Inaugural Meeting of the
International Political Economy Society
Princeton University, 17-18 November 2006
Curbing Agricultural
Exceptionalism: The EU’s Response
to External Challenge
Carsten Daugbjerg & Alan Swinbank
The Universities of Aarhus & Reading
Paper outline
• I. Introduction
• II. Curbing Agricultural Exceptionalism?
• III. A Single Undertaking and CAP Reform
– The Single Undertaking and the oilseeds dispute
– GATT, the Heysel Debacle and the MacSharry
Reform
• IV. Dispute Settlement and the Consensus to
Reject Rule
• V. Concluding Remarks
Agricultural Exceptionalism?
• The idea that agriculture is different from other
sectors of the economy
– more susceptible to climate and disease; low
income elasticity of demand for farm products
resulting in depressed earnings; etc.
• and that it ‘contributes to broader national
interests and goals’
– food security; public goods; the multifunctionality
of agriculture
… in GATT 1947?
• GATT 1947 covered trade in all goods
• but Articles XI and XVI, and the US waiver of
1956, limited its applicability to agriculture
• Plus, very few tariff bindings on agricultural
products
• and a reluctance to accept dispute panel rulings
• meant that agricultural protectionism (including
the EU’s common agricultural policy (CAP))
flourished
… curbed, but not eliminated, in the
WTO?
• Agreement on Agriculture overrides GATT XI
and XVI
• Tariffication of non-tariff barriers, and tariff
bindings
• Quantitative (but not particularly restrictive)
limits on domestic support and export subsidies
• A commitment to pursue further liberalisation,
tempered by recognition of non-trade concerns
But, as Tangermann claims:
‘The Uruguay Round … has also affected the
nature of the policy debate in agriculture. The
WTO has become a relevant factor in
agricultural policy making’
Two major changes in GATT/WTO
institutions enabled actors to curb
agricultural exceptionalism
• The Uruguay Round was a Single Undertaking
– Leading to new WTO rules on agriculture, and in the EU to
the MacSharry Reforms of 1992
• The WTO introduced a quasi-judicial dispute
settlement process
– Which, we claim, does impact on EU farm policy
A Single Undertaking
• Pre-1986: “GATT à la carte”
• Punta del Este Declaration: “The launching, the
conduct and the implementation of the negotiations
shall be treated as parts of a single undertaking”
– nothing is agreed until everything is agreed
• This was very important for the Europeans, but it did
mean agriculture had to be on the table too
– but little evidence to suggest that EU Farm Ministers
recognised this until late in the day
Launching the new round as a
Single Undertaking did not,
however, guarantee it would be
closed in the same fashion
• How could the developing world be persuaded
to sign-up to TRIPS, TRIMS, etc?
• If they didn’t, under GATT rules the benefits of
these agreements had to be extended to nonsignatories because of the MFN rule
According to Steinberg, by October
1990 the US and the EU had agreed
an ‘exit tactic’
• To withdraw from GATT 1947 and their current MFN
commitments
• And to create a new multilateral trade organisation (the
WTO) and re-enact GATT as GATT 1994
• The strategy worked: GATT membership switched en
block to the WTO
• But, in adopting this strategy, the EU had implicitly
accepted that agriculture would be part of the Single
Undertaking
Oilseeds
Sorry: read the paper!
