What are specialty products SP in the WTO

Guide to WTO Agriculture Negotiations

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1 BMLFUW Guideline WTO Agriculture - KUCERA Guideline WTO Agriculture Negotiations Condensed knowledge and explanations for the positioning of Austrian agricultural policy at European and international level after Cancún Project work in the Federal Ministry of Agriculture, Environment and Water Management, Stubenring, Vienna Written by: DI Marcus KUCERA, Consultant for international agricultural and fisheries policy, Department III / 2 Approved by: Section Head DI Andrä RUPPRECHTER, Section Agriculture and Food (III) July 9, 2004

2 CONTENTS 1 TABLE OF CONTENTS Foreword Introduction Basic information on the WTO Concentrated knowledge of the WTO agricultural agreement ... 6 Agriculture in the WTO ... 6 The agricultural agreement ... 6 Reduction of domestic support ... 8 Amber-Box .. .8 Blue Box ... 9 Green Box ... 9 de minimis Peace Clause Export Support SPS Agreement and TBT Agreement DSB Dispute Settlement Doha Round Ministerial Conference of Cancún Original EU Modalities Proposal for Cancún New Alliances Result Derbez Text (Ministerial Declaration Rev.2) GAP reform and WTO The effects of the GAP reform Green box Blue box Amber box Export competition Market access Conclusions Status of negotiations July Effects of EU enlargement Arguments of the EU regarding developing countries Conclusions ... 35 General ... 35 non -trade concerns ... 35 Position in further negotiations Bibliography Glossary July 2004

3 FOREWORD 2 Foreword Globalization has not stopped at agriculture either. The most visible expression of this phenomenon is the strong growth in international agricultural trade. This has doubled in value every seven to eight years over the past 50 years (VON WITZKE, 2001). Agriculture has been increasingly influenced by global economic and international macro-economic developments. Globalization has led to the inclusion of agriculture in the rules of the World Trade Organization (WTO). The EU's agricultural policy therefore increasingly has to take into account the international level, including the WTO provisions. The idea for this work arose from experience gained through professional practice that the WTO and agriculture interrelationships exist in a diverse, sometimes very scientific, form, but in Austria there is no condensed document as a basis for decision-making in agricultural policy. Experts working with the subject also tend to make highly complex presentations, which in agricultural policy practice have not exactly promoted the easier understanding of the connections between WTO agricultural policy and European or Austrian agricultural policy. In the spirit of the author, the present work should therefore help to reduce fear of contact, clear up misunderstandings and offer an easier introduction to the topic. Since the present work is a project work within the framework of basic training (literature and sources are all freely accessible from the Internet), the positions represented do not necessarily have to coincide with the position of the BMLFUW. However, an attempt was made to present the concerns of Austrian and European agriculture in relation to the WTO agricultural negotiations in an objectified form and in a language that was understandable even for non-experts. About the author: Dipl-Ing. Marcus Kucera (born in Vienna) studied landscape ecology and landscape management at the University of Natural Resources and Life Sciences in Vienna and has been a consultant in the field of international agricultural policy at the BMLFUW since September 2000. His main areas of activity include conceptual, analytical and political preparatory work in connection with WTO agricultural policy and in the field of Austrian and European fisheries policy.

4 INTRODUCTION 3 1. Introduction Globalization, a catchphrase used to describe the current world economy, has become the main driving force behind the world economy. The globalized economy benefits from specialization and trade gains. Goods are increasingly being produced where it is cheapest to do so. In regular multilateral WTO trade talks, 148 states are currently negotiating (July 2004) on internationally applicable trade rules and the dismantling of trade barriers. The industrial goods sector was regulated in the General Agreement on Tariffs and Trade (GATT) until 1995. The agricultural sector was first included in the GATT framework for world trade in the Uruguay Round (1986 to 1994). In the 21st century, agriculture has to face three decisive challenges: the advancing globalization, the supply of a growing world population with food and the development of rural areas. Agriculture around the world has a special responsibility to face from these challenges. By using resources sparingly, food security and, at the same time, sustainable development of rural areas can be ensured. Agriculture is therefore of indispensable multifunctional importance for society. The globalization process, which is expanding and deepening at all levels at the same time, should therefore be influenced by active participation, especially from the point of view of agricultural policy. In world agricultural trade, the EU occupies a leading position as the largest agricultural importer and the second largest agricultural exporter. The EU is therefore interested in a functioning world trade system. In a fair world trade system and in agriculture, citizens and NGOs (non-governmental organizations, NGOs) are increasingly expecting that they will contribute to an increase in food security and promote the goals of sustainable development. 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 European Union United States Source: WTO, processed by Kucera (BMLFUW) import / export of agricultural Products in% of the value 2001 Canada Brazil China Thailand Russian Fed. CAIRNS members Malaysia Indonesia Import Export Federal Ministry of Agriculture, Forestry, Environment and Water Management

5 BASIC INFORMATION ABOUT THE WTO 4 2. Basic information about the WTO The WTO (World Trade Organization) was created in 1995 as a result of the so-called Uruguay Round as the successor organization to the GATT (General Agreement on Tariffs and Trade, 1948), which was integrated into the WTO . The WTO was founded to create an organization that would establish binding trade rules at the multilateral level. 148 countries are currently members of the WTO (July 2004). Compared to the GATT, the WTO regulates many more areas and has more power. The WTO is no longer limited to trade in manufactured goods, it also regulates rich services, intellectual property, textiles and agriculture. The founding of the GATT and the WTO is based on the economic theorem, according to which free trade is the engine and guarantor of economic growth, prosperity and innovation. Free trade should enable all countries to achieve optimal social and economic development. Formally, the WTO is an intergovernmental organization that operates on the principle of unanimity. In theory, every country has a right of veto. The highest decision-making body is the ministerial conference, which takes place every two years. The EU, represented by the European Commission, has one voice at the WTO. In the course of the founding of the WTO, further important agreements were concluded which mean an expansion of globally applicable trade rules beyond the areas of trade in goods (GATS service agreement, TRIPs agreement on trade in property rights, AoA agreement on agricultural trade). The WTO trade policy is based on the free trade principle (JOERCHEL, EGGER, 2004). This means that markets that have so far only been accessible to foreign suppliers to a limited extent are to be opened to competing suppliers and that qualitative and quantitative barriers to trade are to be dismantled. Important principles of the WTO are the principle of the most favored nation (MFN) and the source.

