1. Building on the July Framework Agreement: Advice and Cautions International Food & Agricultural Trade Policy Council www.agritrade.org International Agricultural Trade Research Consortium www.iatrcweb.org

2. About the Project Funders: –William and Flora Hewlett Foundation –German Marshall Fund Collaborators: –International Agricultural Trade Research Consortium David Blandford, University of Pennsylvania (Domestic Support) Linda Young, University of Montana (Export Competition) Tim Josling, Stanford University (Market Access) Mario Jales and Andre Nassar, ICONE (Market Access) Ann Tutwiler, IPC (Market Access, Export Competition)

3. Domestic Support: July Framework Positive –Discipline overall trade distorting support –Cap commodity specific and moderately trade distorting support (Amber and Blue) –Refine non-trade distorting criteria (Green) –Harmonize level of support Negative –Relax criteria for moderately trade distorting support (Blue)

4. Domestic Support: IPC Caution July Framework increases permitted support by 15% to 25% plus bound trade distorting support –New US base, 250% of current spending; –New EU base, 170% of current spending Reduction in permitted overall trade-distorting support must exceed 60% to be effective Reduction of components should equal or exceed overall reduction –To reduce “box shifting” from Amber to Blue or de minimis –Blue Box, de minimis will become important for many countries

5. Green Box: Advice Revise criteria to prevent “updating” base acres/animals –Comply with cotton case Retain criteria to allow planting of all crops –Comply with cotton case Clarify role of environmental/social payments –Some may “increase” production Enhance monitoring with formal Ag Committee review Do not cap Green Box payments

6. Composition of Overall Trade-Distorting Support Overall Trade Distorting Support Amber BoxBlue BoxDe Minimis

7. Permitted Spending Under July Agreement Much Higher Than Current Spending Under URAA

8. URAA Actual versus DDA Permitted (60% reduction Amber; 50% reduction de minimis)

9. Blue Box: URAA Actual versus DDA Permitted (5% Cap)

10. July Framework Agreement Does “Harmonize” Support Levels

11. A “Cut” is not Necessarily a Cut

12. Big Cuts in Overall Support Needed to Require Policy Changes

13. Export Competition: July Framework Economic gains “modest” but political gains large Gains for some countries, commodities large Positive innovations –Disciplines cover all forms of export competition –Eliminates subsidized export competition

14. Export Competition: IPC Advice Export Subsidies –Implement down payment (20% to 50%) –Allow, but don’t require rapid phase-down for some commodities Food Aid: Do Not Convert to Cash Only –Count market development spending against export subsidy limits PL480, Title 1 –Phase-out loans for food aid PL480, Title 1 –Prohibit monetization and phase out programme food aid PL480, Section 416B, Food for Progress –Channel food aid donations from stocks thru WFP 416 B

15. Programme Food Aid Dwarfs Project, Emergency Food Aid

16. Programme Food Aid Variable, Large Share Monetized

17. State Trading Entities Elimination of government financing, export subsidies, underwriting losses should remove distortions If monopoly power distorts markets, mandate co- existence –Allow private sector share of market to expand over time

18. Export Credits Reduce value of transactions covered over implementation period Create international credit program to address liquidity constraints –(LDCs, NFIDCs, financial crises, emergencies)

19. Market Access: July Framework Most important, least defined pillar –Approximately 92% of economic gains from lower tariffs in industrialized and developing countries Positive Innovations –Tiered (harmonizing) reductions –Possible cap on tariff peaks –Addresses tariff escalation Negative Innovations –Special, sensitive products –Expansion of TRQs not mandated

20. Market Access: IPC Caution Large cuts in bound tariffs needed to affect trade Formula should be simple, linear reduction –not URAA formula of average/minimum cuts Three to four bands sufficient for tariff cuts Tariff cap needs to be 100% –Or impose harmonizing (Swiss) cut on peak tariffs Sensitive should be limited to a (small) share of consumption or production

21. Tariff Overhang in Developing Countries Elaboration: ICONE

22. Bound Tariff Structures: Developed Countries 3 bands and 100% cap 40% 50% 60% 100% cap Elaboration: ICONE

23. Bound Tariff Structures: Developing Countries 3 bands and 150% cap 46% 26% 33% 150% cap Elaboration: ICONE

24. Tariff Peaks Elaboration: ICONE

25. Selection of Sensitive Products Elaboration: ICONE

26. Tariff Rate Quotas TRQs prevalent, less than ideal measure –Used by 43 of 144 WTO members –In OECD, 43% of trade covered by TRQs –In some developing countries, 99% of trade covered by TRQs –Average fill rate, 60% (improve TRQ administration) Expand or Establish TRQs –If large reductions in tariffs not possible –On Sensitive, Special Products Reduce in-quota tariffs alongside other tariff cuts

27. Developing Country Issues Impose same tariff cuts over longer timeframe –or shallower cuts over same timeframe Base Special Products on concrete criteria –Impose half of required tariff cut –Limit to small share of consumption, production Special Safeguard Measure –Base volume trigger on moving average of import levels –Allow on products with bound tariffs below specified percent Industrial and high income developing countries should provide duty and quota free access to LDCs

28. Other Issues Geographic indications: discussion should be launched under TRIPS regarding whether, how to protect intellectual property (patents, GIs) in foods Sectoral initiatives: higher than average cuts in tariffs, domestic support, export competition should be encouraged Differential Export Taxes: Discipline alongside export subsidies –Distort export markets, –Distort domestic markets –Penalize producers

29. Conclusions Framework incorporates more than adequate flexibility Challenge will be to make real progress in opening markets and reducing trade distorting subsidies Progress needs to be made on each pillar to ensure real reforms Negotiators have 6 months to deliver 2 years work— –Momentum of last July must be regained –Deadline for Schedules: Hong Kong plus 4 months