InInNo. 6ABriefBrief- July 2004

Comparing EU agreements Agriculture Bettina Rudloff and Johannes Simons, Institute of , University of Bonn,

The aim of this InBrief series is to provide a synthesis of various chapters of the ten free trade agreements (FTAs) recently concluded by the with developing countries, as well as other relevant trade agreements when appropriate. Each InBrief offers a detailed and schematic overview of a specific set of trade and trade-related provisions in these agreements.

Agriculture has always been a sensitive area decreasing import prices. Furthermore, The problem of protecting specific designa- in international trade liberalisation due to its certain defined quantities ( rate tions of origin (geographical indications,or importance for national and quotas,or ‘TRQs’) that are subject to lower ‘GIs’) is covered by the Agreement on Trade- rural development and its dependence on tariffs or no tariffs can be established in Related Aspects of Intellectual Property nature. Within the , addition to tariff reduction to achieve mini- Rights (TRIPS). To regulate rights to use GIs a crucial step for integrating agriculture into mum market access . for wines and spirits, the intention is to the worldwide liberalisation process was establish a multilateral system of notifica- made with the conclusion of the Measures to reduce trade-distorting domes- tion and registration and to extend GI pro- Round. The free trade agreements between tic support are classified as red, amber, blue tection to products other than wines and the European Union and its respective trading or green box, with the degree of trade spirits. Contentious points of discussion are partners reinforce that process on a bilateral distortion decreasing from red to green and geographical names that are used as basis. These agreements may entail signifi- reduction commitments declining accor- generic and common terms connoting a cant economic consequences, in particular for dingly. Total trade-distorting support (the production technique in some countries but developing countries. aggregate measure of support, or ‘AMS’) used as GIs in other countries (e.g. cheddar must be reduced. Minimal (de minimis) cheese, port wine). support is not included in the calculation of AMS. The Agreement on Sanitary and Agriculture in the WTO Phytosanitary (SPS) Measures specifies The defined an exceptional general exemptions from free trade com- The World Trade Organization Agreement on role for agricultural subsidies until 31 mitments (GATT, Art. XX) associated with Agriculture (AoA) as part of the Uruguay December 2003. Even if agricultural sub- human, animal or plant life or health. It Round Agreement Act defines binding steps sidies (e.g. export subsidies) do not conform covers rules for establishing non-tariff in the agricultural liberalisation process to the provisions of the Agreement on barriers recognising a twofold objective: (1) with respect to market access, export com- Subsidies and Countervailing Measures they granting sovereignty of WTO members to petition and domestic support (see Box 1). are non-actionable if they conform to the provide the level of health protection they provisions of the AoA. Special and deem appropriate and (2) preventing dis- Market access shall be improved by convert- differential treatment (SDT) for developing guised restrictions on international trade.1 ing non-tariff measures into tariffs (tariffi- countries refers to lower reduction provi- Non-tariff SPS-related barriers must be con- cation) and by tariff reduction. To inhibit a sions and longer implementation periods sistent with international standards or surge of imports, some countries can apply allowed for such countries to realise com- based on a scientific risk assessment. the special safeguard clause for defined mitments. Least developed countries (LDCs) products. This clause allows additional tar- are not required to undertake reduction The reaffirmed the process iffs to be triggered by either extraordinarily commitments. of reducing trade restrictions and distortions increasing import quantities or by unusually in world agricultural markets and the princi-

European Centre for Development Policy Management Centre européen de gestion des politiques de développement Page 2 Comparing EU free trade agreements July 2004 InBrief 6A

ple of special and differential treatment for (1) Tariff concessions concern either com- defined for agriculture.2 Safeguards can be developing countries. Developing-country plete or partial tariff reductions. For those applied to both imports and exports. needs, including food security and rural products charged with both ad valorem and - Imports: Similar to the AoA, safeguard development, shall be taken into account in specific duties, a partial reduction is often measures can be triggered based on quan- all negotiations and agreements (Art. 13 of achieved by simply abandoning the ad val- tity or price. For instance, the EU can make the Doha Declaration). orem component. concessions for certain fruits and vegeta- - For the EU, specification of the tariff reduc- bles by lowering the entry price.3 tion is usually related to WTO MFN rates. - Exports: Shortage clauses similar to GATT - For the EU’s trading partners, a tariff reduc- Art. XI define criteria for possible export Agriculture in EU Free Trade tion normally refers to actually applied tar- restrictions, such as a decrease of domestic Agreements iffs. These applied tariffs may be lower food availability. than the maximum (bound) tariffs agreed Similar to WTO provisions, in recent EU free in the WTO. Some FTAs do not specify the (4) Specific rules of origin for agricultural trade agreements (FTAs) with developing tariff reduction itself but rather the final products ensure the exclusive application of countries agricultural liberalisation is still duty that is charged on imports from the preferences only to FTA members.4 limited compared to that of industrial prod- EU. - Criteria are defined for determining ucts. For agricultural produce, the general whether a product is ‘wholly obtained’, i.e. aim of free trade is subject to numerous (2) Tariff rate quota concessions are tariff if plant products are harvested and ani- exceptions, and any advanced concessions reductions for defined quantities of certain mals are born and raised completely are strictly defined for single products and products. In order to tailor them to the indi- within one partner country. countries. In the seven Mediterranean (MED) vidual needs of the parties, there are sea- - For processed products, the ‘import content agreements and the FTAs concluded with sonal limitations of favoured imports and rule’ defines ratios for the value of , Mexico and Chile, the follow- adjustments of quantities by a fixed annual imported inputs that are tolerated within ing six instruments are applied, separately growth rate or by a rate to be decided flexi- ‘originating’ products. In most EU FTAs, this or in combination, to achieve trade prefer- bly based on an annual review. ratio is set at below 10% of the ex-works ences for the countries concerned beyond price.5 For some processed agricultural the provisions of WTO most-favoured-nation (3) Safeguard clauses can be common for all products thresholds larger than the stan- (MFN) status. products, or special safeguards may be dard 10% apply. Working and processing, such as transporting, sorting and classify- ing, packaging, affixing marks, labels or logos, mixing products, and slaughter of Box 1 Key elements in the WTO Agreement on Agriculture (AoA) animals, are considered insufficient for conferring originating status to products Market access (Art. 4) with imported content. •Tariffication of trade barriers - Bilateral cumulation allows the contracting •"Binding" tariffs countries to cumulate origin. This encour- •Tariff reductions (reference period 1986–88): ages bilateral trade in intermediate prod- - on average, 36% for developed countries over 6 years (24% for developing countries over ucts between the EU and the contracting 10 years) partner. - by product, 15% for developed countries (10% for developing countries) - Regarding GIs, since a multinational •Special safeguard clause allows additional tariffs system of notification still is under nego- •Tariff rate quotas ensure minimum marketaccess tiation at the WTO level, just a few provi- sions on protecting certain GIs are found Export competition (Art. 8-9) within some FTAs. •Reduction in value and outlays of exportsubsidies:36% and 21% for developed countries (24% and 14% for developing countries) (reference period 1986–90) (5) Options for flexible adjustments to a partner’s market access are offered by two Domestic support (Art. 6 and Annex 2) clauses: •Reduction commitments according to degree of trade distortion (reference period 1986–88) - The review clause commits the parties to •"Traffic light" boxes (red,amber,blue and green) distinguish between differenttypes of examine in Association Committees domestic support further opportunities to enhance liberali- •AMS reduction by 20% for developed countries (13% for developing countries) sation in agricultural products, taking into •De minimis clause exempts minimal supportfrom reduction account the sensitivities of trade in agriculture and domestic agricultural Implementation period policies. •Developed countries 1995–2000,developing countries 1995–2004 - The flexibility clause allows partners to modify the agreement if one of the parties Peace clause (Art. 13) changes its domestic agricultural policies. •Agricultural subsidies exceptionally protected from litigation until end 2003 (6) Other specifics summarise those topics Special and differential treatment (Art. 15-16) that are not common to all agreements. •Lower reductions and longer implementation periods for developing countries,exemption from reduction commitments for least developed countries Domestic support is not part of the FTAs and therefore no domestic-support related See www.wto.org/english/tratop_e/agric_e/agric_e.htm provisions are found.

