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External negotiations affecting regulated trade in sugar TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME Marc ROSIERS 09.06.05.

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Presentation on theme: "External negotiations affecting regulated trade in sugar TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME Marc ROSIERS 09.06.05."— Presentation transcript:

1 External negotiations affecting regulated trade in sugar TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME Marc ROSIERS

2 2 Table of contents n Non preferential Trade – Multilateral agreements n Uruguay Round Agreement on Agriculture n Doha Development Agenda n WTO Panel on the Sugar CMO n Preferential Trade – Bilateral Agreements n EU-ACP n EU-Mercosur n EU-Euromed – Unilateral Agreements n Generalised System of Preferences – Rules of Origin n Conclusion

3 n Multilateral Agreements – Uruguay Round Agreement on Agriculture (URAA) 1995 – Doha Development Agenda – WTO Panel no the Sugar CMO Non Preferential Trade

4 URAA 1995 n Uruguay Round Agreement on Agriculture – Domestic Support n Amber, Blue and Green Boxes – AMS = Aggregate Measure of Support – The de minimis rules – Export Subsidies n Reduction in value and in volume – Market Access n Import Tariffs + Special safeguard clause n Minimal Access (tariff rate quotas) – Single undertaking – Peace Clause until

5 URAA 1995 n Impact on sugar : limited – Domestic Support n Pro memory – Export Subsidies n -36% in value ( 499,1 millions) n -21% in volume (1.273 thousand tons) n + waiver on ACP reexports n + introduction of a procedure to declassify quota in the Sugar CMO in order to respect the URAA engagements

6 URAA 1995 n Impact on sugar : limited – Market Access n Import tariffs – From variable tariffs to fixed tariffs – reduction of fixed rights of 20% Raw Sugar from 424 /t to 339 /t White Sugar from 524 /t to 419 /t – Additional rights (special safeguard clause) – WMP (World Market Price) + fixed tariffs + additional rights = 200 /t /t + 109,6 /t = 728,6 /t n Minimal Access = 5% of the internal consumption (TRQ = t) – Is covered by the existing preferential trade agreements (ACP, MFN, SPS)= t (MSN = t)

7 World Market Price Additional Rights Fixed Tariffs Intervention price + storage costs + regional support 700 /t Import Price /t World Market Price URAA /t

8 Computing the additional rights n Base – Art 5.5 of URAA 95 : Special Safeguard Clause n Additional tariffs = – The sum of the difference between the representative price and the trigger price, expressed in % of the trigger price in four bands n 10% difference 10% n 40% difference 40% n 60% difference 60% n 75% difference : DDA 90% of the difference > 75% – Representative Price = average world market price (Cif) – Trigger Price = average reference price for the period 1986/88 = import price for ACP sugar = 531 /t

9 Computing the additional rights (2) 477, ,6 = 159,3 30% de 159,3 = 47,8 (3) 318, ,4 = 106,2 50% de 106,2 = 53,1 (4) 212, ,0 = 12,4 70% de 12,4 = 8,7 n Example – WMP = 200 /t – Trigger Price = 531 /t

10 n Multilateral Agreements – Uruguay Round Agreement on Agriculture – Doha Development Agenda – WTO Panel no the Sugar CMO Non Preferential Trade

11 DDA – Calender n Doha Agenda n Modalities – Cancun – 5th Ministerial Conference failure – Geneva – Framework agreement of – Hong Kong – 6th Ministerial Conference approximation n Definition of the lists by product – Agreement on the lists by product ( ) n Ratification by the member states– 2007 – USA Trade Promotion Authority (TPA) end of n Implementation starting

12 DDA – Domestic Support n Framework Agreement of July 2004 – Domestic Support - general n Amber Box – Amber Box = guaranteed minimal price – Substantial reduction of the «Average Measure of Support » (AMS) n Blue Box – Blue Box = support linked to production – Limited at 5% of the average total value of the agricultural production for the historic reference period n Green Box – Green Box = support decoupled of the production – Integration of non-trade concerns, revision of the criteria ?

13 DDA – DomesticSupport n Framework Agreement of July 2004 – Domestic Support - sugar n EU Commission : Proposals for sugar CMO – Domestic EU price is not guaranteed anymore (reference price) and drops by 40 % = 385 /t sugar (25,05 /t beet + decoupled support) – Absolute reduction of amber box – Shift from amber box to the blue and green boxes

14 DDA – export competition n Framework Agreement of July 2004 – Export competition – in general n Elimination of export subsidies in parallel with the abolition of comparable practices such as export credits, food aid and state trading enterprises – Export competition - sugar n Elimination of export subsidies – Sugar t -> 0 t period : ? – Transformed Sugar (Sugar outside Annex 1) The export subsidies for high-value added products are maintained

15 DDA – Market Access n Framework Agreement of July 2004 – Market Access – in general n reduction of fixed import tariffs (specific) – On the basis of bound rates – Tiered formula distribution in ranges according to Equivalents Ad Valorem (EAV) – much needs still to be defined – Sensitive products n Maintenance of additional import tariffs (safeguard clause) still to be negotiated