6 BASIC INFORMATION ON WTO National Treatment. According to the principle of most-favored nation treatment, a country that grants a WTO trading partner special trading conditions must also grant these to all other WTO member states and can therefore not treat individual states preferentially or discriminate. The principle of national treatment states that a state must treat domestic and foreign companies equally, and its own (state and private) companies must not give preferential treatment or discriminate. A point of criticism that has been raised again and again, which is understandable from the author's point of view, is that the WTO is unilaterally geared towards reducing so-called trade barriers (liberalization). This is contrary to the implementation of other international agreements and political objectives, for example in the area of ​​environmental protection. The economic importance of the WTO for overall prosperity should not be forgotten in such an approach. The negotiations on trade liberalization take place in negotiation rounds (e.g. Uruguay Round, Doha Round), which usually take place in Geneva, the seat of the WTO. At ministerial conferences, which take place every 2 years in different locations, the real or decisive decisions on the acceptance of the negotiations and further negotiation steps and topics are made. Theoretically, decisions can only be made unanimously, i.e. with the consent of all representatives of the countries present at a vote. Most of the time, however, approval is given by acclamation of previously negotiated results in plenary. The decision-making processes in the WTO are partly characterized by non-transparent decision-making structures (e.g. so-called green room meetings) and are therefore heavily criticized by both southern countries and NGOs. The WTO arbitration tribunal (Dispute Settlement Body) is the central instrument for enforcing international trade rules. Any WTO member state can take legal action against other member states in this court and the arbitration awards are binding on all WTO members. Thus, the WTO is one of the few international institutions that has a functioning system of sanctions and can therefore exert massive pressure on its members by imposing punitive tariffs or compensatory payments. The WTO conferences have so far taken place in the following countries: 1996 Singapore 1998 Geneva / Switzerland 1999 Seattle / USA 2001 Doha / Qatar 2003 Cancun / Mexico Two of the five WTO conferences so far have failed spectacularly: the 1999 conference in Seattle and the Cancun conference in Mexico in year Source: Cancun Organizing Committee website 5

7 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT 3. Compressed knowledge WTO AGRICULTURAL AGREEMENT Agriculture in the WTO The reasons for including agriculture in the WTO negotiations were increasing surpluses on the agricultural markets (eg grain, milk powder, butter), which could only be achieved through price cuts and Export subsidies could be sold. High export support resulted in high budget burdens for the individual states. Cheap imports competed with their own domestic production. The aim of the negotiations in the agricultural sector is to reduce distortions in international agricultural trade and to liberalize trade in agricultural products. Unlike the industrial goods sector, however, agriculture is tied to the location (soil, climate, topography), and its structure is at the same time an expression of the cultural landscape of a country. Agriculture not only produces products, but also provides non-commercial services (landscape maintenance, etc.) These agricultural services are summarized today in the expression multifunctionality, which was coined in the Uruguay Round. From an Austrian or European perspective, the decisive question for the inclusion of agriculture in the WTO is: How can the opening of markets, more liberal trade and globally applicable trade rules be reconciled with the multifunctionality of agriculture? The Agricultural Agreement In the Uruguay Round Agricultural Agreement, the reduction of agricultural subsidies, export support and market opening was determined based on the following three pillars: market access, internal support (domestic support) and export competition. The implementation of the modalities defined in the Uruguay Round (contents of the agreement) had to take place in the period from 1996 to 2001. Improving market access This package of measures regulates tariffing and minimum market access for products that have so far not been imported or have barely been imported. A minimum market entry of at least 5% of domestic consumption had to be granted for product groups that were hardly or not at all imported. Tariffing means that all non-tariff trade barriers (levies, levies, etc.) had to be converted into tariffs (customs duties). Customs quotas Since many countries ensure border protection (so-called external protection) primarily through quantity restrictions and not through customs duties, customs% Within the lower tariff quota Outside the higher tariff quota 6

8 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT, tariff quotas were introduced. According to the agricultural agreement, tariff-preferential import options for certain quantities of a product (e.g. t / year of beef divided between the USA, Canada, Argentina, Australia and Uruguay), as granted in the base years 1986/88, had to continue to be ensured. For the import quantities of the years 88/90, the tariff rate was retained within the scope of the quota. For quantities in excess of this, a higher tariff was applied in order to avoid the flooding of the European market with Land Gruppe avg. Customs Maximum customs Tunisia EL 77.8 230.0 India G 21 37.0 210.0 Djibouti EL 23.9 160.0 Mexico G 21 23.4 260.0 Libya EL 23.0 300.0 Egypt G 21 22.8 600.0 China G 21 19.2 71.0 Panama EL 15.1 1000.0 Venezuela G 21 14.8 25.0 Brazil G 21; Cairns 12.5 55.0 Argentina G 21; Cairns 12.3 22.5 Uruguay Cairns 12.3 35.0 Costa Rica G 21; Cairns 12.0 154.0 Bolivia G 21; Cairns 10.0 10.0 Bahrain EL 9.0 125.0 Norway 8.4 555.0 Japan 7.1 50.0 EU EU-15 5.9 74.9 USA 4.7 350.0 Canada Cairns 3, 0 238.0 Malaysia Cairns 2.1 30.0 New Zealand Cairns 1.7 7.0 Australia Cairns 1.1 5.0 Source: WTO, UNCTAD, edited by BMLF UW Kucera to prevent imported products. These duties outside the tariff quotas are calculated as the difference between the internal prices and the prices at the border. Tariffs The tariffs had to be reduced compared to the base years (1986/88) by an average of 36% for all agricultural products, but at least 15% per product within 6 years (until 2001). Current average and maximum tariff rates are shown in the table, as the EU is again (wrongly) accused of the highest average tariff rates. With its tariffs, the EU is more in the lower third. Many developing countries levy very high tariffs to protect their markets, including many emerging countries with WTO developing country status such as Brazil or Argentina. The table on the following page gives an overview of the Uruguay tariff reduction formula: 36% average tariff reduction, 15% minimum per product. This tariff reduction formula allows the flexibility to reduce tariffs for individual products less than for other products. This gives the domestic market some protection. Another method, which has not been used but is always under discussion, the so-called Swiss formula, above all, the peak tariffs are reduced much more sharply and more quickly. 7th