www.ecdpm.org InBrief 6A July 2004 Comparing EU free trade agreements Page 3

Table 1 EU strategic (sensitive) agricultural products vegetables. The agreements with Morocco, Tunisia and Algeria contain no general High domestic protection High domestic protection with tariff concessions in favour of the EU remarkable surpluses except for those limited by TRQs. Bovine animals and beef Meat Among the MED agreements, only the one Domestic swine with Lebanon defines concrete steps for Poultry tariff reductions by the EU trade partner, Dairy Dairy starting five years after the agreement enters into force (Art. 9-10 of the Interim Cereals Cereals Agreement of September 2002). Sugar Sugar Some fruits and vegetables7 (2) Tariff rate quotas are the key instrument to achieve preferences for MED countries. Olive oil The most important quotas refer to some of Citrus fruit and grapes the strategic products mentioned in Table 1, Flowers such as citrus fruits, tomatoes, apples, olive Rice oil, cut flowers and wine. Some quotas are subject to seasonal constraints. For certain products, reference quantities are defined instead of TRQs. The EU has the option to In all agreements, the pattern of product respectively) compared to much lower announce some TRQs flexibly based on coverage of liberalised imports into the EU figures in Israel (3% and 4%). Production is annual evaluations of import volumes. reflects the degree of EU domestic protec- mainly Mediterranean products like fruits Especially fruits and vegetables, as well as tion and the risk, or existence, of internal and vegetables, potatoes, olives and olive oil corresponding processed products, are sub- surpluses for the respective products.6 Here, and wine. In general, agricultural policies are ject to reference quantities.TRQs granted in three general rules apply: characterised by a trend of opening domes- favour of the EU mainly relate to cereals and • High domestic protection leads to a low tic markets and decreasing protection. sugar and corresponding products. All willingness for tariff reduction, as this agreements except that with Algeria define could undermine high domestic prices. The MED agreements aim at establishing a an increase of quota volume by 3% per year, • High domestic protection supplemented WTO-compatible free trade area for all but just for some products.8 by risks of internal surpluses leads to products, with a transitional period of up to additional restrictions on imports by not twelve years. Yet no specific liberalisation (3) All agreements contain common extending TRQs. roadmap has been defined for the agricu- safeguard clauses,though there are no • Existing remarkable surpluses increase EU ltural sector as a whole. Only for certain specific agricultural safeguard provisions. interest in improving its access to the products have specific concessions for liber- Further, all MED agreements have a shor- markets of the contracting partner. alisation been determined. tage clause related to exports. These general statements define not only the EU’s strategic position but also the (1) Tariff concessions are not a central instru- As for the EU’s entry price system (EPS), scope for bargaining for contracting part- ment in the MED agreements. Concessions which constitutes a special EU safeguard for ners (Table 1). related to market access are mainly granted fruits and vegetables, the agreement with by TRQs. Morocco is the only MED agreement that • Tariff reductions granted by the EU refer foresees a seasonal reduction of the EPS mainly to live horses, goats, and sheep; with respect to some favoured products The Euro-Mediterranean meat of those animals; and to some fruits (Protocol 1, Art. 3 and 4) (Table 2). The con- Agreements and vegetables. cessions are limited to certain periods of the • Tariff reductions granted by the MED year and defined quantities. The agreed Since the first Euro-Mediterranean countries concern live animals and meat, entry price is below the MFN entry price. Conference in November 1995, the EU and dairy products and some fruits and twelve Mediterranean countries have been engaged in negotiating Association Agreements. The overall objective is to form, Table 2 Reductions in the entry price system in favour of Morocco* by 2010, one Euro-Mediterranean free trade area from the separate agreements in place. Favoured Period Quantity Agreed entry price MFN entry price To date, bilateral Association Agreements product (tonnes) ( /tonne) ( /tonne) have been concluded with seven trade part- ners: Tunisia (1995), Israel (1995), Morocco Tomatoes Nov–March 150,676 500 700–920 (1996), Jordan (1997), the Palestinian Courgettes Oct–20 April 5,000 451 451–730 Authority (1997), Algeria (2001) and Lebanon Artichokes Nov–Dec 500 600 1000 (2002). Cucumbers Nov–May 5,000 500 576–1200 The seven MED partners are heterogeneous Clementines Nov–Feb 110,000 500 675 with regard to agriculture. For instance, the Oranges Dec–May 300,000 275 372 agricultural sector generates a large propor- tion of GDP and employment in Morocco * These figures refer to the agreement as concluded in 1996. Numbers may change as a and Tunisia (14% and 12%, and 45% and 29%, result of revisions.

