OFI China 11-12 September 2007 Guangzhou, China The impact of trade liberalization on the global oilseed complex Rebalancing the complex with supply, demand, processing shifts Robert Broeska, President, IASC & Canadian Oilseed Processors Association

The impact of trade liberalization on the global oilseed complex Market drivers 2. Trade policy - industry position 3. Trade reform – the China case 4. Doha WTO negotiations 5. WTO impact on industry

Population current world population 6 billion people 97% of increase in less developed regions key developing markets are China & India World population currently stands at around 6 billion people and is growing at around 1.3% each year, which means an extra 78 million people each year to feed – 16 million of these in India. Although growth rates are slowing, the US Census Department predicts the world population will reach 9 billion by 2050 (world population slide). It is interesting to note that from 1804, when the world passed the 1 billion mark, it took 123 years to reach 2 billion people in 1927, 33 years to reach 3 billion in 1960, 14 years to reach 4 billion in 1974, 13 years to reach 5 billion in 1987 and 12 years to reach 6 billion in 1999. Ninety-seven per cent of the world population increase takes place in the less developed regions. Every year the population of Asia is increasing by more than 50 million, the population of Africa by around 17 million, and that of Latin America and the Caribbean by nearly 8 million. Africa has the highest growth rate amongst all major areas (2.36 per cent). Middle Africa, Eastern Africa and Western Africa have growth rates of 2.5 per cent and over. Europe, on the other hand, has the lowest growth rate (0.03 per cent). Key developing markets for this industry are China and India (China/India pop. slide). You can see from this graph that whilst China is predicted to show some restraint, population growth rates in India continue apace such that the population of India is expected to overtake that of China around 2035.

Per capita oils & fats consumption

Vegetable oil disappearance GATT Tokyo Round China WTO accession GATT Uruguay Round

Production of oilseeds & products

Soybean production

Palm oil production

Rapeseed & sunflower production

World oilseed crush and GDP GATT Tokyo Round China WTO accession GATT Uruguay Round

Vegetable oil exports

Oilmeal exports

The global oils & fats market 2. Trade policy - industry position 3. Trade reform – the China case 4. Doha WTO negotiations 5. WTO impact on industry

Trade of oilseeds & products GATT Tokyo Round China WTO accession GATT Uruguay Round

Trade – IASC policy statement A new vision for the international trade of oilseeds & oilseed products A WTO Development Round sectoral initiative 31 March 2003 The members of the International Association of Seed Crushers Council today announce their support for an oilseed industry sectoral initiative under the auspices of the World Trade Organization. The IASC seeks a broad agreement for the liberalization of global trade in oilseeds, oilseed products and edible oils. In pursuit of this objective, IASC member associations agree to solicit the support of their national trade authorities and WTO negotiators for a global sectoral agreement, which harmonizes, reduces, and ultimately eliminates all trade distorting policies and practices for oilseeds, oilseed products and edible oils. Such an agreement would accommodate and define the necessary degrees of staging and/or phasing as agreed to by the participants. The IASC Council envisions that this endeavour will provide a global trading environment, which is conducive to the expansion of production, processing, trade, and consumption of all oilseeds, oilseed products and edible oils. The Council urges all WTO members to avoid trade distorting policies at production or trade levels (i.e. tariff and non-tariff trade barriers, export incentives, export subsidies, export taxes, product-specific supports, etc.). The Council firmly believes that an open and unfettered food trade system is essential to the efficient provision of food for the world’s next billion citizens and beyond. The elimination of trade barriers will reduce food costs for consumers while creating a larger global marketplace for producers. The IASC intends to convey this message directly to the Chairman of the WTO Agricultural Negotiating Committee without delay, and agrees to provide any supporting discussion requested.

