The impact of trade liberalization on the
global oilseed complex
Rebalancing the complex with supply,
demand, processing shifts
Robert Broeska, President, IASC &
Canadian Oilseed Processors Association
The impact of trade liberalization on the
global oilseed complex
1. Market drivers
2. Trade policy - industry position
3. Trade reform – the China case
4. Doha WTO negotiations
5. WTO impact on industry
Population
current world population 6 billion people
2050 world population 9 billion
97% of increase in less developed regions
key developing markets are China & India
10
billions
•
•
•
•
5
0
1980
1990
2000
2010
2020
2030
China India Other countries
2040
2050
Per capita oils & fats consumption
60
kilograms
50
40
30
20
10
0
1980
1985
1990
World
1995
China
India
2000
EU
2006
Vegetable oil disappearance
GATT Tokyo Round
China WTO accession
140
million tonnes
120
GATT Uruguay Round
100
80
60
40
20
0
1980
1985
1990
1995
Soy oil
Palm oil
Rape oil
Sun oil
2000
2006
Other veg oils
Production of oilseeds & products
450
400
million tonnes
350
300
250
200
150
100
50
0
1980
1985
1990
Oils & fats
1995
Oilmeals
2000
Oilseeds
2006
Soybean production
250
million tonnes
200
150
100
50
0
1980
1985
United States
1990
1995
South America
2000
Other countries
2006
Palm oil production
40
35
million tonnes
30
25
20
15
10
5
0
1980
1985
Malaysia
1990
Indonesia
1995
2000
Other countries
2006
Rapeseed & sunflower production
60
million tonnes
50
40
30
20
10
0
1980
1985
1990
Rapeseed
1995
Sunflower seed
2000
2006
World oilseed crush and GDP
GATT Tokyo Round
China WTO accession
350
60000
GATT Uruguay Round
50000
250
40000
200
30000
150
20000
100
10000
50
0
1980
1985
1990
Crush
1995
GDP
2000
0
2006
GDP (billion US$)
Crush (million tonnes)
300
Vegetable oil exports
60
million tonnes
50
40
30
20
10
0
1980
1985
Soy oil
Palm oil
1990
Rape oil
1995
Sun oil
2000
2006
Other veg oils
Oilmeal exports
70
million tonnes
60
50
40
30
20
10
0
1980
1985
1990
Soy meal - South America
1995
Soy meal - total
2000
Oilmeals - total
2006
The global oils & fats market
2. Trade policy - industry position
3. Trade reform – the China case
4. Doha WTO negotiations
5. WTO impact on industry
Trade of oilseeds & products
GATT Tokyo Round
China WTO accession
90
GATT Uruguay Round
80
million tonnes
70
60
50
40
30
20
10
0
1980
1985
1990
Oilseeds
1995
Oils & fats
2000
Oilmeals
2006
Trade – IASC policy statement
A new vision for the international trade of oilseeds & oilseed products
A WTO Development Round sectoral initiative
31 March 2003
The members of the International Association of Seed Crushers Council today announce their support for
an oilseed industry sectoral initiative under the auspices of the World Trade Organization. The IASC
seeks a broad agreement for the liberalization of global trade in oilseeds, oilseed products and edible
oils.
•
In pursuit of this objective, IASC member associations agree to solicit the support of their national
trade authorities and WTO negotiators for a global sectoral agreement, which harmonizes, reduces,
and ultimately eliminates all trade distorting policies and practices for oilseeds, oilseed products and
edible oils. Such an agreement would accommodate and define the necessary degrees of staging
and/or phasing as agreed to by the participants.
•
The IASC Council envisions that this endeavour will provide a global trading environment, which is
conducive to the expansion of production, processing, trade, and consumption of all oilseeds, oilseed
products and edible oils. The Council urges all WTO members to avoid trade distorting policies at
production or trade levels (i.e. tariff and non-tariff trade barriers, export incentives, export subsidies,
export taxes, product-specific supports, etc.).
•
The Council firmly believes that an open and unfettered food trade system is essential to the efficient
provision of food for the world’s next billion citizens and beyond. The elimination of trade barriers will
reduce food costs for consumers while creating a larger global marketplace for producers.
•
The IASC intends to convey this message directly to the Chairman of the WTO Agricultural Negotiating
Committee without delay, and agrees to provide any supporting discussion requested.