www.ecdpm.org Page 4 Comparing EU free trade agreements July 2004 InBrief 6A

Table 3a Elimination of EU duties on agricultural imports from South Africa*

Product Products not List 1 Annex IV: List 2 Annex IV: List 3 Annex IV: List 4 Annex IV: List 5 and 6 List 7 and 8 categories* in Annex IV 01-02-04-06- 01-04-07-08- 06-07-08-10-11- 01-02-04-07- Annex IV: Annex IV: 07-08-09-12-15- 09-15-20-24 15-16-20-22-23 08-10-11-12-15- 04-06-08-13-15- 01-02-04-06-07- 16-17-18-20-21-2 16-17-19-20-22-2 17-18-19-20-21- 08-10-11-16-17- 2-23-24-35-38 3-35 22-29-33-38 20-21-22-23-35 Years after Value of original duty (original duty = 100 %) TDCA in force Duties 75% 91% 100% 100% TRQs or partial No immediate 1 abolished 50% 82% 100% 100% liberalisation liberalisation 2 25% 73% 100% 100% (periodic review –list 7) 3 Duties abolished 64% 87% 100% or no liberalisa- 4 55% 75% 100% 5 45% 62% 83% tion because of 6 36% 50% 67% EU denomina- 7 27% 37% 50% tions (list 8) 8 18% 25% 33% 9 9% 12% 17% 10 Duties Duties Duties abolished abolished abolished * Main product chapters: 01 live animals; 02 meat and edible meat offal; 04 dairy produce; 06 live trees and plants; 07 edible vegetables; 08 edible fruit and nuts; 09 coffee, tea and spices; 10 cereals; 11 products of the milling industry; 12 oil seeds and oleaginous fruits; 13 vegetable saps and extracts; 14 vegetable plaiting materials; 15 animal or vegetable fats; 16 preparations of meat; 17 sugars; 18 cocoa; 19 preparations of cereals; 20 preparations of vegetables, fruit, nuts; 21 miscellaneous edible preparations; 22 beverages, spirits and vinegar; 23 residues andwaste from the food industries; 24 tobacco; 29 organic chemicals; 33 essential oils and resinoids; 35 albuminoidal sub- stances; 38 miscellaneous chemical products.

(4) For agriculture-specific rules of origin, adopted as in the other MED agreements, period of time. Exceptions from liberalisation the general provisions as discussed in the i.e. description of the preferences (Protocol are accepted for sensitive products. For most previous section apply. Bilateral cumulation 2). Another feature of the Lebanon agree- agricultural products, tariff elimination is not is valid for all MED agreements. No specific ment is its general emphasis on cooperation achieved immediately but according to tariff GIs are named. to reduce fraud (Art. 13 Interim Agreement). reduction schedules. Each agreement defines a set of schedules with different starting (5) Options for flexible adjustments are fore- With respect to strategic products the degree dates for the elimination process and with seen in the form of both the review and of liberalisation is limited. The MED agree- different phase-out periods. Detailed flexibility clauses applying to all agreements. ments fix first steps to trade liberalisation by annexes assign individual products to the The review process terminates five years conceding preferential market access in the different tariff reduction schedules and after the agreement enters into force.9 In framework of TRQs. No time schedules are respectively to the exemptions. These three case of applying the flexibility clause, result- defined for an overall process of tariff reduc- agreements cover a wider range of products ing disadvantages for one party shall be tion (except for imports from Lebanon into than the MED agreements. balanced by further concessions from the the EU), but all agreements have a review other. clause to examine further opportunities to enhance liberalisation in agricultural products. The EU-South Africa TDCA (6) Other specifics in the MED agreements Thus, further steps to liberalisation are not concern the absence of a timetable for liber- laid down in the agreements but are depend- The EU and South Africa concluded their alisation related either to the EU or to the ent on the result of the intended reviews. In Trade, Development and Cooperation partner countries (except for Lebanon). addition, a flexibility clause allows for modify- Agreement (TDCA) in 1999, and the TDCA Certain preferences are defined, but only as ing the agreement if one of the parties has been provisionally in force since January exceptions to MFN tariffs. Instead of showing changes its domestic agricultural policies. 2000. a clear time schedule for liberalisation, the agreements lay down different deadlines for In South Africa the agricultural sector plays the revision of the current state of liberalisa- a minor role compared to the industrial sec- tion and for granting further concessions. Agreements with South Africa, tor in terms of GDP and employment (con- Mexico and Chile tributing 3% and 4%, respectively). South As for imports into the EU from Lebanon, a Africa’s main agricultural product is maize, timetable for liberalisation is defined Unlike the MED agreements, the agreements followed by sugarcane and wheat. Major though some products are exempted from with South Africa, Mexico and Chile are export commodities are citrus fruits, cane that process (Protocol 1). For imports into characterised by the assumption of a sugar and wine. Over half of the country’s Lebanon from the EU, the same approach is general liberalisation within a predetermined agricultural exports originate from the

www.ecdpm.org InBrief 6A July 2004 Comparing EU free trade agreements Page 5

Table 3b Elimination of South African duties on agricultural imports from the EU

Product Products not in List 1 Annex VI: List 2 Annex VI: List 3 Annex VI: List 4 Annex VI categories* Annex VI 02-06-07-08-09-10- 02-07-08-11-12-13-15- 02-04-06-07-08-09- 02-04-10-11-16-17-18- 11-12-14-15-16-18-19- 17-19-20-21-23-29-35 10-11-12-13-15-16-18- 19-21-23-53 20-21-22-23-24-35 19-20-21-22-23-24-29- 33-35-51-52 Years after TDCA Value of original duty (original duty = 100 %) in force Duties abolished 75% 100% 100% No immediate libe- 1 50% 100% 100% ralisation; products shall be reviewed 2 25% 100% 100% periodically 3 Duties abolished 67% 100% 4 33% 100% 5 Duties abolished 88% 6 75% 7 63% 8 50% 9 38% 10 25% 11 13% 12 Duties abolished