Lead-up to the EU’s GATT Offer of November
1990 and the MacSharry Reform: 1
• In July 1990 EU Farm Commissioner MacSharry said:
“there can be no question of setting aside the
achievements of the CAP or to put them at risk in the
pursuit of dubious text book economic theories of
comparative advantage and international
specialisation. … The CAP exists because of the
importance given to agriculture and to the rural society
of Europe”
• but, three weeks late, at Dromoland Castle, he
proposed a 30% cut in ‘global subsidies’ to agriculture
• and we now know he was already planning ‘his’ CAP
reform
Lead-up to the EU’s GATT Offer of November
1990 and the MacSharry Reform: 2
• 30% became the basis for the EU’s GATT Offer
• But it was too little, too late, to rescue the GATT
Ministerial meeting at the Heysel (in Brussels) in
December 1990
• EU Farm Ministers now had to confront the fact that
the Single Undertaking included an acceptable deal on
agriculture
• Paving the way for the MacSharry Reforms (May
1992), the Blair House Accord (November 1992), and
final acceptance of the agriculture agreement
(December 1993)
So, GATT pressures led to the
limited MacSharry Reforms
• Which reduced support prices for cereals and beef
• Switched support from consumers (who paid through
high market prices) to taxpayers (who funded the area
and livestock payments now received by farmers)
• And, we would argue, WTO pressures led to further
CAP reform a decade later (the Fischler Reforms)
Dispute Settlement and the
consensus to reject rule
• Changing the rules still requires negotiation and
consensus (as in the Doha Round). But
interpreting (and then implementation of) the
rules now involves a semi-judicial process in
which existing policies can be challenged and
found wanting
– e.g. Brazil’s challenge to the US regime for upland
cotton
How well has the EU responded?
• We tabulated all the WTO ‘challenges’ to the CAP
• Many requests for consultations did not lead to the
establishment of panels
• The EU has ‘lost’ some low-profile cases, and made
changes to its policies: chicken cuts, geographical
indicators
• Also the EU’s approval of biotech products
– But there will doubtless be more clashes over GM
technology
• And 3 high-profile cases: beef hormones, bananas and
export subsidies on sugar
Bananas
• Predated WTO. Heady mixture of old colonial ties and
transnationals
• We endorse the view that “… it was not an ‘old-style’
trade dispute about protecting the domestic losers from
international competition” (Alter & Meunier)
• Led to a change in EU banana policy (albeit still
problematic)
• And to the decision to abandon the Lomé preferences
and redefine the EU’s trade relations with the ACPs
(African, Caribbean and Pacific States)
Beef Hormones
• Again predates the WTO
• Suffice to say the EU lost the case
• but was unwilling (or unable) to implement the
ruling
• Why?
– Consumer rather than producer interests at stake
(food policy rather than farm policy)
– Important role for the European Parliament in
decision-making
Sugar
• Australia, Brazil and Thailand successfully
challenged the EU’s export subsidies
• The EU changed its policy even though, had the
EU known of the problem in 1994, it could
have tabled an alternative set of export subsidy
constraints
– 36% cut in support prices
– and quota reductions
– bringing exports into line with WTO allowances
Why sugar and not beef? (1)
• After all:
– Complying with the sugar ruling had greater
commercial impact than would have been the case
for beef
– Concentration in sugar refining is much greater than
in the abattoir and meat-cutting industries
– And ACP and LDC suppliers of sugar to the EU
were adversely affected
Why sugar and not beef? (2)
• But:
– Institutional Context: Key role for the European
Parliament for beef hormones but not for sugar
• Food rather than farm policy: Consumer concerns about
beef hormones, but no comparable concerns about sugar
– Timing: Support for the Doha Round (another
Single Undertaking) meant that the EU felt
constrained to comply
Conclusions (1)
• The Uruguay Round (a Single Undertaking)
marked a seminal change in the treatment of
agriculture in the GATT/WTO
– Curbed (but did not eliminate) agricultural
exceptionalism, and in the EU this led to the
MacSharry Reforms of 1992
• The quasi-judicial dispute settlement process
introduced new constraints to EU farm policy
Conclusions (2)
• For sugar the EU was willing and able to comply:
– A farm policy issue determined by the Council of Farm
Ministers
– Crucial to the EU’s commitment to the Single Undertaking
in the Doha Round
• For beef, the EU was unwilling/unable to comply:
– A food policy issue determined jointly by the Council and
the European Parliament
Thank you!
• Contacts:
– cd@ps.au.dk
– A.Swinbank@reading.ac.uk
• Related papers:
– Alan Swinbank & Carsten Daugbjerg, ‘The 2003 CAP
Reform: Accommodating WTO Pressures’, Comparative
European Politics, 4(1): 47-64, 2006
– Carsten Daugbjerg & Alan Swinbank, ‘The Politics of CAP
Reform: trade negotiations, institutional settings and blame
avoidance’, Journal of Common Market Studies,
forthcoming, 2007