14/03/2008
CIAA comments on the draft revised modalities for an agriculture agreement under the DDA

CIAA, the confederation of the food and drink industry has always given priority to the multilateral approach and to reaching an agreement in agriculture. There remains much to gain from a multilateral agreement for the EU food and drink industry, such as a clearer set of rules and strengthened disciplines in agriculture that would avoid having recourse to the dispute settlement system. CIAA supports the Commission in seeking a successful and balanced conclusion of the DDA.

The Commission has made continued efforts aimed at concluding the round. During recent weeks, agriculture negotiations have considerably advanced. The current state of progress is however judged differently depending on the sector concerned, mainly because of the agricultural market access pillar. While food and drink sectors with a global trade liberalization approach are encouraged by the recent progress made in agriculture, other sectors with more defensive interests cannot support an agreement based on what is currently on the table in this area.

At this stage of the process, however, two issues, shared by all CIAA members, attract particular attention and require strong emphasis:

• Ensuring parallelism for the dismantlement of export support instruments; the phasing out of the export refunds by the end of 2013 must remain conditional on WTO members’ parallel reduction of other export support instruments, i.e. export credits, food aid and STEs/marketing boards. Their commitments for phasing out of support elements and phasing in of enhanced discipline must follow a clear calendar. Regarding the phasing out of export refunds, commitments must only be on value terms.
• Maintaining specific duties instead of calling for a general conversion into ad valorem duties which per se is not the only way of simplifying tariffs; this allows maintaining consistency throughout the tariff structures and coherence between raw materials and processed products. The possibility to revert to specific tariffs responds to both food and drink industry offensive and defensive interests.

On market access

The market access pillar is the area where divergent evaluations arise among the food and drink industry as to the way negotiations have progressed and may be concluded.

Tiered Formula for tariff reductions

Overall it is important for all CIAA members to maintain consistency throughout the tariff structures of related or competing products between agricultural raw materials and derived processed products.

• The tariff cuts set in the draft revised modalities appear as surpassing the very limit of what EU sectors with defensive interest can bear on imports and would if implemented, have serious negative impacts on these sectors. They consider that the conditions have worsen as compared to the July 2007 draft. In particular, the inclusion of a new sentence in paragraph 63 that “the minimum average cut on final bound tariffs in developed countries should be [54%]” appears as adding a new constraint and additional burden on sectors of the EU agri-food industry with defensive interest.
• Sectors with a global trade liberalization approach would, however, like to see more substantial market access tariff cuts. They also consider that the proposed agreement will offer no or limited market access improvements to the food and drink industry in rapidly growing markets.

Tariff escalation

• CIAA notes that the list is not agreed and recalls that in case of review, the product linkages between the processed product and its raw materials must be taken into account. Tariff escalation for processed products composed on several ingredients cannot be established on the basis of one single ingredient. For example, tomato ketchup (HS 2103.20) is not deriving from tomato only (HS 0702.00), but contains many more ingredients.

Tariff simplification

• CIAA opposes the mandatory conversion of tariffs with specific duty elements into ad valorem duties. In particular, the fact that the draft modalities are considering a tariff “simplification” according to which [90%] or [all] agricultural duties would be expressed in ad valorem duties is not acceptable. Neither is the request that all tariffs within a 4-digit HS heading shall be expressed in the same form. CIAA requests the Commission to contest the fact that ad valorem is the only way of simplifying tariffs. CIAA has always agreed with the objective of simplifying tariffs and is also committed to addressing complex or matrix duties. For CIAA, this can be best achieved by converting compound duties into specific duties, at least it should be possible to choose ad valorem or specific duties.
• When ad valorem equivalents (AVEs) were first calculated, this was explicitly done for the purpose of classifying products into different bands to enable the European Commission to identify the level of tariff reduction that would need to be applied. At the time, CIAA and Commission services were very clear that this was conditional upon a “return-ticket” whereby tariffs could be converted back to specific duties.
• CIAA members prefer specific duties not only for commodities but also for food and drink processed products, which today feature a combination of mixed duties, compound duties or complex matrix duties. For imports into the domestic market, this ensures that there is consistency throughout the tariffs structures, which recognises the link with the protection of primary products. For EU exports, specific duties are more transparent, predictable and encourage high value added and quality products.
• It is often forgotten that the EU food and drink industry has offensive export interests. The main asset of European food and drink products is their quality. Ad valorem penalise products that put emphasis on high quality and higher price, because they face increased tariffs.