* Main product chapters: 01 live animals; 02 meat and edible meat offal; 04 dairy produce; 06 live trees and plants; 07 edible vegetables; 08 edible fruit and nuts; 09 coffee, tea and spices; 10 cereals; 11 products of the milling industry; 12 oil seeds and oleaginous fruits; 13 vegetable saps and extracts; 14 vegetable plaiting materials; 15 animal or vegetable fats; 16 preparations of meat; 17 sugars; 18 cocoa; 19 preparations of cereals; 20 preparations of vegetables, fruit, nuts; 21 miscellaneous edible preparations; 22 beverages, spirits and vinegar; 23 residues andwaste from the food industries; 24 tobacco; 29 organic chemicals; 33 essential oils and resinoids; 35 albuminoidal sub- stances; 38 miscellaneous chemical products; 51 wool; 52 ; 53 other vegetable textile fibres.

Western Cape. Since 1994, several compre- liberalisation. This pertains especially to (2) Tariff rate quota concessions are imple- hensive reforms have affected the agricul- cheese and wine (Art. 13 and 9). Table 4 lists mented for some of the products that are tural sector, including land reforms, labour the products excluded from liberalisation. excluded from the overall liberalisation market reforms, marketing policy and trade process (Table 5). Additionally, some quotas policy reforms. Trade in agriculture has increased through general deregulation and a further opening of the domestic market. Table 4 Exceptions from trade liberalisation between the EU and South Africa Main products excluded from liberalised Main products excluded from liberalised (1) Tariff concessions are characterised by an import into the EU import into South Africa asymmetric and differentiated reduction of tariffs aimed to establish a free trade area beef / sugar / some dairy (powdered milk beef, swine, goats, sheep / sugar / some for agricultural products (Art. 14 and 15). products) / sweet corn / maize and maize dairy (butter and other fats and oils derived Tables 3a and 3b provide the schedules of products / rice and rice products / starches / from milk: dairy spreads, cheese and curd, the TDCA as an example of how liberalisa- some cut flowers / some fresh fruits (cer- ice cream) / sweet corn / maize and maize tion of the agricultural sectors is structured tain citrus, apples, pears grapes, bananas) / products / barley and barley products / in EU FTAs.10 In the case of the TDCA: prepared tomatoes / some prepared fruits wheat and wheat products (incl. wheat • The transition period for the completion of and fruit juices / some wines / vermouth / starches) / chocolate the tariff reduction schedule is twelve ethyl alcohol years on the side of South Africa and ten years on the EU side. • The reduction of duties takes place in six Table 5 Tariff rate quotas conceded by the EU and South Africa different reduction schemes in the case of Main TRQs (quota/year) conceded for Main TRQs (quota/year) conceded for the EU and four reduction schemes in the imports into the EU imports into South Africa case of South Africa. Duties on the more sensitive products of the two parties are cut flowers (1,600 t, half duty) / strawber- cheese and curd (5,000 t, half duty) liberalised either partially or more slowly. ries (250 t, half duty) / several canned fruits (60,000 t, half duty) / several fruit juices Products whose denomination is protected (5,700 t, half duty / some wines (32 million within the EU are excluded from trade litres, duty free)