9 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT 8 Original duty rate 150% Original duty rate 125% Original duty rate 100% Original duty rate 75% Original duty rate 50% Original duty rate 25% Original duty rate 10%% Reduction year year year year year year Year Annual steps (% points) Comparison: Swiss formula, year 6, with coefficient = reduction of domestic support (domestic support) According to the WTO agreement, domestic support (internal support or subsidies) had to be reduced for those measures that provide an incentive exercise a volume increase in production. The individual measures were categorized according to their effect on the quantitative production. A distinction was made between three categories, so-called boxes: the amber box, the blue box and the green box. Amber-Box Source: WTO, processed by Kucera Special Safeguard Clause (SSG) The special safeguard clause (SPECIAL SAFEGUARD MEASURE SSG) stipulates that measures can be taken if the import volumes in one year are more than 125% of the average of the three preceding years . In other words, the safeguard clause applies if the tariff quota is exceeded by 25% (on average over three years). Measures can also be taken if the import price falls at least 10% below the reference price of 1986/88. The amber box includes measures that trigger a production incentive and are therefore considered to be trade-distorting. The AMS (aggregated measure of support) is used as the measure of internal support.The AMS is calculated from the domestic production quantities (Mi), the price difference between home and abroad (Pi-Pa) as well as product-related support (Sp) and taxes paid by the producers (Tp): AMS = Mi * (Pi-Pa) + Sp - Tp The average for the years 1986/88 was used as the basis. The AMS (Amber Box) had to be reduced by 20% within 6 years until 2001, whereby the level of degradation for the individual products could be determined by each country itself. The EU's amber box was already reduced in the first few years of the implementation of the agricultural agreement, which is due to the changed European agricultural policy (agenda of more direct payments to farmers instead of price support for certain products). The upper limit for the AMS set in the Uruguay Round for the EU-15 is 67.159 billion per year. In fact, according to the notification to the WTO, around 48 billion

10 COMPRESSED KNOWLEDGE OF THE WTO AGRICULTURAL AGREEMENT 9 granted to such support; the support level of the EU was thus 69% of the upper limit (ORTNER, 2003). Green Box Source: Kucera, BMLFUW Uruguay Round Agricultural Agreement Reduction of import protection and support within 6 years The 3 pillars of the WTO agricultural agreement Market access Export competition Internal support Conversion of import protection into fixed tariffs Tariff reduction% Protective clause Tariff quotas Reduction of expenditure 36% Reduction of quantities 21% Blue -Box Amber Box 20% Blue Box Green Box The so-called blue box measures did not have to be reduced. These are direct payments under programs restricting production if they are based on fixed areas and yields or are granted for a fixed number of animals. The blue box (Article 6.5 of the Agricultural Agreement) contains agricultural subsidies that are linked to production, for example to the cultivated area, yields or stock sizes, but which are also subject to production restrictions (e.g. set-aside). Overall, only a few countries use the blue box category (EU, Norway, Switzerland, Iceland, Slovakia and Slovenia). Therefore, this category has been the focus of negotiation discussions for years. In the green box (Annex 2 of the Agricultural Agreement), subsidies are classified that are assumed to have little or no trade-distorting effects. According to the agricultural agreement, this permitted support does not have to be reduced. No conditions to continue production may be associated with this support. Green box payments therefore have no direct influence on the production volumes and therefore do not, or only very slightly, distort trade or competition. The definition of the measures covered by the green box is too broad for many WTO members. Only a total of 24 of the 145 member countries notify (report) green box measures to the WTO, with 90% of the payments made here being made by the EU, Japan and the USA. The most important of the green box measures mentioned are: public services (research, disease and pest control, training, advice and information, control, marketing and advertising, provision of infrastructure) food reserves food subsidies for needy groups of people direct payments according to certain criteria non-production income subsidies loss of income Over 30% disaster aid Early retirement Structural adjustment through the set-aside of resources Structural adjustment through investment aid

11 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENTS Environmental programs Regional programs. In particular for the structural adjustment measures through intervention aid and environmental and regional programs, the condition applies that the payments concerned must not exceed the costs that the program causes or the structural disadvantage that the program seeks to eliminate. In no case may these payments depend on the current or future production volume or on the current prices. In Austria, two thirds of the support measures for agriculture can be assigned to the green box (around 1.4 billion euros / year). Amber Box support measures had to be reduced by 20% Reduction relates to the AMS production-related measures e.g. Market price support de minimis de minimis Blue Box no reduction obligation partially decoupled from production low trade-distorting direct payments in the case of generation restriction programs e.g. Animal and area premiums Peace clause Green Box no reduction obligation Decoupled from production Low to no trade distortion e.g. Environmental programs, regional aid, disaster aid According to Article 6.4 of the Agriculture Agreement, a WTO member is not obliged to include or reduce the following subsidies in the calculation of his current overall AMS: Production-specific domestic subsidies provided that these are 5% of the total value of the production of a basic agricultural product in the year in question not to exceed non-production-specific domestic subsidies provided they do not exceed 5% of the value of a member's total agricultural production. For developing countries, the de minimis percentage is 10%. The US notifies 85% of all de minimis payments in the WTO. In comparison, the EU only 3% of these payments, or around 0.3 billion euros in 1999/00. The EU calls for the abolition of this exemption for industrialized countries in order to plug the loophole for the USA. Peace clause The WTO agricultural agreement contains a clause (Art. 13) with the title due restraint, the so-called peace clause. The peace clause regulates the application of other WTO agreements to agricultural products (WTO agreement on subsidies and compensatory measures, parts of GATT 1994). It was valid during the implementation phase (9 years), i.e. until green box measures are exempt from the application of countervailing tariffs, anti-dumping measures or measures to reduce or abolish tariff concessions. Countervailing tariffs could be applied to amber and blue box measures and de minimis, but WTO member states should exercise due restraint in initiating investigations and the extent of the damage or threat must be determined beforehand. They are also exempt from anti-dumping measures or measures to reduce or abolish tariff concessions if they do not exceed the 1992 level. In the case of export support, 10