OILSEED PROCESSORS
LEVEL PLAYING FIELD COALITION
JOINT DECLARATION
September 2005
In order to establish an international Level Playing Field (LPF) during the Doha Development
Agenda negotiations on agriculture, our national associations hereby endorse the
following reciprocal objectives to be implemented as part of a WTO Sectoral Agreement
which provides that member countries eliminate all trade barriers for oilseeds, oilseed
products, and edible oils:
• Eliminate import tariffs for oilseeds, oilseed products, and edible oils
• Eliminate export subsidies for oilseeds, oilseed products, and edible oils
• Eliminate differential export taxes (DETs) on oilseeds, oilseed products, and edible oils
• Provide export credits only in conformance with WTO rules and disciplines
In addition to the above LPF objectives, we support the following mutual undertakings:
• To actively encourage our respective governments to provide an increasing portion of
domestic support for agriculture in a decoupled form
• Not to implement any other trade distorting practices
ABIOVE - Associaçâo Brasileira das Industrias de Óleos Vegetais, São Paulo, Brasil
AOF - Australian Oilseeds Federation, Melbourne, Victoria, Australia
CIARA - Cámara de la Industria Aceitera de la República Argentina, Buenos Aires, Argentina
COPA - Canadian Oilseed Processors Association, Winnipeg, Canada
FEDIOL - Fèderation de l’Industrie d’Huilerie de la CE, Brussels, Belgium, European Union
NOPA - National Oilseed Processors Association, Washington, DC, United States
The global oils & fats market
3. Trade reform – the China case
4. Doha WTO negotiations
5. WTO impact on industry
China oilseed situation
GATT Tokyo Round
China WTO accession
60
3000
2500
50
2000
GATT Uruguay Round
40
1500
30
1000
20
500
10
0
1980
Crush
1985
1990
Oilseed imports
1995
2000
Oils & fats imports
0
2006
China GDP
GDP (billion US$)
Crush & imports (million tonnes)
70
Veg oil consumption & global prosperity
• As the poor advance economically, they move
from grains to veg oils to meat
• Per capita veg oil consumption in the poorest
countries is used by IMF as a measure of
changing living standards
• Very poor do not purchase meat
• In many developing countries, massive job
creation and rapidly advancing incomes spur
improved dietary intake
• The result? An unprecedented expansion of veg
oil and protein consumption
China vegetable oil disappearance
GATT Tokyo Round
China WTO accession
million tonnes
25
20
GATT Uruguay Round
15
10
5
0
1980
1985
1990
Soy oil
Groundnut oil
1995
Palm oil
Cotton oil
2000
Rape oil
Other veg oils
2006
million tonnes
China oilmeal disappearance
50
45
40
35
30
25
20
15
10
5
0
1980
1985
Soy meal
Groundnut meal
1990
1995
Rape meal
Other oilmeals
2000
Cotton meal
2006
China oilseed imports
30
million tonnes
25
20
15
10
5
0
1980
1985
Soybeans
1990
Rapeseed
1995
Sesame seed
2000
2006
Other oilseeds
million tonnes
China vegetable oil imports
10
9
8
7
6
5
4
3
2
1
0
1980
1985
Soy oil
1990
Palm oil
1995
Rape oil
2000
Other veg oils
2006
The global oils & fats market
4. Doha WTO negotiations
5. WTO impact on industry
DOHA WTO Negotiations
Draft modalities text
Crawford Falconer, Chair, Agriculture Committee - July 17, 2007
Main negotiating pillars
1.
2.
3.
4.
Domestic supports – a tiered formula for overall
phased reduction of trade-distorting domestic supports
Market access – a tiered formula for phased tariff and
tariff escalation reductions
Export competition – parallel elimination of all forms
of export subsidies and disciplines on all export
measures
Other issues – range of issues/positions/proposals
that are tabled/referred to and remain of interest, but
are not materially advanced and not yet agreed;
includes differential export taxes and sectoral
initiatives
WTO draft modalities text - July 17, 2007
Trade-distorting domestic supports*
Level of support
Phased reduction**
(a)
+ US $60 billion
75-85%
(b)
+ US $10 billion;
- US $60 billion
- US $10 billion
66-73%
(c)
50-60%
* Base period for calculation 1995-2000
** Uruguay Round implementation period: 6 years commencing January 1, 1995
WTO draft modalities text - July 17, 2007
Market access: tiered formula
Bound duty –
ad valorem equivalent*
Phased reduction
Developed
Developing
Developed
Developing
(a)
0-20%
0-30%
48-52%
X 2/3
(b)
21-50%
31-80%
55-60%
X 2/3
(c)
51-75%
81-130%
62-65%
X 2/3
(d)
+ 75%
+ 130%
66-73%
X 2/3
* Uruguay Round achievements - Agriculture
1.
2.
3.
4.
Tariffication and minimum access commitments
Tariffs reduced by 36% (average), minimum 15%
Average unweighted ad valorem bound tariff rates post-Uruguay Round for
oilseeds, fats and oils 42% A.V.E.
NAMA – tariffs reduced by 40% to 3.8% A.V. Avg.
