WTO – EU, US and DC’s Suspension of the Negotiations Søren E. Frandsen

Uruguay Round did not deliver the wanted results ! DC did get their interests on the Agenda in Seattle, 1999 In Doha 2001 a new round was initiated – focus: needs of the DC No framework was achieved before the deadline Cancún meeting did conclude without agreement in Nov Framework Agreement (147 countries) was achieved WTO Trade Negotiations The (recent) history of the Negotiations

WTO Trade Negotiations The July 2004 Framework Agreement Uruguay Round identified the 3 main areas of negotiations Export support Market access Domestic support In addition the July 2004 Framework Agreement Phasing out completely all forms for export support Partial phasing out and disciplining export credits and food aid Significant cuts in total domestic trade distorting support Cuts in so-called de minimis support Special and differential treatment of developing countries, in particular LDC’s

WTO Trade Negotiations The July 2004 Framework Agreement Framework Agreement of July 2004 is less clear wrt. The criteria for the required cuts in the ’blue box’ Level of ambition for cuts in tariff rates Ceiling on the maximum level of tariff rates Countries possibilities for self declaring their ’sensitive products’ DC’s identification of number of special products (flexible agreement) And the reality and goals of the negotiators …. Reach an agreement that seem ambitious Return to their capitals and assure ministers, that they do not need to implement serious reforms / adjustments Loop holes / exceptions are the ideal instrument to reach these goals Therefore a need to keep an eye on the loop holes !

WTO Trade Negotiations Hong Kong – December 2005 Agreement on concluding statement + framework for next steps Countries did approach each other – but deep concerns in DC’s Avoided a bread down Deadlines: 30. April 2006: Negotiations on modalities concluded 31. July 2006: Deadline for implementation of the agreement End 2006: Technical details to be concluded

July 2006: Breakdown and Suspension Breakdown 24. July 2006 ! (Doha Round Suspended Indefinitely) A Triangle of Issues: The US would have to agree to deeper cuts to domestic farm support The EU to increased agricultural market access Developing countries such as Brazil and India to lower industrial tariffs The ‘blame game’ is ongoing !

I. Export Support Deadline: Export support eliminated by 2013 Progressive: Substantial cuts half into implementation period Paralism: All forms of export support

II. Domestic Support Three bands for cuts in trade distorting support Cuts to be linear and with a %, increasing in the bands EU to be in upper band, US and Japan i the next Agree to establish disciplines to achieve effective cuts in the total trade distorting support Criteria for support in green box to be re-evaluated – to achieve no or minimal trade distortions

Total cut in support – three bands Support > 60 mia. $  70-80% 10 < support < 60 mia. $  53-75% Support < 10 mia. $  31-70% De minimis support (continues disagreement wrt. DC’s) Cut  50-80% Blue box (disagreement on techniques wrt. limitations) Some convergence – agreement to limit amount of support Yellow box (AMS) – 3 categories (not full agreement on bands) AMS > 25 billion $  70-83% 12/15 < AMS < 25 billion $  60-70% AMS < 0-12/15 billion $  37-60% II. Domestic Support

Loop Holes 1: Domestic Support Bound and actual domestic support (AMS, Mio. €) Bound support from last round Actual support 2001 Actual support after reform Total AMS er et mål for samlet forvridende produktionsstøtte (gul boks), der skal reduceres. Hertil kommer ’de minimis’ og delvis afkoblede støtteordninger under produktionsbegrænsede foranstaltninger (blå boks), der tilsammen udgør indenlandsk støtte i alt (der også skal reduceres tilsvarende) (samlet støtte = gul+blå+de minimis)

- 41 % (-11,3 billion €) -53 % (5,3 billion €) - 75 % Loop Holes 1: Domestic Support Bound and actual domestic support (AMS, Mio. €) Bound support from last round Actual support 2001

Loop Holes 1: Domestic Support …but AMS is much more than market prices support …. -0 % (0 billion €) -40 % (4 billion €) Bound support from last round Actual support 2001