12 COMPRESSED KNOWLEDGE OF THE WTO AGRICULTURAL AGREEMENT, countervailing duties may be levied, but only if damage or a threat based on volume and prices or any other influence has been proven beforehand. With regard to export subsidies, too, due restraint should be exercised when initiating corresponding investigations. Export subsidies are also excluded from measures relating to anti-dumping measures or measures to reduce or abolish tariff concessions. In the ongoing negotiation process for a new agricultural agreement, no WTO MS is likely to propose a dispute settlement procedure regarding internal support and export subsidies, even though the Cairns Group has threatened such. Such a procedure would massively affect the negotiations on the further dismantling of this support and make a compromise impossible. Apart from that, the procedures take about 1 ½ -2 years (this is usually followed by an implementation period of 15 months), ie compensatory measures would probably only become effective after the definition of a new agricultural agreement, or at least after the definition of its modalities, and thus become more important to lose. In addition, the claimant would have to prove a specific violation of WTO provisions, which will be difficult, since the provisions are very clearly formulated and are also complied with by the EU. 11 Internal support notified to the WTO in 1999/00 in billion euros, 89 46.04 Amber Box (curr. AMS) Green Box created on the basis of the 1999/00 notifications converted into euros at the interbank spot rate BMLFUW III / 2 DI Marcus KUCERA 30 Blue Box 20 19.9319.79 15.61 12.01 "de minimis" 20,, 84 0 0.31 0.00 0.12 0.73 0.00 0.01 0.72 1.06 EU USA Australia Japan

13 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT 12 The following table shows examples of domestic subsidies in Austria according to WTO categories. Area premiums for grain and maize Oil and protein crops Other crops Set aside vineyard set aside Animal premiums Premium for suckler cows Premium for female calves Premium for ewes Special premium for male cattle Slaughter premium Supplementary contribution for livestock farming premium Extensification premium for male cattle and suckler cows Promotion of the starch potato cultivation area in the mountain area Extensivization premium for milk potatoes Seed cultivation Promotion of tobacco cultivation Environmentally friendly measures Environment program (ÖPUL) Other environmental measures Energy from biomass Quality improvement Plant cultivation Animal husbandry Milk Green box Blue box Amber box de minimis Structural measures Compensatory allowance for disadvantaged areas Agricultural investments Subsidiary subsidies Individual and collective investments Processing and marketing Sector plans Adaptation and development from rural areas measures in Objective 1 and 5b areas Community initiatives (Leader plus) Community initiatives (Leader, Interreg) Producer associations Sales promotion measures Restructuring aid for viticulture Interest subsidies as part of investment promotion Transport development in rural areas Machine and operating aids as well as courses Improvement of the market structure Marketing measures Innovation promotion Organic associations Agricultural operations Agricultural hydraulic engineering Contributions in the context of mountain pasture management Agricultural housing research and, education and consulting Research and advice Adult education Vocational training Natural damage compensation Frost damage Drought damage Subsidies for hail insurance Subsidies for frost insurance Animal diseases (control, compensation) Other

14 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT 13 Export support According to the agricultural agreement, agricultural products that are exported with subsidies had to be reduced in volume by 21% and in budget by 36% compared to the reference period (). Currently, 25 WTO-MS grant export support for products or product groups that have been specified in the WTO lists of obligations (the EU for 20 product groups). Countries that have not set any reduction commitments cannot grant export refunds. The EU currently grants 90% of all export support notified to the WTO, around 2.7 billion euros in 2000/01. In comparison, the USA grants US $ 15.2 million and Australia no export refunds at all. The following graphic shows the products for which EU export support is granted (20 product groups, 2000/01). In addition, the share of the supported export volumes in the total export volumes is shown, i.e. for some areas the export support plays an important role (butter, beef, etc.). Support level in% Export support level of the total export quantities for the EU 2000 / butter and milk fats beef eggs other dairy products wheat and wheat flour alcohol cheese rice milk powder coarse grain fruit and vegetables, fresh poultry fruit and vegetables, processed wine sugar pork rapeseed olive oil raw tobacco created on the basis of the notifications 2000 / 01 BMLFUW III / 2 DI Marcus KUCERA Export refund from the EU in 2000 (million euros) Federal Ministry of Agriculture, Forestry, Environment and Water Management million euros Processed products Other dairy products Beef Sugar Butter and milk fats Cheese Coarse grains Wheat and wheat flour Alcohol Poultry Pork Rice Fresh fruit and vegetables Milk powder Wine Eggs Processed fruit and vegetables Rapeseed Olive oil Raw tobacco Export refunds EU expenditure in million euros 0 Processed products Other dairy products Beef Sugar Butter and milk fats Cheese Coarse grains Wheat and wheat flour

15 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENTS SPS agreements and TBT agreements Sanitary and phytosanitary as well as technical regulations and standards vary from country to country. Therefore, the WTO set of rules tries to establish international rules for the application of these regulations. The SPS Agreement is of particular importance for the trade in agricultural products. The TBT Agreement, which mainly concerns trade in non-agricultural goods, is nonetheless applicable to agricultural trade in certain cases. For example, this includes packaging and labeling regulations. In order for the trading partners to find out about the current regulations, measures, standards, testing and certification procedures, etc. and to question them if necessary, a notification to the WTO Secretariat must be made in accordance with both the SPS and the TBT Agreement. A national notification authority and a national information point must be set up. In Austria this is the Federal Ministry of Economics and Labor, in the EU the European Commission. International organizations corresponding to the Convention on Sanitary and Phytosanitary Measures (e.g. Codex Alimentarius, International Office for Animal Diseases) are only permitted if scientifically justified and after an objective risk analysis. Precautions that cannot be justified in this way are only permitted for a limited period. The Agreement on Technical Barriers to Trade The TBT Agreement tries to ensure that technical regulations and standards etc. are not drawn up with protectionist intentions and do not create unnecessary barriers to trade. To protect life and health, to protect the environment or to safeguard consumer interests, for example, every country has the right to set the standards it deems appropriate and to take the necessary measures. These should be based on the available scientific and technical information. If possible, international standards should be used as a basis. Imported goods may not be treated worse than similar goods of domestic origin or similar goods from another country. The WTO members are required to examine the recognition of the equivalence of technical regulations of other members. 14 This agreement, which is important for agriculture, gives its members the right to impose import restrictions in order to protect the life and health of humans, animals and plants, provided that this does not result in unjustified discrimination or a hidden barrier to trade. If the exporting country can prove that its measures correspond to those of the importing country, their equivalence is to be recognized by the importing country. Each state can determine for itself the level of protection that it considers appropriate. Higher standards than those of the