Special products

• CIAA does not question the ability of developing countries to self-designate a number of special products. However, the indicative amount of ([12] [20] per cent) of all tariff lines that could fall under this category is a source of concern as it adds to the other specific protective provisions that emerging economies, as they fall in the developing countries category, will be able to invoke.
• In addition, it is unclear how the illustrative list of indicators for the designation of special products will apply in practice.

Tropical and diversification products

• For CIAA, the Uruguay Round list of tropical products should be retained unchanged.
• If there is need to enlarge the list, it should focus on products that are truly and exclusively tropical.

Preference erosion

• As a means to increase trade opportunities for developing countries, a larger number of developed countries, but also advanced developing countries, should be asked to implement a form of “Everything but Arms” approach pursued by the EU and some other countries.

On domestic support

• CIAA acknowledges the important commitments the EU is ready to endorse as regards OTDS and AMS. The domestic support chapter appears very much as being specifically tailored to the United States’ needs and CIAA regrets that without specific commitments the US will be in a position to continue making use of particularly trade distorting instruments, e.g. systems of exceptional income support and of loan deficiency loans.
• CIAA acknowledges the changes in the “blue box” provisions with a view to diminish trade-distorting domestic support and considers that the new proposed ‘green box’ provisions should be compatible with the approach taken by the CAP.

Export competition

• CIAA puts great emphasis on the need for parallelism for the dismantlement of export support instruments. The phasing out of the export refunds by the end of 2013 is conditional on WTO members’ parallel reduction of other export support instruments, i.e. export credit, food aid and STEs/marketing boards. But some more progress is still required to fulfil this condition. Whereas the implementation period for the elimination of export subsidy call for a reduction of 50% by the end of 2010, the implementation period for other elements of the export competition chapter remains partly unclear, notably as regards food aid and also the operation of STEs. CIAA also takes note of the still debated elimination of agricultural export monopolies by 2013.
• Quantity commitments on the phasing out of export refunds are unacceptable. Neither proposals set out in brackets in the draft modalities can be accepted by EU agri-food industries. In the second case quantity commitment levels could even immediately be phased out, based on “actual applied quantities”. The removal of quantity constraints remains one of CIAA’s priorities for the negotiations.
• CIAA notes that the timetable to reduce 50% of export refunds in budgetary terms by the end of 2010 becomes inconsistent and out of balance in comparison with the dismantling and reductions in other pillars. This will result in a lack of overall coherence and will increase problems for EU exporters to access non-EU markets.

Differential export taxes

• CIAA regrets that the discussions on the important issue of differential export taxes (“DET”) have not advanced. Several WTO members have adopted a system of DETs imposing higher taxes for the export of raw materials than those demanded for the export of finished products. In some cases export tax exemptions are also granted, creating important distortions in international trade.
• The effects of such DETs are as follows:
  • It forces farmers to sell their productions to local transformers at a price below international market prices and therefore penalizes them;
  • Local industries therefore can buy their raw materials at very competitive prices and this creates a discrimination vis-à-vis foreign buyers;
  • It limits the access of foreign partners to raw materials.
• There are no logical arguments for disciplining all other trade distorting instruments (export refund, export credits, food aid, state trading enterprises…) and ignoring the considerable detrimental effects of DETs. Not addressing this issue would seriously threaten the EU supply in agricultural products at a moment when the EU is embarking into a renewable energy policy.

Geographical indications

CIAA promotes enhanced protection of geographical indications in the context of the TRIPS Agreement. CIAA believes that the existing TRIPS agreement should lead to an effective and continuous protection of the specific character of products suing particular denominations (geographical indications and denomination of origin), in the form of a multilateral register for wines and spirits as a priority and possibly extension of protection to other foodstuffs later on.

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