www.ecdpm.org Page 6 Comparing EU free trade agreements July 2004 InBrief 6A

are established for those products that do Table 6 Exceptions from trade liberalisation between the EU and Mexico not benefit from immediate liberalisation. Annual growth rates are defined. Main products excluded from liberalised Main products excluded from liberalised import into the EU import into Mexico (3) Specific agricultural safeguard clauses bovine animals, beef, swine, poultry / dairy bovine animal, beef, swine poultry / dairy / emphasise the sensitivity of agricultural / eggs / honey / cut flowers / some fruits eggs / potatoes / bananas / cereals except markets and the right to take provisional and vegetables (e.g. olives for the produc- buckwheat / roasted coffee / some oil and measures in exceptional circumstances tion of oil, sweet corn, asparagus, peas, fats (palm oil, cobra oil, animal fats or oil) / (Art. 16). Beyond that, agriculture is inte- beans, apples, pears, strawberries, grapes, sugar / cocoa / grape juice and grape most / grated into a common safeguard clause bananas) / cereals except buckwheat / rum which lays down requirements for applying sugar / some juices (tomatoes, citrus fruits, the safeguards, applicable safeguard pineapple, apple, pear) / vermouth / ethyl measures and procedures. Compared alcohol / vinegar with the other agreements, South Africa has achieved more flexibility to initiate so- Table 7 Tarif rate quotas conceded by the EU and Mexico called ‘Transitional Safeguard Measures’ (Art. 25) during a transition period of twelve Main TRQs (quota/year) conceded for Main TRQs (quota/year) conceded for years.11 The TDCA contains no shortage imports into the EU imports into Mexico clause. eggs (1,500 t, half duty) / honey (30,000 t, no TRQs conceded half duty ) / cut flowers (1,500 t, duty free) / (4) Regarding agriculture-specific rules of aspargus (600 t, duty free; 1,000 t prepared, origin some provisions (all in Protocol 1 half duty) / peas (500 t, half duty) / cane attached to the main agreement) concern molasses (275,000 t, duty free) / prepared the extension of ‘origin’ to countries which tropical fruit (1,500 t, duty free) / juices are not joining the FTA. Products containing (orange 1,000 t, half duty; 30,000 t, 25% components from other African, Caribbean duty; 2,500 t pineapple juice, half duty ) and Pacific (ACP) countries are defined as originating in South Africa (and thus receive TDCA preferences) if the value added in South Africa exceeds the imported ACP for any export marketing except for trade cessions at an equivalent level on imports value (Art. 3-7 of Protocol 1). Beyond the within the SACU and SADC (Southern from the other party. value requirement, products need not African Development Community). undergo additional working or processing Regarding the latter, such use must cease (6) The TDCA contains a range of other in South Africa. As for inputs originating in within eight years. Within twelve years, specifics: the Southern African Customs Union (SACU use of the names within South Africa’s – South Africa, Botswana, Lesotho, Namibia domestic market must end (Art. 5 of the • Additional provisions are laid down in the and Swaziland), any ‘working or processing wine agreement). aforementioned Agreement on Trade in carried out within SACU shall be considered • For spirits, use of the names Grappa, Ouzo, Wine and Agreement on Trade in Spirits. as having been carried out in South Africa, Korn, Kornbrand, Jägertee, Jagertee, • A provision enables South Africa to offer when further worked or processed there’ Jagatee and Pacharan may continue dur- an accelerated tariff reduction compared (Art. 3.4 of Protocol 1). Flexible cumulation of ing a transitional period of five years (Art. to the agreed time schedules. Accelerated origin across such a large number of third 4 of the spirits agreement). reduction is coupled with the elimination countries is a unique feature distinguishing of EU export refunds on the respective this TDCA from other agreements. Products whose denomination is protected products. Implementation is to be decided within the EU are excluded from trade liber- by the EU (Art. 17). Geographical indications are covered in the alisation. This pertains especially to the • A general additional objective is coopera- separate Agreement on Trade in Wine and cheese and wine listed within the TDCA tion on issues of (environmental) sustain- the Agreement on Trade in Spirits. These itself (Annex IV, list 8). ability (Art. 84). Concrete measures – by agreements specify rules for some products means of knowledge transfers, capacity traditionally produced and marketed under (5) Options for flexible adjustments are building and joint ventures – aim at the same trademark in South Africa and in included in the TDCA by means of both a modernising and restructuring the agricul- the EU. Strongly diverging positions of EU review clause and a flexibility clause (Art. 18 tural sector, enhancing the competitive- and South African negotiators on the details and 20). The review clause states that ness of farmers from disadvantaged of these agreements were among the main within five years of the TDCA entering into communities, diversifying output, develo- factors delaying the TDCA negotiations. force, further liberalisation steps shall be ping cooperation in animal and plant Besides the WTO-level negotiations on a considered especially for those products health, and examining possibilities to har- multilateral register, South Africa’s transi- that are excluded from total tariff reduction. monise SPS standards and rules (Art. 61). tional use of trademarks was integrated in The flexibility clause allows the parties, after the TDCA after strong negotiation. The key agreement has been reached in the As in the other agreements important prod- elements of these supplementing agree- Cooperation Council, to amend the agricul- ucts are excluded from tariff reduction in the ments are as follows: tural arrangements in the TDCA as a result TDCA. Market access for a limited amount of of changes in domestic agricultural policies. those products is granted by TRQs. Further • For sherry and port, the use of traditional Yet it also requires that the party amending steps for liberalisation shall be considered in names must be stopped within five years the arrangements make liberalisation con- a review process five years after entry into