16 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT DSB Dispute Settlement Since 1995, when the WTO was founded, the dispute settlement mechanism has been a cornerstone of the organization. From an international perspective, the dispute settlement mechanism is the only functioning instrument with effective sanctions. The Dispute Settlement Understanding (DSU) is a horizontal WTO agreement. It contains rules and procedures for resolving disputes that may arise between WTO members in the implementation of the various WTO agreements. The Dispute Settlement Body (DSB) is responsible for carrying out the DSU. The DPO is authorized to set up panels, to accept reports from the panels and the Appellate Body, to review the implementation of the recommendations of the panels and to authorize WTO members to suspend concessions. Selected examples EU as accused: EU hormones: opponents: USA and Canada The EU has lost this case. Punitive tariffs of $ 116.8 million (USA) and $ 11.3 million were imposed. The scientific studies commissioned by the EU have not yet been fully completed to this day. Bananas: Opponent: USA Ecuador Guatemala Honduras Mexico. A number of Latin American countries joined as third parties. Retention measures: against Ecuador 201.6 million US dollars, against the USA 191.4 million US dollars. The EU lost the dispute and had to change its banana import regime, the sanctions were then suspended and the dispute is over. Export refunds for sugar: Opponents: Brazil, Australia and Thailand. Most ACP countries are interested third parties and take a pro-EU position. The opposing parties question the European sugar market regime; a panel was installed, the panel statement is still pending. Genetically modified organisms: Opponents: USA, Argentina and Canada. An application was made to set up a panel on. A panel was set up at the DPO meeting on. This case concerns the EU moratorium on GMOs (the authorization of genetically modified products has been suspended for an indefinite period). The panel application is also directed against individual EU member states, including Austria, which have imposed an import ban on GMOs. Austria advocates maintaining the existing moratorium as long as the issues of coexistence, traceability, labeling and liability have not been resolved. A corresponding motion for a resolution was passed in the Austrian parliament in the EU sub-committee with the votes of all parties. 15th

17 COMPRESSED KNOWLEDGE WTO AGRICULTURAL AGREEMENT 16 EU as prosecutor: The panel process USA - Foreign Sales Corporations: The EU won this dispute. The EU received Mill.US dollars granted as compensation. Australia - SPS measures: The EU submitted this panel proposal because Australia has very restrictive veterinary and phytosanitary import regulations. This case is still ongoing. On August 28, 2003, the EU asked the WTO to rule on the legality of Australia's quarantine regime for imports of a wide variety of foods of interest to the EU. The consultations between Australia and the EU held in May 2003 did not lead to any resolution of the problems with access to the Australian market. The EU therefore had no choice but to challenge these restrictive trade practices through the WTO dispute settlement procedure. Source: WTO

18 DOHA ROUND Doha Round New round of WTO negotiations As early as when the GATT / WTO agreement was signed in Marrakesh in 1994, it was decided that the next WTO round should begin in 2000. The new world trade round should have been launched at the Ministerial Conference in Seattle in November 1999. But this did not succeed because the positions of the various countries were too different. After this ministerial conference, the WTO members decided on the one hand to take measures to strengthen confidence in the world trading system, especially among developing countries. On the other hand, negotiations continued with a view to starting a new world trade round. At the ministerial conference in Doha / Qatar in November 2001, the new world trade round, the Doha Round (so-called Doha Devlopment Agenda, DDA) was launched. According to the timetable, the modalities (contents) for a new agreement should have been determined by the end of March 2003. However, due to the strongly diverging interests of individual groups, this did not succeed. The divergent positions in the agricultural dossier have in some cases also led to a blockade in other dossiers. The other branches of the economy are therefore increasingly exerting massive pressure to press ahead with the agricultural negotiations. The disputes in the agricultural negotiations can be traced back to a different understanding of the role of agriculture in the national economy and society. The idea of ​​a purely food-producing agriculture meets the concept of a multifunctional agriculture that provides public lines in addition to food. Doha Ministerial Declaration on Agriculture WT / MIN (01) / DEC / W / 1 14 November 2001 AGRICULTURE 13. We recognize the work already undertaken in the negotiations initiated in early 2000 under Article 20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf of a total of 121 members. We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a program of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this program. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture. 14. Modalities for the further commitments, including provisions for special and differential treatment, shall be established no later than 31 March Participants shall submit their comprehensive draft Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference. The negotiations, with respect to rules and disciplines and related legal texts, including shall be concluded as part and at the date of conclusion of the negotiating agenda as a whole.

