19/05/2003
WTO agriculture modalities
CIAA evaluation
of the Revised Draft WTO Agriculture Modalities

Introduction

CIAA was disappointed that the draft "modalities" document for further commitments in agricultural negotiations at the WTO, presented by the Chairman Stuart Harbinson, failed to provide common ground for establishing these "modalities" within the deadline set by Ministers in Doha. In fact, the draft modalities' text proposes uneven efforts and commitments on specific disciplines to be applied to WTO members, which call for significant improvements.

The fact that interested parties have not been able to establish "modalities" for further commitments by the scheduled date of 31st March 2003 must not have lasting consequences. It should neither prevent WTO members from reaching an agreement on agricultural negotiations that is acceptable to all parties. Efforts for bridging the major divergences before the next Ministerial Conference in Cancún later in the autumn must continue. Making rapid progress and providing precise results on some of the important technical issues to be addressed (export credit, food aid, special products...) should help maintain the momentum of the agriculture negotiations and contribute to finding compromise solutions in some areas.

Indeed, since last summer, initial diverging views on agricultural negotiations have been exacerbated by some WTO Members' positions, which have become over-ambitious and more radical in the course of the negotiation. Progress relies on a constructive negotiation attitude from all WTO members in trying to identify mutually acceptable rather than radical solutions.

CIAA recalls that its members are committed to the multilateral process and that they expect the current negotiations in agriculture:

• To continue the reform process in international agricultural policies and to lead to a clear set of trade rules creating a fairer playing field for WTO members by further reducing trade distorting measures;
• To improve trade opportunities and facilitated access for EU food and drink products in third countries as new global markets open up;
• To create a framework that benefits and secures agro-industrial investments in the EU, requiring hence the future agriculture agreement to be balanced in itself.

Market access

Market access, as central element of the negotiation, is raising most attention because the EU food and drink industry has both offensive and defensive interests in this part of the negotiation.

For the food and drink industries' defensive interests, the overall approach to tackle market access is considered as too ambitious and likely to put serious pressures on certain EU sectors as it risks going beyond the margins provided by scheduled and proposed EU agricultural policy reforms. The proposed tariff reduction formula - in three bands - and the additional minimum access provisions raise particular concerns.

For the food and drink industries' offensive interests, the Uruguay Round formula (as proposed by the EU) does not satisfy the need for substantial further market opening to deliver reductions in high tariffs. Since under the current draft modalities, emerging economies, in particular, would be able to escape equivalent or comparable market access commitments, the Harbinson approach would not provide expected benefits for the offensive interests of the food and drink industry.

Whereas CIAA considers that special and differential treatment needs to be provided to developing countries, it will be important to graduate the treatment according to the real economic situation and needs. If the Round is to be concluded to the benefit of developing countries, it will be essential to ensure that the benefits are spread widely rather than confined to the comparatively few that are in a ready position to take immediate advantage, not least at the expense of other developing countries.

CIAA understands the interest in introducing the concept of "strategic" or "special" for developing countries but considers that it is imperative that developing countries restrict this to few products only. CIAA awaits with interest the outcome of the ongoing technical discussions in this area, as industry would be concerned if this concept was not restricted to a few products only.

Export Competition

First of all, CIAA evaluates the envisaged export refund elimination, with a formula that entails a strong front end loading, as too ambitious. The classification of products in two different groups does not provide sufficient flexibility to adjust cuts at a pace that will be coherent with further domestic support reforms in different EU sectors. For example, the implementation of the Harbinson reduction formula (roughly 50% cut in the 2 first years, indifferently whether reductions apply in 5 or 9 years) if applied to "incorporated products" would bring exports in these products to a halt. As long as differences between world market and EU prices persist for certain raw materials used, export refunds to compensate and to reach a level playing field are necessary for EU exporters. CIAA also recalls that it is opposed to any further cut in volumes.

In addition, as did the Uruguay Round agriculture agreement, the approach focuses again mostly on EU export refunds without equivalent reduction commitments on export credits and food aid that are used by other developed exporting countries. CIAA cannot accept that proposed provisions to regulate these other instruments to support exports would give opportunities to escape disciplines and to maintain these support measures while at the same time the EU would have to completely dismantle export refunds.

Domestic support

CIAA considers that a timely decision on internal EU proposals to further reform the Community agricultural policy would provide a clearer indication about the room for manoeuvre the Commission can further use in WTO negotiations. In that respect, food industry has broadly been in favor of further -not necessarily total- decoupling of support from production. Pursuing this EU proposed approach would allow to go some way in the direction proposed by Stuart Harbinson and consider commitments to reduce blue box measures.

CIAA has opposed making green box measures subject to reduction commitments. Further, support for farmers to meet higher standards, including animal welfare and environmental standards, adopted with a view to making agriculture more sustainable must be part of the green box. On this point the draft modalities document seems to go in the right direction.