WTO draft modalities text - July 17, 2007
Export competition
(a) Export subsidies*
(i) Developed – eliminate by end of 2013; 50% by 2010
(ii) Developing – eliminate in equal annual reductions by year X
(b) Export credits/guarantees/insurance
- maximum repayment schedule – 180 days
- disciplines applied give effect to (a)
(c) State trading enterprises/international food aid
- disciplines applied give effect to (a)
* Uruguay Round reduced volumes of subsidized exports by 21% and
budget outlays by 36%; DOHA Round considering a phase-out of
differential export taxes by end of implementation period
The global oils & fats market
5. WTO impact on industry
WTO trade liberalization significantly increases global production,
consumption & trade of vegetable oils & protein meals
A study commissioned by the
International Association of Seed Crushers
and undertaken by
LMC International (Oxford, England)
June 2006
•
•
•
•
•
Vegetable oil demand would rise by more than 40% & oilseed meal demand by 30%
in low-income countries
Global vegetable oil production would increase by about 30% & oilseed meal
production by about 40%
In total, world trade would expand by 35% for vegetable oil & by 45% for oilseed
meals
An independent report by
IPC (Washington, USA)
October 2005
Global oilseed production (7 major oilseeds) would increase by about 25% (currently
from 380 mmt to 475 mmt)
Palm oil production would increase by 39% (currently from 38 mmt to 52 mmt) to
meet these increased levels of consumption and trade requirements
Notable market access indicators
Average price elasticities of demand & import tariffs
Meal
Demand elasticities
Oil
Import tariffs
Demand elasticities
Import tariffs
Argentina
0.94
Free
0.85
Free
Brazil
0.94
Free
0.85
Free
Canada
0.66
Free
0.49
Free
USA
0.77
Free
0.52
Free
China
1.05
5%
0.88
9%
India
0.20
30%
0.74
45%-90%
Indonesia
1.05
Free
0.90
Free
Japan
0.69
Free
0.56
13%
Malaysia
0.70
Free
0.75
5%
Philippines
0.93
3%
0.75
7%
Thailand
0.80
4%
0.60
20%-140%
EU
0.69
Free
0.56
6%-10%
Ukraine
0.45
400 EUR/t
0.68
150 EUR/t
Russia
0.45
Free
0.68
15%
Australia
0.71
Free
0.50
4%-5%
Iran
0.87
4%
0.74
4%
Egypt
0.87
5%
0.74
2%
Bangladesh
1.05
Free
0.81
7.5%
Pakistan
1.05
10%
0.81
32%
Source: USDA ERS and LMC International
Veg oil trade liberalization: a WTO sectoral initiative
Oil consumption forecasts (LMC International)
Countries (‘000 tonnes)
Before liberalization
After liberalization
Argentina
654
878
Australia
336
398
Bangladesh
1,041
1,376
Brazil
3,371
4,525
856
1,007
China
16,921
22,923
Egypt
1,118
1,444
15,522
18,754
India
8,899
11,471
Indonesia
4,087
5,587
Iran
1,140
1,473
Japan
2,189
2,645
Malaysia
3,230
4,182
Pakistan
1,936
2,558
401
519
2,566
3,233
Thailand
839
1,029
Ukraine
719
906
9,603
11,448
108,777
138,957
Canada
EU
Philippines
Russia
USA
World total
Protein meal trade liberalization: a WTO sectoral initiative
Meal consumption forecasts (LMC International)
Countries (‘000 tonnes)
Before liberalization
After liberalization
Argentina
633
795
Australia
713
844
Bangladesh
410
531
Brazil
8,212
10,313
Canada
2,886
3,362
China
25,538
33,047
Egypt
1,266
1,562
46,143
54,271
India
3,967
4,089
Indonesia
1,873
2,424
Iran
1,057
1,304
Japan
5,312
6,248
Malaysia
1,051
1,240
Pakistan
733
949
Philippines
1,713
2,145
Russia
1,785
1,966
Thailand
3,167
3,836
542
597
30,785
36,988
169,177
204,441
EU
Ukraine
USA
World total
World meal and oil production before and after
liberalization in soybean meal and oil equivalents
million tonnes of meal/oil
300
250
200
150
100
50
0
Before liberalization
Meal
After liberalization
Oil
Source: LMC International, 2006
% change after liberalization
Percentage change in world seed/oil/meal
production after liberalization, by oilseed
55
50
45
40
35
30
25
20
15
10
5
0
Soybeans
Rapeseed
Sunflower
After liberalization
Source: LMC International, 2006
Palm
World recoverable oil before & after liberalization
60
million tonnes of oil
50
40
30
20
10
0
Soybeans
Rapeseed
Before liberalization
Sunflower
Palm & palm
kernel oil
After liberalization
Source: LMC International, 2006
Soybean production before & after liberalization
100
million tonnes of soybean
90
80
70
60
50
40
30
20
10
0
Argentina
Brazil
Before liberalization
USA
China
After liberalization
Source: LMC International, 2006
India
Rapeseed production before & after liberalization
20
million tonnes of rapeseed
18
16
14
12
10
8
6
4
2
0
Canada
China
Before liberalization
India
EU
After liberalization
Source: LMC International, 2006
Australia
Sunflower seed production before & after liberalization
million tonnes of sunflower seed
10
9
8
7
6
5
4
3
2
1
0
Argentina
USA
Before liberalization
EU
Ukraine
After liberalization
Source: LMC International, 2006
Russia
Palm & palm kernel oil production before & after liberalization
million tonnes of combined palm oils
18
16
14
12
10
8
6
4
2
0
Indonesia
Malaysia
Before liberalization
Thailand
After liberalization
Source: LMC International, 2006