19 CANCÚN MINISTERIAL CONFERENCE 5th Ministerial Conference in Cancún The aim of the agricultural negotiations at the Ministerial Conference in Cancún (Mexico) in September 2003 was to bring the different interests together to a consensus and to make up for the definition of the modalities for a new agricultural agreement (originally March 2003 ). The Cancun Ministerial Conference failed, but not primarily because of the agricultural negotiations. The discrepancies in the Singapore topics (investment policy; public procurement; trade facilitation; competition) were the decisive factor in breaking off the ministerial conference. It is difficult to say whether a compromise on agriculture would have been possible in Cancun, as the ministerial conference was broken off before intensive negotiations on the agricultural issue. Original EU modalities proposal for Cancún Reduction of export refunds by an average of 45%. Products (guidelines) Consideration of the special needs of developing countries (Special and Differential Treatment): o Obligation of the industrialized countries and the more developed EL products of the least developed EL to grant duty-free market access o Industrialized countries should ensure that at least 50% of imports from developing countries no duty is levied o Reduce tariff escalation for products sold for EL from 18

20 CANCÚN MINISTERIAL CONFERENCE ooooooo particular importance is given to promoting technical assistance, as in the UR, longer transition periods and lower reduction steps are to be agreed for EL Establish obligations in currencies of stable value Introduction of a food security box for EL A special safeguard clause for certain products De minimis regulation up to 10% The value of production Food security: review exceptions to the reduction commitment New alliances The agricultural negotiations in Cancún gave rise to new camps with more or less coinciding interests, while groups such as the Cairns Group and the group of multifunctionalists no longer performed their traditional roles. The main groups of Cancún in agriculture are: The US-EU alliance, which was sealed by a joint text on August 13, 2003. This agreement clearly had the greatest influence on the content of the draft ministerial declaration in the agricultural sector.

21 CANCÚN MINISTERIAL CONFERENCE 20 20 developing and emerging countries formed a second important alliance. Brazil, China, India and South Africa emerged as spokesmen for the G20. On September 4, 2003, this group presented a tactical counterproposal, which in some points went much further than the proposal of the US-EU alliance. The formation of this group was a surprise and must be seen as a diplomatic masterpiece of Brazil. The agricultural exporters in the group have succeeded in getting their interests, which they previously represented in the Cairns Group, to be carried by other developing and emerging countries and thus giving their concerns a development-policy cover. Switzerland, together with Bulgaria, Iceland, Israel, Japan, Liechtenstein, Mauritius, Norway, Switzerland, South Korea and Taiwan, formed the G-10 group, whose members took a more moderate position, especially in the negotiations on tariff dismantling and the reduction of domestic support than the two aforementioned camps. Central to the demands was the granting of a certain flexibility to domestic sensitive products. A heterogeneous group of developing countries, which consisted of an alliance around Indonesia, advocated the greatest possible special treatment of their special products (Special / Strategic Products) as well as a special protection clause (G33). A grouping of several small structurally weak developing countries expressed concern about the erosion of their tariff preferences on the markets of the industrialized countries and called for compensation for the erosion of preferences (G90). These last two groups show that the group of developing countries is not homogeneous and that interests sometimes diverge. The cotton initiative developed by four African countries was included as an independent topic in the draft ministerial declaration. The initiative calls for the abolition of subsidies for the export of cotton and therefore primarily affects the US. However, the US has shown no particular willingness to address this concern.

22 CANCÚN MINISTERIAL CONFERENCE Result Not only because of the EU-US agreement on a common framework for negotiations in the run-up to the ministerial conference, an agreement on the contents (modalities) of a new agricultural agreement seemed within reach in the field of agriculture. In the end, however, the last compromise proposal was not negotiated at all. The EU had offered significant and targeted measures to improve market access for developing countries and was ready to make major concessions in reducing trade-distorting agricultural subsidies. In the area of ​​export promotion, the EU had offered developing countries to gradually phase out export support for products that are important to them. The controversial points of the revised draft of the ministerial declaration were above all the speed at which the so-called blue box measures (direct payments such as area and animal premiums) and the provisions and criteria of the green box measures that are important for the European, multifunctional agricultural model (e.g. Environmental measures, support for rural development and the single farm payment decoupled from production as part of the CAP reform of June 2003). The EU pleaded for this WTO funding category to be retained unchanged, since these green measures do not show any trade-distorting effects and also have no influence on production. Derbez-Text (Ministerial Declaration Rev.2) The ministerial declaration presented by the Mexican Minister for Economic Affairs DERBEZ in Cancún provided for stricter modalities in the area of ​​internal support than had been agreed between the EU and the USA and was therefore rejected by the EU (additional upper limit AMS, upper limit AMS + Blue-Box + de minimis). An additional linear reduction of the blue box had to be rejected because it went beyond the offered 60% reduction (limited to 5% of the agricultural production value). Negotiations on new green box criteria (including an upper limit) were also to be rejected. In the area of ​​market access, the proposed tariff reduction (average across all agricultural products and not, as before, various categories with the option of lower tariff reductions for sensitive products) and a reduction in tariffs for tariff quotas were rejected. In the area of ​​export competition, setting a date for export support to expire was not acceptable. The continuation of the peace clause was supported. The Drebez text will, however, serve as a starting point for further negotiations. 21 Dr. LUIS ERNESTO DERBEZ

23 CANCUN MINISTERIAL CONFERENCE 22 Possible reasons for the failure of Cancun First appearance of the new G20 group (Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Cuba, Ecuador, Egypt, El Salvador, Guatemala, India, Mexico , Pakistan, Paraguay, Peru, Philippines, South Africa, Thailand and Venezuela) long wait by the presidency before the presentation of new compromise proposals (48 hours) no willingness to compromise in the African group rejection of the cotton initiative by the USA (EU for) early termination of the talks , after which there was no progress on Singapore issues (Mexican Presidency) in agriculture and in other areas the detailed negotiations had not even started Overview of the results of the Uruguay Round (starting point for the Doha Round) Cancún Lagoon Source: WTO

24 CAP REFORM AND WTO CAP reform and WTO The effects of CAP reform The reform of the CAP in June 2003 decoupled a large part of direct payments to agriculture from production. This will enable the EU to transfer these payments from the blue box to the green box. This corresponds to a reduction in the blue box of around 75%. Effects of decoupling on the WTO obligations of the EU 1 Blue Box area payments in million euros Measure currently decoupling 75% 25% remain in the Blue Box Maize 1159.0 289.75 Grain 8,841,, 40 soybeans, rapeseed and 1,318.00 329, 50 sunflowers, peas, broad beans and broad beans and 524.30 131.08 sweet lupins, flax except for fiber flax (linseed) 306.60 76.65 set aside obligation in connection with the 1848.00 462.00 area payment for grain durum wheat 1006.20 251.55 rice 124.30 31.08 Animal premiums in million euros Source: BMLFUW The scope of the EU in the WTO negotiations, especially in the area of ​​internal support, has been massively expanded as a result of the CAP reform. The green box, which is now increasing (up to 76%; see table), is not expected to be fundamentally called into question in the negotiation process. The increased leeway in internal support means that the EU can exert increased pressure on the USA in terms of export competition (loans, state trade, food aid) and the de minimis loophole. Scenario decoupling suckler cow premium 0 slaughter premium 0%% slaughter premium sheep 50% 60% sheep 50% male cattle 25% sheep 50% suckler cow premiums 1628,, 4 0 0 male cattle 1299,, 3 slaughterings (seasonal equalization premium) 2.60 1.04 2.6 0 Ewe and goat premiums 1,733.80 866.9 866.9 866.9 Total Blue Box 19792,,,, Addition value from decoupling in million euros 13513,,, 90 New Green Box in million euros Euro 33,444,,, 40 Green Box increase% starting point values ​​1999/00 Reduction of the Blue Box% Green Box (19,930.50 million Euro 1990/00)