OILSEED PROCESSORS LEVEL PLAYING FIELD COALITION JOINT DECLARATION September 2005 In order to establish an international Level Playing Field (LPF) during the Doha Development Agenda negotiations on agriculture, our national associations hereby endorse the following reciprocal objectives to be implemented as part of a WTO Sectoral Agreement which provides that member countries eliminate all trade barriers for oilseeds, oilseed products, and edible oils: Eliminate import tariffs for oilseeds, oilseed products, and edible oils Eliminate export subsidies for oilseeds, oilseed products, and edible oils Eliminate differential export taxes (DETs) on oilseeds, oilseed products, and edible oils Provide export credits only in conformance with WTO rules and disciplines In addition to the above LPF objectives, we support the following mutual undertakings: To actively encourage our respective governments to provide an increasing portion of domestic support for agriculture in a decoupled form Not to implement any other trade distorting practices ABIOVE - Associaçâo Brasileira das Industrias de Óleos Vegetais, São Paulo, Brasil AOF - Australian Oilseeds Federation, Melbourne, Victoria, Australia CIARA - Cámara de la Industria Aceitera de la República Argentina, Buenos Aires, Argentina COPA - Canadian Oilseed Processors Association, Winnipeg, Canada FEDIOL - Fèderation de l’Industrie d’Huilerie de la CE, Brussels, Belgium, European Union NOPA - National Oilseed Processors Association, Washington, DC, United States

The global oils & fats market 3. Trade reform – the China case 4. Doha WTO negotiations 5. WTO impact on industry

China oilseed situation GATT Tokyo Round China WTO accession GATT Uruguay Round

Veg oil consumption & global prosperity As the poor advance economically, they move from grains to veg oils to meat Per capita veg oil consumption in the poorest countries is used by IMF as a measure of changing living standards Very poor do not purchase meat In many developing countries, massive job creation and rapidly advancing incomes spur improved dietary intake The result? An unprecedented expansion of veg oil and protein consumption

China vegetable oil disappearance GATT Tokyo Round China WTO accession GATT Uruguay Round

China oilmeal disappearance

China oilseed imports

China vegetable oil imports

The global oils & fats market 4. Doha WTO negotiations 5. WTO impact on industry

Main negotiating pillars DOHA WTO Negotiations Draft modalities text Crawford Falconer, Chair, Agriculture Committee - July 17, 2007 Main negotiating pillars Domestic supports – a tiered formula for overall phased reduction of trade-distorting domestic supports Market access – a tiered formula for phased tariff and tariff escalation reductions Export competition – parallel elimination of all forms of export subsidies and disciplines on all export measures Other issues – range of issues/positions/proposals that are tabled/referred to and remain of interest, but are not materially advanced and not yet agreed; includes differential export taxes and sectoral initiatives

WTO draft modalities text - July 17, 2007 Trade-distorting domestic supports* Level of support Phased reduction** (a) + US $60 billion 75-85% (b) + US $10 billion; - US $60 billion 66-73% (c) - US $10 billion 50-60% * Base period for calculation 1995-2000 ** Uruguay Round implementation period: 6 years commencing January 1, 1995

ad valorem equivalent* WTO draft modalities text - July 17, 2007 Market access: tiered formula Bound duty – ad valorem equivalent* Phased reduction Developed Developing (a) 0-20% 0-30% 48-52% X 2/3 (b) 21-50% 31-80% 55-60% (c) 51-75% 81-130% 62-65% (d) + 75% + 130% 66-73% * Uruguay Round achievements - Agriculture Tariffication and minimum access commitments Tariffs reduced by 36% (average), minimum 15% Average unweighted ad valorem bound tariff rates post-Uruguay Round for oilseeds, fats and oils 42% A.V.E. NAMA – tariffs reduced by 40% to 3.8% A.V. Avg.

