InInNo. 6ABriefBrief- July 2004 Comparing EU free trade agreements Agriculture Bettina Rudloff and Johannes Simons, Institute of Agricultural Policy, University of Bonn, Germany 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 European Union 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 (tariff rate tions of origin (geographical indications,or importance for national food security 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 World Trade Organization, 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 Uruguay 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 peace clause 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 Doha Declaration 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 South Africa, 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