) may feel no deal is better than a bad deal  Concerns of weakest developing countries must be addressed (e.g. cotton)  EU the champion of a Development Round  But agriculture ministers (i.e. France) keeping tight rein on the negotiators Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Prospects post-Hong Kong December 2005  Failure of Doha  URAA lives on, without the protection of the Peace Clause  Regional integration agreements e.g. Mercosur  Litigation rather than negotiation? US upland cotton EU sugar EU bananas GMOs? Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews Prospects post-Hong Kong December 2005  Doha successfully concluded 2006  Implementation into early 2010s, when export subsidies finally eliminated  Further CAP reform before end of the decade? Doha timetable Framework Agreement Development Dimension EU implications Doha prospects

CAP/WTO Success: Global Perspective Alan Matthews More information Policy coherence in Trade & Agriculture website