CAP/WTO Success: A Global
Perspective
Alan Matthews
Trinity College Dublin
Presentation to the Agricultural Science Association
National Conference, 23 September 2005
The support of the Advisory Board for Development
Cooperation Ireland for this work is acknowledged.
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Outline
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects





The Doha timetable
The July 2004 Framework Agreement
The development dimension
EU implications of a Doha Round
What are the prospects?
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Why focus on Doha?
Composition of operating surplus in agriculture
Development
Dimension
2500
EU
implications
2000
€ million
Doha
prospects
Rural development
payments
Rural
development
1500
WTO reduced
protection
Market returns
1000
Decoupling
500
0
Premia and arable
aid
Premia and arable aid
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Some Key Stages:
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Article 20 negotiations: e.g. the EU’s Comprehensive
Negotiating Proposal, December 2000
 Doha Mandate, November 2001
 EU’s Specific Drafting Input, January 2003
 Adoption of the Fischler Reforms, June 2003
 EU/US Joint Initiative, August 2003
 Cancún Ministerial, September 2003
 EU’s offer to eliminate export subsidies, May 2004
 Framework Agreement, July 2004
 Paris May 2005 agreement on AVEs
 Dalien July 2005 G20 proposal on market access
 Trade Negotiation Committee, 28 July 2005
 Hong Kong Ministerial, December 2005
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Market access
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects




Tariffs will be reduced using a ‘tiered formula’
Deeper cuts in higher tariffs
Cuts applied to bound rates
Each country to designate appropriate number of
sensitive products (lower than otherwise tariff
reductions will apply, but TRQ will be expanded)
 Tariff escalation will be addressed
 Future of the special safeguard to be negotiated
 Special and differential treatment for developing
countries, including addressing preference erosion
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Market access – what needs to be decided?
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 The tiers (how many? Which thresholds?)
 G20 proposal at Dalien accepted as basis for
discussion
 The tariff reduction formula within each tier
 Linear cut, progressive linear cut, Swiss
formula, Uruguay Round approach (allows for
flexibility)
 Sensitive products
 Negotiations not yet started
 Crucial – the overall level of ambition
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Domestic support
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Higher levels of trade distorting support subject to
deeper cuts, using a tiered formula
 Each of total (amber box + blue box + de minimis),
amber box and de minimis trade distorting support
will be subject to a specific reduction commitment
 Product-specific caps on amber box support
 Expansion of blue box but capped at 5% of total
value of production (with some flexibility for larger
users)
 Review and clarification of green box to ensure at
most minimal trade distorting impact
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Export competition
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 The following to be eliminated, in parallel, “by a
credible end date”, to be agreed:
 Export subsidies
 Subsidised export credits
 Trade distorting practices of exporting State
Trading Enterprises
 Improper forms of food aid which displace
commercial purchases
 Flexibility - ”phasing will take into account internal
reform steps of members”
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Non-trade concerns (raised by EU)
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Food safety, and Article 5(7) of the SPS Agreement
 Mandatory labelling (presumably with respect to
GMOs and animal welfare) and Geographical
Indications
 Food security for developing countries
(Development Box)
 Protecting the environment (but no specific
demands – multifunctionality yesterday’s game)
 Rural development – but no specific demands
 Animal welfare : specific demand for inclusion of
support payments in the Green Box
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
The Doha Development Round
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 A visible ‘development return’ crucial to success of
the Round
 Successful agricultural negotiations are key to this
perception
 But assessing the agricultural outcome of the
Round for developing countries is not easy….
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Doha Round impacts on developing countries
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Agricultural trade liberalisation will have
contrasting effects for developing countries
 For middle income countries facing high
protection, liberalisation means positive
prospects for competitive export sectors
 For poorer countries, rising import prices,
preference erosion and more onerous standards
darken picture considerably, particularly under
partial reforms
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
World Bank estimates of income effects of
merchandise trade liberalisation, June 2005
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Doha Round impacts on developing countries
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Developing country gains overall from reduction in
OECD agricultural protectionism in Doha are
positive but have been greatly inflated
 Benefits for developing country farmers (and thus
poverty) are more significantly positive
 Northern agricultural protectionism not a
significant explanation of the problems facing the
poorest countries to integrate into international
trade
 Extensive preferential access in EU and elsewhere
 Technical/SPS barriers which often prevent any trade at all
(EU restrictions on fish/shellfish exports, FMD controls preventing beef
exports)
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Export Subsidies
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 January 2003: EU initially offered to reduce
aggregate expenditure limits by 45%
 but in 2001/02 only used 35% of entitlement
 In July 2004 Framework Agreement, EU signed up
conditionally to full elimination
 Importance of ‘credible date to be agreed’
 Blair has called for end by 2010
 It may be that policy change will eliminate the
commodity export surplus: but what about NonAnnex I goods, i.e. the food industry?