16 DDA – Market Access n Framework Agreement of July 2004 – Market Access - sugar n reduction in fixed tariffs (specific) – AVE on the basis of world market prices (Paris agreement) 419/200 = 209 % – Sugar in the largest tier (Hypothesis > 90%) Average reduction : - 60% /t /t ( %) = 368 /t 385 /t Without additional rights, the community preference is meaningless /t /t ( %) = 368 /t + 17 /t = 385 /t 385 /t Alternative : sugar as a sensitive product

17 DDA – Market Access n Framework Agreement of July 2004 – Market Access - sugar n reduction in fixed tariffs (specific) – Sugar = sensitive product Minimal reduction : - 45% /t /t ( %) = 431 /t 385 /t Without additional rights, the community preference is meaningless - prevision /$ =1,45 en 2006 (/$ =1,60 en 2007/08) $/t / 1,45 = 138 /t (200 $/t / 1,60 = 125 /t) /t /t( %) = 369 /t + 17 /t = 385 /t 385 /t TRQ (MFN) = imports with O tariff for at least 10% of the EU consumption (= t)

18 World market price Fixed Tarifs Intervention price + storage costs + regional support 700 /t Import Price /t World Market Price DDA – Market Access 385 /t Additional Rights

19 n Multilateral Agreements – Uruguay Round Agreement on Agriculture – Doha Development Agenda – WTO Panel on the Sugar CMO Non Preferential Trade

20 WTO Panel on the Sugar CMO n Calendar – September 2002 n Request for consultation by Brazil, Australia, Thailand – December 2003 n Constitution of panel (DS265, DS266, DS283) – October 2004 n Report of Panel – January 2005 n EU appeals the decisions of the panel – April 2005 n Report of the Appellate Body – May 2005 n Approval and publication of the report of the Appellate Body – July 2006 n Likely implementation date

21 WTO Panel on the Sugar CMO n Three elements of the dispute – The footnote regarding the reexports of ACP sugar is not valid – The C sugar is produced under the cost of production – The C sugar exports = subsidized exports n One requirement – Immediate stop of EU exports after condemnation

22 WTO Panel on the Sugar CMO n Four answers – Yes n The footnote has no legal value and does not influence the legal EU commitments – Yes n The C beet producers receive an export subsidy as a result of a governmental measure that allows the sale of C beet to C sugar producers under the average cost of production – Yes n The C sugar producers receive an export subsidy as a result of a governmental measure in the form of a transfer of financial means via cross subsidising in the sugar CMO – Yes n The EU has between 14 and 18 months to implement the WTO panel decisions

23 WTO Panel on the Sugar CMO n Impact on the Sugar CMO – The EU confirms its obligations vis-vis ACP countries n Export subsidies for quantities imported from ACP/India sugar becomes impossible in the existing CMO commitments. The internal market has to absorb it. n 1,600 million of tons 0 t – The C sugar exports is subject to the limitations for the quota sugar n The July framework foresees the elimination of export subsidies for sugar n 3,000 millions of tons 0 t

24 WTO Panel on the Sugar CMO n Impact on the Sugar CMO – reduction of the quotas (-16%) n Current Quotas (UE 25) – Elimination of export subsidies – Elimination of ACP re-exports – Sub total – reduction of production (-29%) n Current Production (UE 25) – Elimination of export subsidies – Elimination of ACP re-exports – Elimination of C sugar exports – Sub total

25 WTO Panel on the Sugar CMO n Impact on the Sugar CMO – Implementation of the URAA commitments on the footnote is legally defendable n 1.600t – 21% = 1.264t – What with the « accidental C sugar production »? n Is this part of « governmental measures »? – Impact of the Panel on the agricultural negotiations process n If domestic support : export of one kg/litre support becomes a form of cross subsidisation forbidden to export n Many countries/ products are in the same situation n Necessity for a negotiated definition of cross-subsidising

26 Preferential Trade n Preferential trade n Bilateral agreements n Unilateral agreements n Rules of origin

27 Preferential Trade n Sugar preferential imports [ 04/05 ] – Imports from ACP countries n 20 ACP countries – Imports SPS n 20 ACP countries – Imports EBA n 49 LDC (of which 37 ACP) – Imports under MFN n Cuba, Brazil, … – Imports of the Balkan countries n Albania, Bosnia Herzegovina, Serbia Montenegro, Fyrom – Total preferential imports

28 Preferential Trade n Preferential imports n Bilateral agreements n Unilateral agreements n Rules of origin

29 Preferential Trade n Bilateral agreements – EU-ACP – EU-SPS – EU-Balkan – EU-Mercosur – EU-Euromed – …

30 EU-ACP n Today – The sugar protocol (Cotonou agreement) – Quota at O tariff, guaranteed price n In the framework of the « Economic partnership Agreements » (EPA) negotiations are ongoing with 6 groups of countries n Aim : creation of a free trade zone between the EU and the six regions – Every zone becomes a common market with an Common External Tariff