www.ecdpm.org InBrief 6A August 2004 Comparing EU free trade agreements Page 7

force. But there are some provisions particu- (2) Tariff rate quotas (Table 7) are conceded commits to protect all European designations lar to the South Africa TDCA. The transition by the EU for imports originating in Mexico. and the EU commits to protect Tequila and period for tariff reduction is asymmetric with No annual growth rate is defined, but the Mezcal. Further steps for liberalisation shall twelve years on the side of South Africa and contracting parties can make further con- be considered in an elaborate review process ten years on the side of the EU. An acceler- cessions according to a review clause. As for three years after entry into force of the ated tariff reduction coupled with the elimi- imports into Mexico, there are no conces- agreement. Flexible adjustment of the agree- nation of EU export refunds on the respective sions for those products that are excluded ment due to changes in national policy is not products can be offered by South Africa and from trade liberalisation (Annex II, Section A foreseen. agreed on by the EU. With respect to and B). safeguards, South Africa has the right to impose transitional measures and thus can (3) Regarding special safeguards clauses, react relatively flexibly. As for rules of origin, only a common safeguard clause exists The EU-Chile Association special provisions refer to products from ACP (Art. 15). It describes the requirements for Agreement countries and from the SACU. Flexible implementing safeguard measures, time- amendment is foreseen in response to frames for consultation and the need for The latest free trade agreement concluded changes in domestic agricultural politics, but compensation.13 A shortage clause by the EU to date is the one signed with the party that changes the arrangements has (Decision, Art. 16) defines conditions for jus- Chile in November 2002. Though the to balance possible disadvantages. tifying export restrictions similar to GATT Association Agreement goes beyond trade Article XI. to cover political dialogue and cooperation, its trade provisions stand out as the most (4) As for agriculture-specific rules of origin, detailed yet in EU bilateral agreements. The EU-Mexico Global general provisions for qualification as origi- Apart from trade in goods and agricultural Agreement nating product apply and bilateral cumula- products, the agreement covers services, tion is valid (Annex III). Geographical investment, government procurement, The EU and Mexico signed their Economic indications are tackled by the separate intellectual property rights, competition, Partnership, Political Coordination and Agreement on the Mutual Recognition and customs procedures and, in annexed agree- Cooperation Agreement, also known as the Protection of Designation of Spirit Drinks. ments, wine and spirits and SPS standards. ‘Global Agreement’, in December 1997. The Mexico protects all European designations agreement came into force in October 2000. (Annex I) and the EU protects Tequila and Chile’s agricultural sector contributes a rela- Mezcal (Annex II) in accordance with exist- tively minor proportion of the country’s GDP Mexico’s agricultural sector is characterised ing domestic law. and employment (11% and 14%, respec- by a low share in GDP (4%) but a high share tively). Main agricultural products are in overall employment (45%). The main (5) Options for flexible adjustments are cereals, fodder, sugarbeets, potatoes and Mexican products exported to the EU are offered through a review clause (Art. 10). vegetables. Due to the inverted growing coffee, vegetables and spirits. The major This review clause is much more precise season, fruits have become a particularly imports from the EU are oilseeds, dairy than those in other agreements. The clause important product exported to northern products and wine. Mexico initiated a major provides for further liberalisation of agricul- countries. Wine has also gained increased agricultural policy reform in the early 1990s tural trade after an evaluation by the Joint status as a key export product. affecting its most important crops, i.e. copra, Council within the first three years of the cotton seed, barley, rice, soy, sorghum, sun- agreement’s enforcement. The Global (1) The Association Agreement defines a flower, and wheat. Import controls and gov- Agreement also explicitly mentions a review transition period of maximum ten years for ernment direct price supports to producers of the TRQs (also within three years), as well trade liberalisation of agricultural commodi- were abolished, and subsidies to agricultural as of the EU’s protection of denomination ties and processed agricultural products. inputs, credit and insurance were drastically (in accordance with developments in intel- Regarding tariff concessions,there are four reduced. lectual property rights). It further specifies tariff elimination schedules in which the EU that ‘where appropriate’ the relevant rules completely eliminates duties with transi- (1) The Global Agreement sets out a transi- of origin shall be reviewed as well. No flexi- tional periods of zero, four, seven and ten tion period of ten years for the implementa- bility clause is defined. years. In addition, duties are partially liber- tion of all liberalisation commitments. For alised in four other product schemes (Art. products subject to tariff concessions,as (6) Other specifics concern the supplemen- 71). On the Chilean side, liberalisation takes many as eight different liberalisation ting Agreement on the Mutual Recognition place in three schedules of zero, five and ten schemes (both complete and partial) are and Protection of Designation of Spirit years, in which tariffs for the respective defined for both the EU and Mexico (Art. 8 Drinks. products are phased out completely. Besides and 9).12 In schedules which foresee com- TRQs, Chile has not committed to any fur- plete liberalisation, the longest transitional In the Global Agreement the transition ther partial liberalisation schedules (Art. 72). periods for the EU and Mexico are nine and period for tariff reduction is ten years. But As in the Global Agreement, products whose ten years, respectively. Products whose again some important products are excluded denomination is protected within the EU are denomination is protected within the EU are from tariff reduction. For some of the excluded from trade liberalisation. This is excluded from trade liberalisation. This excluded products the EU concedes preferen- especially valid for cheese and wine (Art. 71). pertains especially to cheese and wine (Art. tial market access within the limits of tariff Table 8 lists other main products that are 8, 10). Table 6 lists the main products that rate quotas, whereas Mexico grants the EU excluded from liberalisation. are excluded from liberalisation. no such preferential access. The problems of geographical indications are covered by an (2) Main tariff rate quotas for products additional agreement wherein Mexico excluded from liberalisation are listed in

