1[Giovanni Anania, IAAE Congress, Durban, August 2003]

The Fischler reform of the CAPThe Fischler reform of the CAP and the WTO negotiations and the WTO negotiations

Giovanni AnaniaDepartment of Economics and Statistics University of Calabria, Italy

2[Giovanni Anania, IAAE Congress, Durban, August 2003]

the presentation

the (main elements of the) EU proposals for the WTO negotiations on agriculture (January, July, and August 2003)

the implications of the June 2003 Fischler reform of the CAP for the EU position in the negotiations

…why did the EU offer what it offered in January, what is ready to offer now and why, what may be able to agree upon by the end of the negotiation…… all in 12 minutes

3[Giovanni Anania, IAAE Congress, Durban, August 2003]

market access

tariff reduction

average reduction of 36% in six years, with a minimum reduction of 15%

Tariff Rate Quotas (TRQs)

volumes: no change (increase volumes)

in-quota tariffs: no change

better discipline

4[Giovanni Anania, IAAE Congress, Durban, August 2003]

the “Everything But Arms” (EBA) Regulation (2001)

EBA

granted duty-free and quota-free access to imports of all products but arms and ammunitions from least developed countries (49)

immediate implementation for all goods but fresh bananas (full implementation by 2006), rice and sugar (2009)

5[Giovanni Anania, IAAE Congress, Durban, August 2003]

Market access to Least Developed Countries

market access

duty-free and quota-free access for least developed countries’ exports to developed and advanced developing countries

duty-free access for developing countries’ agricultural exports to developed countries should represent no less than 50% of their total imports from developing countries

6[Giovanni Anania, IAAE Congress, Durban, August 2003]

Market access to Least Developed Countries

market access

EU&US duty-free access for developing countries’ agricultural exports to developed countries should represent no less than [?]% of their total imports from developing countries

7[Giovanni Anania, IAAE Congress, Durban, August 2003]

market access & the Fischler reform

lower protection needed for rice (but need to renegotiate bound tariffs)

lower protection needed for dairy products (lower intervention prices, increase in production quotas and stringent constraints on volume withdrawn from the market at intervention prices all put downward pressure on domestic prices)

8[Giovanni Anania, IAAE Congress, Durban, August 2003]

market accesstariff reduction

tariff lines that exceed a maximum of [?]% shall be reduced to that maximum, or additional market access shall be assured through a request:offer process that could include TRQs

EU&US [?]% of tariff lines subject to a [?]% average tariff

cut and a minimum of [?]% ;

[?]% of tariff lines subject to a Swiss formula coefficient [?]

[?]% of tariff lines shall be duty-free

9[Giovanni Anania, IAAE Congress, Durban, August 2003]

export subsidy reduction

volume of subsidized exports: average “substantial” cut (all forms of export subsidization)

export subsidy expenditure: 45% reduction in six years (all forms of export subsidization)

export competition

10[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition: where are the subsidies?

EU - Export subsidy expenditure by group of products (95-01)

Wheat and coarse grain 14,5%

Sugar 12,2%

Dairy products 31,5%

Processed products 12,0%

Beef meat 19,3%

Other products 10,4%

11[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition & the Fischler reform (cereals)

Commission’s proposal to reduce intervention price by 5,9% has been rejected by the Council of

Ministers of Agriculture

…it would have probably lowered domestic prices, and certainly lowered per unit export subsidies and

made, under normal market and exchange rate conditions, export subsidies for wheat unneeded

12[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

1995 1996 1997 1998 1999 2000 2001 2002 2003

0

20

40

60

80

-20

likely impact of the reduction of the intervention price for cereals in the Commission proposal for the MTR

Common wheat. Maximum export subsidy or tax (Euro/t; open tenders; January 1995 - July 2003)

13[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

Wheat and wheat flour. Subsidised exports and maximum subsidised exports commitment

1995 1996 1997 1998 1999 2000 2001 20020

5

10

15

20

25(Million t)

Subsidised exports Maximum commitment

14[Giovanni Anania, IAAE Congress, Durban, August 2003]

Rice and Sugar: the Everything But Arms Regulation

EBA

expectations are that domestic prices will approach those prevailing on the world market

export subsidies will become an unfeasible policy instrument

Rice (Fischler reform): 50% cut of the intervention price

Sugar: to be reformed soon

15[Giovanni Anania, IAAE Congress, Durban, August 2003]

25% (butter) / 15% (SMP) intervention price reduction, small quota increase, limits to

intervention for butter

lower per unit export subsidies

likely, increased pressure on volume of subsidized exports

export competition & the Fischler reform (dairy)

16[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

1995 1996 1997 1998 1999 2000 2001 2002 20030

100

200

300

400

500(000 t)

Subsidised exports Maximum commitment

Cheeses. Subsidised exports and maximum subsidised exports commitment.

17[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

1995 1996 1997 1998 1999 2000 2001 2002 2003

0

100

200

300

400

500

-100

(000 t)

Subsidised exports Maximum commitment Unsubsidised exports

Cheeses. Subsidised and unsubsidised exports and maximum subsidised exports commitment.

18[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

1995 1996 1997 1998 1999 2000 2001 2002 20030

200

400

600

800

1000

1200

1400(000 t)

Subsidised exports Maximum commitment Unsubsidised exports

Other milk products. Subsidised and unsubsidised exports and maximum subsidised exports commitment.

