Cairns Group Farm Leaders Meeting

Global Advocacy to Promote Agricultural Trade Reform

Marcos S. Jank • Special Expert in Integration and Trade, Inter-American Development Bank • Associate Professor at the University of São Paulo (USP)

Santa Cruz de la Sierra Bolivia, October 18-19 2002 Pressures on Agricultural Trade Negotiations POSITIVES

ƒ Approval of the TPA (Trade Promotion Authority) • Allows to move forward on WTO and FTAA ƒ WTO: negotiations of “modalities” on track • March 2003: final draft for the 5th Ministerial in Cancun ƒ WTO: U.S. launch of a bold proposal for • Corrects the signal of the 2002 Farm Bill ƒ EU: “Mid Term Review” of Common • Baseline reform of the Agenda 2000 by the Commission • Internal pressures: EU-25 enlargement, food safety, public opinion ƒ Pressures from the Cairns Group • No “Blair House” Pressures on Agricultural Trade Negotiations NEGATIVES ƒ 2002 U.S. Farm Bill • Higher (target) prices and no supply control ƒ Restrictions on TPA • Restrictions on 521 agricultural sensitive tariff lines ƒ WTO U.S. proposal • Higher commitments from EU and • Domestic resistance: sugar, orange juice and dairy ƒ : “basic outline” for CAP reform • Domestic resistances: France, Ireland, Spain, Portugal,... • Food safety and “new” non-tariff barriers ƒ Preferential Trade Agreements ƒ Regional Integration Agreements Assymetry of Interests in Agriculture

ƒ Large Economies (Europe, US, Japan) ƒ Agriculture is a politically sensitive sector ƒ Low average tariffs....but “cirurgical” use of tariff peaks and TRQs ƒ Non-tariff barriers (sanitary, technical) + Non-trade concerns (EU) ƒ Small Economies (ACP, GSP, EBA, CBI, AGOA) ƒ High dependence on preferential or duty-free access ƒ High tariffs (CARICOM): major source of fiscal income ƒ Net Food Importers: dependence from subsidized imports ƒ Middle Economies (Cairns Group) ƒ Trade preferences and quotas (TRQs) are not first best ƒ (Global?) advocacy to promote agricultural trade reform (Cairns) MARKET ACCESS

¾ High Tariffs (ad valorem, specific, mixed) ¾ Tariff Peaks and Escalations ¾ Tariff Rate Quotas (TRQ) ¾ Sanitary and Technical Restrictions FTAA: Comparative Tariff Structure in Agriculture MEAN TARIFFS (HS8 2000)

Barbados Bahamas Mexico Dominica Dominican Republic European Union Grenada St. Kitts and Nevis Antigua & Barbuda Jamaica St. Vincent Trinidad & Tobago St. Lucia Average Panama Venezuela Ecuador Costa Rica Honduras United States El Salvador Bolivia Nicaragua - 5 10 15 20 25 30 35 40

Source: 2001 Hemispheric Database of the Americas, INT-IDB Calculations Distribution of Tariffs

Mercosur Number of tariffs

Developed Countries

median mean mean 1000% median Magnitude of Tariffs Source: M. Jank, 2002 Comparative Tariff Profiles (2000) AGRICULTURE Mercosur EU-15 USA Canada Mean (%) 12.5 18.3 10.6 22.4 Median (%) 13.0 7.7 3.5 3.0 Maximum (%) 32 252 350 538 Std Dev (%) 5.7 24.5 29.5 63.1 Nb Tariff Lines 933 2,079 1,736 1,361 Nb zero tariffs 79 845 372 538 Tariffs > 30% 1 362 120 130

Sugar, dairy, meats, cereals, dairy, Sugar, dairy, tobacco, cereals, bananas, olive oil chocolate, orange juice, peanuts poultry Note: Harmonized System at 8 digits, including the conversion of specific and mixed tariffs in ad valorem equivalentes and all Tariff Rate Quotas (TRQ). Source: Hemispheric Database of the Americas, TRAINS, COMEXT, AMAD. SUBSIDIES

¾ Domestic Support ¾ Export Subsidies Domestic Support: WTO notifications

EXEMPT FROM REDUCTION COMMITMENTS

Green Box: - Not or minimally trade distorting

Blue Box: - Production-limiting programs

S&D Box: - Developmental policies in developing countries

WITH REDUCTION COMMITMENTS

Amber Box: - Trade distorting domestic subsidies, including MPS - Measure: Aggregate Measurement of Support (AMS) - Exception: “de minimis” levels (5% for DCs)