WTO draft modalities text - July 17, 2007 Export competition (a) Export subsidies* (i) Developed – eliminate by end of 2013; 50% by 2010 (ii) Developing – eliminate in equal annual reductions by year X (b) Export credits/guarantees/insurance - maximum repayment schedule – 180 days - disciplines applied give effect to (a) (c) State trading enterprises/international food aid * Uruguay Round reduced volumes of subsidized exports by 21% and budget outlays by 36%; DOHA Round considering a phase-out of differential export taxes by end of implementation period

The global oils & fats market 5. WTO impact on industry

WTO trade liberalization significantly increases global production, consumption & trade of vegetable oils & protein meals A study commissioned by the International Association of Seed Crushers and undertaken by LMC International (Oxford, England) June 2006 Vegetable oil demand would rise by more than 40% & oilseed meal demand by 30% in low-income countries Global vegetable oil production would increase by about 30% & oilseed meal production by about 40% In total, world trade would expand by 35% for vegetable oil & by 45% for oilseed meals An independent report by IPC (Washington, USA) October 2005 Global oilseed production (7 major oilseeds) would increase by about 25% (currently from 380 mmt to 475 mmt) Palm oil production would increase by 39% (currently from 38 mmt to 52 mmt) to meet these increased levels of consumption and trade requirements

Notable market access indicators Average price elasticities of demand & import tariffs Meal Oil Demand elasticities Import tariffs Argentina 0.94 Free 0.85 Brazil Canada 0.66 0.49 USA 0.77 0.52 China 1.05 5% 0.88 9% India 0.20 30% 0.74 45%-90% Indonesia 0.90 Japan 0.69 0.56 13% Malaysia 0.70 0.75 Philippines 0.93 3% 7% Thailand 0.80 4% 0.60 20%-140% EU 6%-10% Ukraine 0.45 400 EUR/t 0.68 150 EUR/t Russia 15% Australia 0.71 0.50 4%-5% Iran 0.87 Egypt 2% Bangladesh 0.81 7.5% Pakistan 10% 32% Source: USDA ERS and LMC International

Before liberalization Veg oil trade liberalization: a WTO sectoral initiative Oil consumption forecasts (LMC International) Countries (‘000 tonnes) Before liberalization After liberalization Argentina 654 878 Australia 336 398 Bangladesh 1,041 1,376 Brazil 3,371 4,525 Canada 856 1,007 China 16,921 22,923 Egypt 1,118 1,444 EU 15,522 18,754 India 8,899 11,471 Indonesia 4,087 5,587 Iran 1,140 1,473 Japan 2,189 2,645 Malaysia 3,230 4,182 Pakistan 1,936 2,558 Philippines 401 519 Russia 2,566 3,233 Thailand 839 1,029 Ukraine 719 906 USA 9,603 11,448 World total 108,777 138,957

Before liberalization Protein meal trade liberalization: a WTO sectoral initiative Meal consumption forecasts (LMC International) Countries (‘000 tonnes) Before liberalization After liberalization Argentina 633 795 Australia 713 844 Bangladesh 410 531 Brazil 8,212 10,313 Canada 2,886 3,362 China 25,538 33,047 Egypt 1,266 1,562 EU 46,143 54,271 India 3,967 4,089 Indonesia 1,873 2,424 Iran 1,057 1,304 Japan 5,312 6,248 Malaysia 1,051 1,240 Pakistan 733 949 Philippines 1,713 2,145 Russia 1,785 1,966 Thailand 3,167 3,836 Ukraine 542 597 USA 30,785 36,988 World total 169,177 204,441

Source: LMC International, 2006 World meal and oil production before and after liberalization in soybean meal and oil equivalents Source: LMC International, 2006

Source: LMC International, 2006 Percentage change in world seed/oil/meal production after liberalization, by oilseed Source: LMC International, 2006

World recoverable oil before & after liberalization Source: LMC International, 2006

Soybean production before & after liberalization Source: LMC International, 2006

Rapeseed production before & after liberalization Source: LMC International, 2006

Sunflower seed production before & after liberalization Source: LMC International, 2006

Palm & palm kernel oil production before & after liberalization Source: LMC International, 2006