Cuts in the bound domestic support will therefore only in a few cases / countries lead to reel cuts in existing actual domestic support … … and EU will probably not at a % cut need to change its existing domestic support Loop Holes 1 Bound and actual domestic support (AMS, Mio. €)

III. Tariffs and Market Access Band approach (far from agreement) Divided into 4 categories – highest rates to be reduced most No agreement on bands and cuts Some rejects the idea of max. rates, others % Sensitive and special products (far from agreement) Proposals: 1% to 15% of agricultural products Special and differentiated treatment Probably four levels for Developing Countries cuts Agreement on smaller cuts

Loop Holes 2: Tariff Rates Bound and Applied Tariff Rates (Agriculture), % ”Water”

Butter CheeseMilk con. Loop Holes 2: Tariff Rates Bound and Applied Tariff Rates (Dairy Products), %

Cuts in the bound tariff rates will therefore not always lead to corresponding cuts in the actual applied tariff rates … … and therefore in increased market access Loop Holes 2: Tariffs Bound and Applied Tariff Rates

Bånd : Bånd: Bånd: Bånd: 20 – 50 Bånd: Bånd: Bånd: Bånd: Bånd: > 60Bånd: > 75Bånd: > 90 III. Tariffs and Market Access Proposals on Bands and Reductions

EU Tariff Rate on Cheese Imports Existing and proposed new bound rates New bound EU proposal New bound G20 proposal New bound USA proposal

Tariff Rates on Danish Cheese Export Existing and proposed new bound tariff rates New bound EU proposal New bound G20 proposal New bound USA proposal

Tariff rates on Danish Butter Exports Existing and proposed new bound tariff rates New bound EU proposal New bound G20 proposal New bound USA proposal

Gains – Full Trade Liberalization Global gains equals more than 1800 billion DKr. / year 560 billion DKr. goes to poor countries 32 million fewer individuals, that will live in extreme poverty 4 times larger than the yearly development assistance from rich to poor countries 1150 billion DKr. – agricultural liberalisations 1000 billion DKr. – rich countries liberalisations 93 % - increased market access 2 % - elimination of export support 5 % - cuts in domestic support

Elimination of export subsidies Bound domestic support EU and USA-75% Cuts in bound tariff rates Dev. countr.:t < 15% -45% 15% < t < 90% -70% t > 90% -75% DC’s:t < 20% -35% 20% < t < 60% -40% 60% 120% -50% t > 120%-60% Cuts in tariffs for non-agricultural commodities -50/-33/0% Gains – WTO Trade Agreement

… global income gains amount to 575 billion DKr. –App. 2,5 million fewer, that live for a 1 $ or less per day Real income in EU25: +190 billion DKr. Per year (+0,3 %) Impacts for European Agriculture: –Value added: -15 % –Production: -0,3 % –Employment: -2,8 % Gains – WTO Trade Agreement

Lesser cuts for just 2 % of agricultural products … … gains will then be reduces by 75% … and gains for DC’s will disappear completely because –Smaller (or no) cuts in developing countries –Much ’water’ between bound and applied rates in DC’s Loop Holes 3: Sensitive Products

Conclusions Large economic gains at stake in these negotiations DC’s can gain substantial: Number of poor might fall by 32 mill. individuals (5%) if full liberalisation Still in Agriculture where reforms are needed the most Disciplining domestic support is important – but increased market access is imperative Large cuts in direct support is necessary to accomplish real cuts –Even with -75% only 2-4 countries will be required to reduce support

Very significant cuts in bound tariff rates necessary to increase market access Even with very large cuts in tariffs only limited impacts, if lesser cuts for sensitive products –Med 2% exceptions (-15 %) gains are reduced by 75% With very large differences between negotiated and actual tariff rates Developing Countries are only required to undertake a few cuts To accomplice liberalisations for other commodities and services will increase the gains significantly and in particular in DC’s. Conclusions