Export Subsidies: - New subsidies are banned LEGEND WTO Notifications on Subsidies Green box Blue box Amber box S&D box (US$ Billion) Export subsidies

130 E.U. 120 U.S. 130 110 120 100 110 90 100 80 90 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 - 1995 1996 19971995 1998 1996 1997 1998

Like-Minded 130 R.O.W. 120 130 110 (EFTA, East Europe, Japan, Korea) 120 100 110 90 100 80 90 70 80 60 70 50 60 50 40 40 30 30 20 20 10 10 0 0 1995 1996 19971995 1998 1996 1997 1998 Domestic Support: PSE (OECD)

ƒ Producer Support Estimate (PSE) PSE is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to support producers, arising from policy measures.

Two components: • Market Price Support (MPS) • All Budgetary Outlays Domestic Support in the European Union

Amber plus Blue boxes PSE

120

110 De Minimis/NPS Sugar Sugar 100

90 Others 80 Grains 70 12 0

Others 110 60 10 0 Dairy 50 90 Grains 80 Pork+Poultry 40 70 Beef 60 30 50

40 20 Dairy 30 10 Beef 20 10 0 0 19 9 5 19 9 6 19 9 7 19 9 8 19 9 9 2 0 0 0 2 0 0 1 1995 1996 1997 1998 1999 Sources: WTO, OECD.

Market Price Support Amber (AMS) = gov. administered price – fixed external reference 86-88 PSE = domestic producer price – current international price Domestic Support in the United States

Amber plus Blue boxes PSE

Sugar

Poutlry+pork

Beef Others Oilseeds Oilseeds

60 60 55 55 Cereals 50 Others 50 45 Sugar 45 40 40 Dairy 35 35 30 De 30 25 Minimis/NPS 25 20 20

15 15

10 Cereals 10 5 Dairy 5

0 0 1995 1996 1997 1998 199919 9 5 2000 19 9 6 2001 19 9 7 19 9 8 19 9 9 2 0 0 0 2 0 0 1

Note: Forecasts: 1999-2001. Sources: WTO, OECD

Market Price Support Amber (AMS) = gov. administered price – fixed external reference 86-88 PSE = domestic producer price – current international price Domestic Support in Like-Minded Protectionist Countries (EFTA, East Europe, Japan, Korea)

Amber plus Blue boxes PSE

De Sugar Minimis/NPS Beef Others

12 0Poultry /pork 12 0 Others 110 Dairy 110 10 0 10 0

90 90 Beef80 80 Cereals 70 70 60 60 Dairy 50 50 Cereals Poultry /pork 40 40

30 30

20 20

10 10

0 0 19 9 5 19 9 6 19 9 71995 1996 19 9 8 1997 1998 1999 2000 2001

Sources: WTO, OECD.

Market Price Support Amber (AMS) = gov. administered price – fixed external reference 86-88 PSE = domestic producer price – current international price CONCLUSIONS

MARKET ACCESS: ROUTE TO ? Developing countries: 9 High Tariffs (bound and applied) 9 Divergence of interests: free trade x preferential trade Developed countries: 9 Strong lobbies on key sensitive products 9 TRQs: fulfillment of quotas and administration issues 9 Protection through specific and mixed tariffs 9 Sanitary restrictions CONCLUSIONS

SUBSIDIES: SEVEN LOOPHOLES OF THE URAA w Export Competition: export subsidies Î export credits, abuse of food aid programs w Blue Box exemption w “De Minimis” provisions and Non-Product Specific notifications w Trade distorting subsidies into the green box w S&D and Development Boxes w Government administered prices in AMS w Implementation issues FINAL REMARKS

FIRST BEST ™ Important reduction of TARIFFS and elimination of TRQs at the Doha Round (CGE models: removals of tariffs Î greater impact than removal of subsidies) SECOND BEST ™ Partial liberalization of tariffs and TRQs ™ Subsidies: Reduction commitments established on a product-by-product basis ™ No exceptions ™ Commitments should be established in a product by product basis ™ Full decoupling of subsidies: payments should be fully decoupled from the volume of production, planted area or animal unit ™ Reductions in subsidies should be related to market access enhancement THIRD BEST ™ Access through regional integration agreements ™ WTO: disciplines on subsidies FINAL REMARKS

CAIRNS GROUP

9 Harmonization of the objectives and key messages 9 is a key issue for important gains in trade liberalization at the Doha Round 9 Build external coalitions in each one of the three pillars 9 Intensify internal pressures on protectionist countries (Congress, Administration, NGOs, private sector): role of “Global Alliances” Thank you! Gracias! Obrigado!