25 GAP REFORM AND WTO Green Box The formulation of future green box criteria (e.g. preventing an upper limit) will remain the most important concern for the EU in further negotiations, alongside non-trade concerns and the peace clause. The unchanged retention without a cap - this WTO category for internal support is of central importance in the current WTO negotiations, since the EU will categorize its subsidies from the blue box to the green box in the coming years. In addition, over the next few years, more EU funds will flow into measures for rural areas, which also fall into this category. At the moment in July this unchanged retention of the green box does not seem to be questioned anymore from the point of view of the WTO member countries and the transfer resulting from the decoupling will also correspond to the rules of a new WTO agricultural agreement. Blue box A strong reduction in the blue box is possible for the EU after the CAP reform (the possible reduction for the EU is between 68 and 76%). In the negotiations, it will now be important to defend the blue box per se, since around 25% of the payments to be categorized as such remain in the blue box. (USA and Cairns Group call for abolition, only 5 out of 148 WTO-MS use the Blue Box). The reduction in the blue box and the increase in the green box can only be roughly estimated after it depends on which decoupling scenario the individual EU member states choose for implementation. At the end of the implementation of the CAP reform (2013), two thirds of the current blue box measures will probably have moved into the green box. However, since some measures remain in the blue box, the defense of the category per se will play a role in the negotiation process. Even before the end of the Uruguay Round, it was planned to include the blue box in the AMS and thus reduce it. In a concession by the USA to the EU (Blair House Agreement), the blue box was ultimately exempted from the reduction obligation. Amber box More leeway is created as a result of the CAP reform through price reductions in some market regimes, including for trade-distorting support in the Amber Box (AMS). The decoupling of direct payments in the beef sector and the lowering of the intervention price for butter, grain and rice can reduce the EU's AMS, as EU prices will gradually be brought closer to world market levels. The 55% reduction in the AMS proposed by the EU was realistic even before the CAP reform. According to the EK, there would be a possibility of reduction of up to 70% through Agenda 2000 alone. Amber Box support measures had to be reduced by 20% Reduction relates to the AMS production-related measures e.g. De minimis market price support blue box no reduction obligation partially decoupled from production low trade distortion direct payments in the case of generation restriction programs e.g. Animal and area premiums Peace clause Green Box no reduction obligation Decoupled from production Low to no trade distortion e.g. Environmental programs, regional aid, disaster aid 24

26 GAP REFORM AND WTO Currently only 69% of the permitted AMS level is used by the EU. As a result of Agenda 2000 and the 2003 CAP reform, analysts assume that the EU can reduce this value even further to 50-60% after a new agreement.In the EU's negotiation proposal, a 55% reduction was offered and the EU will therefore be able to meet the obligations in the area of ​​the amber box with the new agricultural policy. Export competition The export subsidies in the EU are the result of the complex support system for the individual agricultural sectors. The reduction in intervention prices through the CAP reform creates little scope for the EU to reduce export support. However, export support will continue to play an important role as an agricultural policy instrument, especially in the areas of sugar, butter, cheese and beef. Analyzes confirm that the EU may be able to maintain prices in the grain sector without export support. In the other areas mentioned above, however, this will only be possible with great difficulty. Currently, 25 of the 148 WTO member states grant export support for products or product groups that have been specified in the lists of obligations (the EU for 20 product groups). WTO states that have not stipulated any reduction commitments cannot grant export refunds. The EU's export subsidies have already declined sharply in recent years: As part of the liberalization of world trade, the EU has significantly reduced export refunds for agricultural products. Ten years ago, EU spending on export refunds was around 10 billion euros. At that time, this corresponded to around 30% of the expenditure of the European Agricultural Fund (EAGGF). In 2000 the reimbursements only burdened the Community budget with around EUR 5.6 billion and in 2002 it was only around EUR 3.4 billion. This means that only just under 9% of the resources of this agricultural fund were used for export refunds. The refunds granted so far enabled the sale of agricultural products on the world market. Meat and meat products, milk and dairy products as well as grain and sugar consume the largest share of export refunds. Together these products account for around 85% of the total export subsidies. The reimbursements for these agricultural products have, in some cases, been sharply reduced in recent years: For milk and milk products, expenditure has fallen by more than 50% since 1993, to most recently 1.16 billion euros. In the case of beef and veal, expenses for reimbursements even shrunk by almost 80% between 1993 and 2002, to recently only 387 million euros. So that the European market can continuously adapt to the changed conditions, no date should be set for the expiry of the export support option at this point in time. The EU's arguments for export support Source: European Commission The EU exports to world markets at world market prices. However, it does not set these prices itself. Rather, they result from the global market conditions that are determined by some large, developed exporting countries in the area of ​​crops that are important for the food supply, such as: B. the USA, which grant so-called "deficiency payments" on a large scale, and some countries of the Cairns group. The EU has responded when its exports were found to have had negative effects, as was the case with beef exports to West Africa in the 1980s. It has discontinued its aid for certain products. However, experience shows that the markets that make up the EU 25