19[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

1 1 1 1 1 1 1 1 195 96 97 98 99 00 01 02 03

020406080

100120140160180200220240260280300

(000 t)

Butter, public Butter, private SMP, public

Dairy intervention stocks (January 1995 - July 2003)

20[Giovanni Anania, IAAE Congress, Durban, August 2003]

export competition

if we consider the last three years and we ignore the export subsidy expenditure for rice and sugar (because of EBA) the percentage drops to 41,1% (27,7% in 2001/2002)

….and then we have to take into account the effects of the Fischler reform on the subsidy expenditure for dairy products

in the 1995-2001 period EU export subsidy expenditure was 47,8% of the maximum allowed under the URAA (47,2% in the last three years, 34,5% in 2001/2002)

21[Giovanni Anania, IAAE Congress, Durban, August 2003]

the EU does not use export subsidies for

oilseeds

the URAA allows the EU to use export subsidies, but the EU has not been using them for:

rapeseed, olive oil and tobacco

the EU, as a result of EBA, likely will soon end up not using export subsidies for

rice and sugar

export competition

22[Giovanni Anania, IAAE Congress, Durban, August 2003]

after the Fischler reform, and assuming no further cuts to producer support, the CAP still needs export subsidies for

dairy products meats

cereals (coarse grains)

export competition

...the EU can reduce export subsidies by a large amount, but needs some “flexibility” to be allowed

23[Giovanni Anania, IAAE Congress, Durban, August 2003]

export subsidy reduction export competition

trade distorting elements of export credit treated as export subsidy

disciplines for exporting STEs, including ending single desk export privileges, prohibition of special financing privileges, and disciplines on pricing practices

UE&US eliminate export subsidies for “certain products” (of importance for LDCs)

reduce subsidized exports and export subsidy expenditure for other products

24[Giovanni Anania, IAAE Congress, Durban, August 2003]

domestic support

European Union. Domestic support reduction commitments: notified AMS, support falling in the "blue box" and margin left

with respect to the maximum allowed AMS.

95/96 96/97 97/98 98/99 99/00 00/01.0

20

40

60

80

100(Bill Euros)

Notified AMS "Blue box" support Margin Maximum AMS

25[Giovanni Anania, IAAE Congress, Durban, August 2003]

decoupling

most of the EU support currently in the “blue” box and part of that currently in the “amber” box [certain payments for beef producers; support for

milk and (soon to be decided) for sugar producers] will move into the “green” box

domestic support & the Fischler reform

26[Giovanni Anania, IAAE Congress, Durban, August 2003]

“modulation”

(small) support reduction, coupled and decoupled

domestic support & the Fischler reform

27[Giovanni Anania, IAAE Congress, Durban, August 2003]

domestic support reduction [“amber” box]

UE (55% reduction in six years)

60% reduction

WTO 60% reduction in five years

domestic support

28[Giovanni Anania, IAAE Congress, Durban, August 2003]

the “blue” box

UE maintained and support reduced by 60% (i.e., the “blue” box is eliminated…)

the strongest of the two domestic support reduction options proposed by Harbinson

WTO eliminated, or maintained but support reduced by 50% in five years

domestic support

29[Giovanni Anania, IAAE Congress, Durban, August 2003]

the EU’s AMS in 99/00 was 47.9 bill €

the Fischler reform and the EU AMS

.. if we apply to 99/00 data current intervention prices for cereals and beef, those agreed with the Fishler reform for dairy products, we equal rice and sugar domestic and world prices (because of EBA) and we add 25% of current blue box support, domestic support equals 32.5 bill € !

the July 2003 EU proposal: 60% support reduction (“amber” and “blue” boxes), corresponding to a maximum allowed AMS after 6 years equal to 34.8 bill € (for the “blue” box, the base considered is 99/00)

30[Giovanni Anania, IAAE Congress, Durban, August 2003]

domestic support reduction

EU&US [?]% reduction of support in the “amber” box

domestic support

“blue” box maintained (and modified…) and support capped at 5% of value of domestic production

“de minimis” exemption made less generous

31[Giovanni Anania, IAAE Congress, Durban, August 2003]

international protection of “geographical indications” (TRIPS)

a negotiation priority for the EU!

the EU considers the negotiation on the protection of the “denominations of origin” as part of the negotiation on agriculture

….it is unlikely that there will be any deal on agriculture before a satisfactory agreement is reached on the protection

of “geographical indications”

32[Giovanni Anania, IAAE Congress, Durban, August 2003]

which are the most sensitive areas of negotiation from the EU viewpoint?

Market access Tariff reduction TRQsSpecial Safeguard Clause

Export competition Export subsidy reduction

Domestic support

Support reduction (amber box)Blue box

Geographical indications

33[Giovanni Anania, IAAE Congress, Durban, August 2003]

the January 2003 EU proposal (which was based on the 1999 Agenda 2000 CAP reform), if compared with the URAA, was already a significant step toward more liberalized trade

conclusions

the Fischler reform reduced producer support and made the CAP significantly less trade distorting

this made the July 2003 EU offer and the August 2003 EU-US joint proposal possible

immediate reactions notwithstanding, the EU-US joint proposal appears like an important step forward and a credible framework (with the possible exception of the market access component…) for the final stages of the negotiations on agriculture