www.ecdpm.org Page 8 Comparing EU free trade agreements July 2004 InBrief 6A

Table 9. An annual growth rate is specified agreement (Art. 74). No flexibility clause is Towards more comprehensive per product. Quotas for meat increase by included. approaches 10% of the original quantity. The rest of the quotas increase by 5% of the original quan- (6) Other specifics of the Association Trade in agricultural products is far from tity, except those for sugar confectionery, Agreement concern Annex IV on SPS being completely liberalised. The EU and its cocoa preparations and sweet biscuits, measures and Annex V on wine. Moreover, trading partners retain many tariff barriers waffles and wafers, which do not increase. economic cooperation objectives include concerning market access. So the agricul- domestic measures to enhance sustainable tural parts of EU FTAs contend with the con- (3) In addition to a common safeguard and agriculture and agricultural development. flict of trade liberalisation on the one hand shortage clause (Art. 92 and 93), a special Technical assistance related to productivity and national interests to limit market access safeguard clause for agricultural products is and food quality is envisioned, as well as on the other hand. defined and extended to processed agricul- projects to support compliance with SPS tural products (Art. 73, called the emergency measures (Art. 24) and to encourage conser- The analysis of the different EU FTAs shows clause). The clause contains provisions for vation and improvement of the environ- that the EU excludes important products measures that may be applied in case of ment in the interest of sustainable from the targeted free trade. The EU’s emergency (e.g. raising tariffs to the development (Art. 28). domestic protection and support pattern for pre-liberalisation level), as well as the time- certain agricultural products can be identi- frame for consultations before such meas- The Association Agreement sets out a ten- fied as a key factor determining these ures enter into force (30 days) and year transition period for tariff reduction for exceptions. For those products that are regulations for immediate actions under both parties. Corresponding to the agree- excluded from liberalisation, the EU grants exceptional circumstances (provisional ments with South Africa and Mexico, some important concessions by admitting market measures for a maximum of 120 days). This products are excluded from general liberali- access within the limits of TRQs. clause concretises the case of emergency sation and subject to preferential market and admits the right to seek compensation access by TRQs. A review process aiming at Concerning the liberalisation process, two to the exporting party.14 further liberalisation shall start three years different approaches for agriculture can be after entry into force of the agreement. No discerned: (4) Regarding agricultural rules of origin the flexible adjustment of the agreement due to (1) Defining the products that benefit from general provisions for conferring goods to changes in national policy is foreseen. The preferential market access (the MED agree- origin status apply and bilateral cumulation Chile agreement is characterised by a com- ments). This positive list approach limits the is applicable (Annex III, Art. 1-6). Elaborate prehensive set of arrangements covered in overall coverage of products. It defines the processing requirements for originating supplemental annexes: one discusses SPS first steps of the liberalisation process, agricultural products are listed in Appendix measures15 and another concerns wine. though an overall roadmap is missing. II of Annex III. Economic cooperation is intended to enhance Flexibility with respect to further steps to sustainable agriculture and agricultural an advanced liberalisation is granted by a (5) Options for flexible adjustments are inte- development. review clause. grated by means of a review clause (called (2) Defining timetables for the overall libera- the evolution clause), thus providing oppor- lisation process (South Africa, Mexico, Chile tunities to further enhance liberalisation and Lebanon for imports into the EU). These three years after the implementation of the FTAs define timetables with differing start dates and lengths of the liberalisation process. Again, important products are Table 8 Exceptions from trade liberalisation between the EU and Chile excluded and they are favoured by conces- sions within the limits of TRQs. Allocating Main products excluded from liberalised Main products excluded from liberalised agricultural products to different timetables import into the EU import into Chile or exemptions from free trade and restric- ting market access to TRQs increases the beef, swine, sheep and goats, poultry / dairy dairy / leguminous vegetables / sweet corn / controllability of the liberalisation process. / eggs / some fruits and vegetables (e.g. wheat and meslin flour, wheat groats and Additional flexibility is achieved by review beans, mushrooms of the genus agaricus, pellets of cereals / vegetable oil and mar- clauses concerning products that are (still) olives for the production of oil, sweet corn, garine / sugar exempted from free trade. manjoc) / cereals and the corresponding products of the milling industry / sugar / Thus, though the agreements aim at libera- vermouth / ethyl alcohol / vinegar lisation, important agricultural products Table 9 Tarif rate quotas conceded by the EU and Chile remain excluded from free trade. Main TRQs (quota/year) conceded for Main TRQs (quota/year) conceded for With respect to agriculture the agreements imports into the EU imports into the EU with South Africa, Mexico and Chile cover a wider range of issues and products, espe- beef (1,000 t, duty free) / meat of swine cheese and curd (1,500 t duty free) / olive oil cially those connected to trade of wine and and prepared food (3,500 t, duty free) / (3,000 t per year, duty free) spirits. The Chile agreement includes meat of sheep (2,000 t, duty free) / meat of additional provisions concerning coopera- poultry and prepared food (7,250 t, duty tion to enhance sustainable agriculture and free) / cheese and curd 1,500 t, duty free) / capacity building, possibly providing ways to worked cereal grains (1,000 t duty free) / intensify bilateral relations beyond trade prepared mushrooms (500 t, duty free) liberalisation.

www.ecdpm.org InBrief 6A July 2004 Comparing EU free trade agreements Page 9

Table 10 Comparative relevance of single FTA instruments

Set of Instruments MED TDCA Mexico Chile 1) Tariffs Duty free Reduction Timeframe for only liberalisation EU-Lebanon 2) Quota TRQs Annual growth rates - except for Algeria – 3) Safeguard clauses Agriculture-specific safeguard clause – – Shortage clause – Specific entry price only system EU-Morocco – – – 4) Rules of origin Agriculture-specific rules of origin Bilateral cumulation Extension to non- member countries – –– Protected geographical indications – – 5) Options for adjustments General review (5 years) (5 years) (3 years) (3 years) Policy changes –– 6) Other specifics • Lebanon lists exceptions • Supplemental agree- • Supplemental agree- • Supplemental agree- from liberalisation ments on wine and spirits ment on spirit drinks ments on wine and SPS • Option for accelerated • Cooperation on tariff reduction domestic measures • Cooperation on domestic measures

www.ecdpm.org Page 10 Comparing EU free trade agreements July 2004 InBrief 6A

Box 2 Where to find articles on agriculture in EU trade agreements

MED agreements: http://europa.eu.int/comm/external_relations/euromed/med_ass_agreemnts.htm

TDCA (South Africa): Title II, Section C; Annex IV; and Protocol 1: http://europa.eu.int/eur-lex/en/archive/1999/l_31119991204en.html

Global Agreement (Mexico): EC/Mexico Joint Council Decision no. 2/2000 of March 2000: Title II, Section 3; and Annexes I-III: http://europa.eu.int/comm/trade/bilateral/mexico/fta.htm

Association Agreement (Chile): Title II, Chapter 1, subsection 2.3; and Annexes I-III: http://europa.eu.int/comm/trade/issues/bilateral/countries/chile/euchlagr_en.htm

For other agreements, see the Trade Agreements Database and Archive by the Dartmouth Tuck School of Business: http://mba.tuck.dartmouth.edu/cib/research/trade_agreements.html

Notes chokes (1 November to 30 June); courgettes; 11 See ECDPM FTA InBrief on safeguards. sweet oranges (1 December to 31 May); man- 12 The articles refer to Decision no 2/2000 of 1 See also the ECDPM-CTA FTA InBrief on SPS darins (including tangerines and satsumas); the EC/Mexico Joint Council of 23 March measures. clementines, wilkings and similar citrus 2000. 2 See also the ECDPM FTA InBrief on safe- hybrids (1 November to end February); 13 See ECDPM FTA InBrief on safeguards and guards and anti-. lemons (citrus limon, citrus limonum); table anti-dumping. 3 The entry price system (EPS) allows an addi- grapes (21 July to 20 November); apples, 14 See ECDPM FTA InBrief on safeguards and tional charge (maximum tariff equivalent,' pears (16 July to 31 March); apricots (1 June anti-dumping. MTE') if import prices fall below the to 31 July); cherries (21 May to 10 August); 15 See ECDPM – CTA FTA InBrief on SPS respective entry prices laid down in the peaches including nectarines (11 July to 30 measures. WTO schedule for the EU; for some products September); plums and sloes (11 June to 30 the validity of the EPS is seasonally limited. September); grape juice; grape must. 4 See also the ECDPM FTA InBrief on rules of 8 For Lebanon the increase is specified in origin. absolute terms. Converting the increase to 5 The ex-works price is the price paid for the growth rates it accounts for up to 25 % for product after manufacturing in the originat- single products. But the underlying volumes ing country (where the last working or pro- are very small (e.g. 2,000 tonnes) so these cessing has been carried out), including the growth rates are by no means representa- value of all the materials used, minus any tive for the MED agreements. internal taxes returned or repaid when the 9 As for the agreement with Morocco addi- product obtained is exported. tional market access was conceded by EU 6 This differentiation is based on the current for tomatoes and by Morocco for wheat. EU Common Agricultural Policy (CAP) and The amount of preferential market access thereby can change in the future due to for EU wheat is dependent on Morocco’s reforms. internal production. 7 In general, the fruits and vegetables that 10 For a detailed understanding of the extent can be classified as 'strategic' are those to which the parties have liberalised their that are subject to the entry price system various agricultural sectors, see the (EPS): tomatoes; cucumbers; globe arti- annexes of the agreement.