27 CAP REFORM AND WTO, are often occupied by products that come from other developed countries and are just as competitive with or without subsidies. Thus, the positive effects of the abolition of export subsidies are overstated. Some WTO members grant state-supported export credits for a significant portion of their trade in order to secure market share in developing countries. According to an OECD study, US publicly-supported export credits amounted to $ 4 billion in 1998. It greatly distorts trade and such loans should be disciplined as much as other forms of export support. Price formation by state trading companies to which the state has granted special rights or privileges should also be subject to discipline. Cross-subsidization, price pooling and the like are incompatible with fair business practices and should be addressed during the ongoing WTO negotiations. The export of surpluses from agricultural production as "spurious" food aid can also have a negative impact on the cultivation of crops that are important for food supplies in developing countries. This is especially true of the US, which provides more food aid when prices are low and less when prices are higher. The prices of some agricultural products are artificially depressed in the USA by the system of "deficiency payments". This system guarantees farmers a minimum income regardless of the price at which they sell their produce. In addition, the world market prices are often derived directly from the artificially low US prices, so that the "deficiency payments" depress the world market prices for many products to a far greater extent than the EU export refunds. The EU has respected the commitments it made in the field of export refunds during the Uruguay Round and is aiming to further reduce it. However, it believes that all other forms of export support should also be disciplined. Market access This area was not addressed by the CAP reform and therefore there will not be any greater leeway for the EU in terms of market access in view of the WTO negotiations. In addition to export competition, it will also be the most difficult area of ​​negotiation in the Doha Round. Sugar, butter, cheese and beef are also to be named as the most sensitive areas when it comes to market access. Conclusions At present (July 2004) two main areas are crystallizing for the EU in the WTO agricultural negotiations, namely market access and export support. In these areas, the CAP reform has not created the same room for maneuver as it did with internal support. The offer made by the European Commission in May 2004 to make export support available (abolition) can be explained in this sense, but is associated with the great risk of not being reciprocated by the other WTO partners. From an Austrian point of view, the offer at the present time does not seem entirely understandable because this agricultural policy instrument has only recently proven useful in the recovery of sensitive markets, most recently in pork, also in the opinion of the European Commission. 26th

28 NEGOTIATING STATUS MAY Negotiating status July 2004 Despite far-reaching offers from the EU (expiry of export support), a concrete solution in all three negotiating pillars (market access, internal support and export competition) is not yet visible (but there are certainly opportunities). The positions of the WTO members are far apart. With regard to the upcoming US presidential elections and the change in the EU Commission, there is only a narrow window of time until the end of July 2004 to reach agreement on a WTO framework text in agriculture, the key area for the entire WTO round (Doha round). (negotiations will not resume in August). Should no agreement be reached, the WTO round would be seriously jeopardized. Negotiations are currently ongoing at the informal level (bilateral and multilateral, WTO ambassador). The MS will be reported retrospectively by the EC. Tim GROSER (Chair of WTO Agriculture) made a comprehensive statement in the WTO Trade Negotiation Committee on, which already suggests the content of the draft framework text, which is to be distributed on July 14, 2004. Much of the content is still open and may not have to be negotiated until a framework text has been approved at the end of July. According to GROSER, it is becoming apparent that, in the area of ​​internal support, the amber and blue boxes and the de minimis must be shortened (acceptable from the EU's point of view). The green box appears to be undisputed (a necessity from the EU's point of view due to the decoupling). However, the green box criteria could only be reviewed after the framework agreement had been adopted. In export competition there is a convergence that a point in time for the expiry of all forms of export subsidies is fixed. How the equivalent provisions (parallelism) for export credits, state trade and food aid should look like, however, has to be negotiated first (relevant from the point of view of the EU). The EU's negotiating offer to abolish export support (letter from Commissioners Fischler and Lamy) and to refrain from negotiations on most Singapore issues did not, however, lead the multilateral round of negotiations out of an impasse. In terms of market access, the blended formula, which would have allowed special treatment of sensitive products, did not meet with general approval, so that the idea of ​​the so-called banded formula or tiered approach could now be applied (tariff bands staggered according to the current customs level and different future reductions in tariffs). The treatment of sensitive products according to this approach is still open and decisive (especially from the point of view of the EU). According to the EK, there is little hope of a compromise on market access. Due to the questions that have not yet been resolved, the July Framework Agreement could only be weakened to consolidate the current progress of the negotiations (without any really concrete stipulations). Source: European Commission ,; Commissioners Fischler and Lamy

29 EFFECTS OF EU ENLARGEMENT Effects of EU expansion In May 2004, the European Union was expanded to include ten more states. The eastward expansion also influences the agricultural policy position of the EU in the WTO negotiations (IAMO, 2003). For the new member states, joining the EU is directly linked to the adoption of European trade and agricultural policy. All candidate countries are already members of the WTO and on average have lower tariffs than the EU. With the enlargement, the acceding countries will adopt the higher tariff level of the EU. In accordance with the WTO's basic principle of most-favored-nation beneficiaries, the new burdens resulting from the adopted customs and trade barriers vis-à-vis the other WTO member states as a whole must not be higher or more restrictive than was the case before integration into the customs union. According to Art. XXIV, Paragraph 6 of the GATT, WTO members may demand a trade-policy balance in the event that their own trade interests are impaired. In this case, the EU must grant tariff concessions to the damaged countries for certain products and import quantities. This already took place during the last EU enlargement via the so-called Art. XXIV.6 negotiations. Accession does not lead to an increase in the EU's export subsidy framework, since the acceding countries have hardly or no export subsidies in the WTO. In fact, on balance, the export subsidies permitted for the Union are reduced if they are reduced by the part that was previously attributable to EU exports to the acceding countries (so-called netting-out), as was the case with the accession of Sweden, Austria and Finland was the case. According to the WTO, in 2000, for example, in Poland, the largest accession country, 28.4% of the total internal support payments were for amber box measures and 72% for green box measures, while support payments corresponding to the blue box were not at all were used. For Slovenia, the country in Central and Eastern Europe with the highest level of production, the support services were divided into boxes of 9% amber box, 14% blue box and 77% green box. The corresponding proportions for Latvia are 24% amber box, 0% blue box and 76% green box (IAMO, 2003). Source: The enlargement will not have any notable influence on the AMS volume of the EU, since here too the acceding countries have only committed very small support contributions within the framework of the GATT. To