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
Domestic support
– EU situation 2001 (before Mid-Term Review)
Amber Box
US dollars
Bound AMS
65,383
Market Price Support
25,085
Direct Payments
12,117
less De Minimis
Current AMS
Degree of AMS Overhang
411
36,791
44%
Blue Box
$ Millions
% Value of Agricultural Production
Green Box
21,262
7%
19,452
Overall Distorting Support (ODS)
Bound ODS
87,056
Current ODS
58,464
Degree of ODS Overhang
33%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Market access – level of ambition?
Harbinson proposal 2003
Development
Dimension
EU
implications
Doha
prospects
Current tariff
level
Average cut
Minimum cut
< 15%
40%
25%
15% - 90%
50%
35%
>90%
60%
45%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Market access
Effect on tariff cut on beef price
Development
Dimension
EU
implications
Doha
prospects
EU support price (basic
intervention price)
€2,224
Estimated world market price
€1,200
Current EU import tariff
€1,922
Possible tariff cut which does
not impact on EU market price
(tariff overhang)
40%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Market access
Effect on tariff cut on beef price
Development
Dimension
EU
implications
EU market price
€2,700
Estimated world market price
€1,200
Current EU import tariff
€1,922
Doha
prospects
Possible tariff cut which does
not impact on EU market price
(tariff overhang)
16%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Market access
Effect of tariff cuts on butter prices, €/tonne
Development
Dimension
Unfavourable
world market
Favourable
world market
EU market price (2008)
€2,247
€2,247
Estimated world market
price
1,170
1,575
Current EU import tariff
1,896
1,896
Possible tariff cut which
does not impact on EU
market price (tariff
overhang )
36%
54%
EU
implications
Doha
prospects
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Framework
Agreement
Market access
Effect of tariff cuts on SMP prices, €/tonne
Development
Dimension
EU
implications
Doha
prospects
Unfavourable world
market
Favourable
world market
EU market price (2008)
1,782
1,782
Estimated world market
price
1,650
1,800
Current EU import tariff
1,118
1,118
Possible tariff cut which
does not impact on EU
market price (tariff
overhang )
55%
64%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Effect of tariff cuts on white sugar price
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
EU support price (based on
Commission July 2005 reform
proposal)
€386
Estimated world market price
€210
Current EU import tariff
€419
Possible tariff cut which does not
impact on EU market price (tariff
overhang )
63%
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Prospects post-Hong Kong December 2005
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 US commitment to successful outcome doubtful
despite Bush rhetoric
 Farm lobby and Congress deeply suspicious
(e.g. CAFTA vote)
 Trade Promotion Authority runs out mid 2007
 Developing countries (G20) may feel no deal is
better than a bad deal
 Concerns of weakest developing countries must
be addressed (e.g. cotton)
 EU the champion of a Development Round
 But agriculture ministers (i.e. France) keeping
tight rein on the negotiators
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Prospects post-Hong Kong December 2005
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Failure of Doha
 URAA lives on, without the protection of the
Peace Clause
 Regional integration agreements
• e.g. Mercosur
 Litigation rather than negotiation?
• US upland cotton
• EU sugar
• EU bananas
• GMOs?
CAP/WTO Success: Global Perspective Alan Matthews
Doha
timetable
Prospects post-Hong Kong December 2005
Framework
Agreement
Development
Dimension
EU
implications
Doha
prospects
 Doha successfully concluded 2006
 Implementation into early 2010s, when export
subsidies finally eliminated
 Further CAP reform before end of the decade?
CAP/WTO Success: Global Perspective Alan Matthews
More information
Policy coherence in Trade & Agriculture website
www.tcd.ie/iiis/policycoherence