31 EU-ACP n Impact on sugar – Confirmation of the EU commitment to import 1,6 million tons – Action plan with measures following the EU Sugar CMO n Impact of the negotiations at the WTO – Erosion of preferences – Possibility to introduce a special safeguard clause for protecting against imports of third countries n Protection against the volatility of the world market prices stabilisation of the internal market

32 EU-Mercosur n Aim of the negotiations – reduction of the import tariffs for almost all products and services over a period of 10 years n Offer Mercosur – 83,5% of UE imports – Products divided in 5 categories n A : immediate elimination of tariffs n B : progressive elimination over 8 years n C : progressive elimination over 10 years n D : progressive elimination over 10 years with different pace than C n E : progressive elimination over 10 years with different pace than C and D

33 EU-Mercosur n EU Offer – 91% of the Mercosur imports n E : sensitive products – No tariff reduction, but TRQ – m3 bio ethanol – Single pocket negotiations n Explicit linkage between the preferential and multilateral trade negotiations of the DDA n Example : TRQ bio ethanol in 2 steps – Step 1 : immediately – Step 2 : according to the DDA negotiations n Calendar – Normally an agreement in October 2004 – Linkage with the agricultural negotiations of the WTO

34 EU-Euromed n Aim of the negotiations – Drastic liberalisation of trade in agricultural goods except for sensitive products n EU – sensitive products (including sugar) TRQ n Calendar – Start of negotiations : October 2005 – Implementation : 2007

35 Preferential Trade n Preferential imports n Bilateral agreements n Unilateral agreements n Rules of origin

36 Unilateral Agreements n EBA (Everything but arms) – Is part of the Generalised System of Preferences (GSP) of the EU since2001 n Quota and duty free imports from the 49 LDC – Sugar, rice, bananas: transition measures n For the period 2001 to 2009 – Guaranteed price for quota – quota +15% per year until 2009 – Tariff reduction outside quota from 2006 onwards 0 in 2009 n After 2009 – Free imports (= without quotas, no guaranteed price)

37 Unilateral Agreements n Evolution of imports under EBA n The potential export through full market access is estimated at 2,2 millions of tons

38 Preferential Trade n Preferential imports n Bilateral agreements n Unilateral agreements n Rules of origin

39 Preferential Trade n Revision of the Rules of Origin – Calendar n : Communication of the EU Commission n : Project of regulation n Discussions in the Customs Code Committee n Agreement expected in the autumn 2005 n Implementation – First GSP – Followed by ACP – APE negotiations – Followed by successive implementation of other agreements

40 Preferential Trade n Revision of the Rules of Origin – Proposals of the EU Commission n Definition of preferential origin on the basis of added value approach – Net production costs – Definition of added value thresholds – Elimination of the list of minimal transformation n Modifications of customs procedures for the control of preferential origin – The importer takes the commercial risk – List of registered exporters – Control of economic operators and the origin of products by customs authorities

41 n Method based on – Net Production Cost (NPC) = n Costs involved in the production of the exported product – Local Value Content (LVC) = n Value added to materials imported in a country – Regional Value Content (RVC) = n Value added to non originating materials under cumulation – Sufficient Processing Thresholds (SPT) = n Minimum % of NPC required to consider a product as sufficiently processed Added value

42 Preferential Trade n Revision of the Rules of Origin – Impact on sugar : an example n 50/50 sugar mix PMA - Brazil – Value of commodity in LDC 593 /t – Value of commodity in Brazil (NOM)192 /t – Net Production Cost (NPC) in LDC785 /t – LVC = (785 – 192) / 785 = 75% > 50% SPT Sugar from LDC obtains 100% origin NOM = value of commodity not of origin

43 Preferential Trade n Revision of the Rules of Origin – Impact on sugar : an example n 33/33/33 sugar mix PMA – India - Brazil – Value of commodity in LDC 593 /t – Value of commodity in India 343 /t – Value of commodity in Brazil (NOM)192 /t – Net Production Cost (NPC) in LDC1.128 /t – RVC = (1.128 – 192) / = 83% > 50% SPT Sugar from LDC obtains 100% origin NOM = value of commodity not of origin

44 Preferential Trade n Revision of the Rules of Origin – Impact on sugar : position n Maintaining a list of sufficient transformation – If impossible, definition of industrial transformation aiming at excluding simple mixing or refining n Ban of regional cumulation with countries that do not benefit from a preferential trade agreement n Thresholds for added value : as high as possible n Possible alternative : the only sugar produced on the basis of locally produced commodities can obtain the origin (cfr NAFTA approach)

45 Preferential Trade n The UE : from net exporter to a net importer 05/0606/0709/10 – Imports n ACP n LDC n Balkan – Exports n Quota n ACP n C – Import (-) export (+)

46 Conclusion n Impact of external negotiations on a regulated sugar market – Liberalisation = deregulation – Price n Reduction in tariffs alignment of prices on the WMP n Safeguard clause reduction of uncertainty – Volume n Regulation of supply (quotas) replaced by a regulation by prices n EU is moving from a position of net exporter to a net importer reduction of European production

47 LEXIQUE


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