www.ecdpm.org InBrief 6A July 2004 Comparing EU free trade agreements Page 11

Acronyms

ACP African, Caribbean and Pacific countries MFN Most-Favoured-Nation AMS Aggregate Measure of Support SACU Southern African Customs Union AoA WTO Agreement on Agriculture SADC Southern African Development Community EPS Entry Price System SDT Special and Differential Treatment EU European Union SPS Sanitary and Phytosanitary Standards FTA Free trade agreement TDCA Trade Development and Cooperation Agreement GATT General Agreement on Tariffs and Trade TRIPS Agreement on Trade-related Aspects of Intellectual GDP Gross Domestic Product Property Rights GI Geographical Indication TRQs Tariff Rate Quotas LDCs Least developed countries WTO World Trade Organization MED Euro-Mediterranean Association

Selected publications and information sources on agriculture

Publications Information sources

CTA (2004), Agritrade Executive Brief on Market Access, March, www.acp-eu-trade.org http://agritrade.cta.int/market/executive_brief.htm Agritrade: http://agritrade.cta.int Dell’Aquila, C. and M. Kuiper (2003), Which road to liberalisation? A first assessment of the EuroMed association agreements,ENARPRI EU Expanding Exports Helpdesk: advice for developing countries discussion paper no. 2, October, exporting to the EU: www.enarpri.org/Publications/WPNo2.pdf http://export-help.cec.eu.int/

Stevens, Chris (2002), Key agricultural issues in the post-Cotonou Schedules of concession in agriculture trade per WTO member negotiations, Institute of Development Studies (IDS), state: http://agritrade.cta.int/Stevens-post-cotonou.pdf www.wto.org/english/tratop_e/schedules_e/goods_schedules_e.htm #parts UNCTAD (2003), Trade Negotiations in the Cotonou Agreement: Agriculture and Economic Partnerships Agreements, Doha Declaration related to agriculture and TRIPS: www.unctad.org/en/docs//ditctncd20032_en.pdf www.wto.org/english/tratop_e/dda_e/dohaexplained_e.htm

Backgrounder of the WTO agricultural negotiations: www.wto.org/english/tratop_e/agric_e/agnegs_bkgrnd_e.pdf

www.ecdpm.org Page 12 Comparing EU free trade agreements July 2004 InBrief 6A

InBrief series on trade for 2004-2005

The InBrief series Comparing EU free trade agreements is aimed at The InBriefs are available online at www.acp-eu-trade.org trade negotiators, policy makers, officials and experts in gathering a www.ecdpm.org and http://agritrade.cta.int/ better technical insight into the evolution of EU trade agreements and the approaches adopted by the EU in negotiating these agreements. This InBrief on agriculture is an initiative by the European Centre for This might be of particular interest to actors involved with or Development Policy Management (ECDPM) and the Technical Centre interested in the current and forthcoming negotiations on trading for Agricultural and Rural Cooperation (CTA),under the editorial agreements with the EU, such as the African, Caribbean and Pacific supervision of Sanoussi Bilal ([email protected]), Stefan Szepesi (ECDPM) (ACP) countries with Economic Partnership Agreements (EPAs). A and Vincent Fautrel ([email protected]). complementary and parallel series on EPAs, called Economic Partnership Agreement InBriefs,provides insights into the main issues faced by the ACP,and discuss options for the negotiations with the EU.

Topics included in the ECDPM InBrief series on trade for 2004-2005 are: • Agriculture • Anti-dumping and Safeguards • Competition Policy and State Aid • Dispute Settlement • Fisheries • Government Procurement CTA Postal address CTA visiting address • Investment Postbus 380 Agro Business Park 2 • Rules of Origin NL-6700 Wageningen Wageningen • Sanitary and Phytosanitary Standards (SPS) The The Netherlands • Services • Special and Differential Treatment Tel +31 (0)317 46 71 00 Fax +31 (0)317 46 00 67 • Technical Barriers to Trade (TBT) E-mail [email protected] • Trade Facilitation • WTO Compatibility Website www.cta.int

'InBrief' provides summarised background information on the main policy debates and European Centre for Development Policy Management activities in ACP-EC cooperation. These complementary summaries are drawn from consultative Onze Lieve Vrouweplein 21 processes in which the European Centre for Development Policy Management (ECDPM) engages with NL-6211 HE Maastricht numerous state and non-state actors in the ACP and EU countries. The Centre is a non-partisan organi- sation that seeks to facilitate international cooperation between the ACP and the EC. Information may The Netherlands be reproduced as long as the source is quoted. The ECDPM acknowledges the support it receives for the 'InBrief' from the Department for International Tel +31 (0)43 350 29 00 Fax +31 (0)43 350 29 02 Development in the United Kingdom, the Ministries of Foreign Affairs in , Finland and the [email protected] www.ecdpm.org Netherlands, the Directorate-General for Development Cooperation in Belgium, the Swiss Agency for Development and Cooperation and the Instituto Português de Apoio ao Desenvolvimento in . ISSN 1571-7542