1. The Doha Endgame SS Economics of Food Markets Alan Matthews

2. Review - Topics Graphical analysis of world market effects of protection Uruguay Round framework Uruguay Round implementation Doha Round negotiations and endgame Developing country interests Quantification of impacts

3. The ‘landing zone’ Export competition disciplines essentially agreed after Hong Kong EU to accept G20 proposal on market access (54% cut in average tariff compared to own proposal of 39%) –Mandelson Davos speech “ready to add more than 10 percentage points” US to bring domestic support down by around 70% to $15 billion and accept product-specific caps (compared to own proposal of 53% cut in OTDS implying non-green support of $23 billion). Messy details on tariff caps, sensitive products, special agricultural safeguards, Special Products and Special Safeguard Mechanism

4. Implications of a Doha Agreement for the CAP

5. Export Subsidies January 2003: EU initially offered to reduce aggregate expenditure limits by 45% –but in 2001/02 only used 35% of entitlement In July 2004 Framework Agreement, EU signed up conditionally to full elimination Hong Kong 2005 agreed to end date of 2013, with substantial progress in early years Only important now for dairy and sugar exports, but implications for Non-Annex I goods, i.e. the food industry?

7. The EU’s AVEs (ad valorem equivalents of specific rates), excluding sugar Note many of the highest tariffs are actually on processed foods (e.g. yogurt, whey) rather than bulk commodities

8. Comparison of EU banded offer with Swiss 60 formula

9. Market access Effect on tariff cut on beef price EU support price (basic intervention price) €2,224 Estimated world market price€1,200 Current EU import tariff€1,922 Possible tariff cut which does not impact on EU market price (tariff overhang) 40%

10. Market access Effect on tariff cut on beef price EU market price€2,700 Estimated world market price€1,200 Current EU import tariff€1,922 Possible tariff cut which does not impact on EU market price (tariff overhang) 16%

11. Market access Effect of tariff cuts on butter prices, €/tonne Unfavourable world market Favourable world market EU market price (2008)€2,247 Estimated world market price 1,1701,575 Current EU import tariff1,896 Possible tariff cut which does not impact on EU market price (tariff overhang ) 36%54%

12. Market access Effect of tariff cuts on SMP prices, €/tonne Unfavourable world market Favourable world market EU market price (2008)1,782 Estimated world market price 1,6501,800 Current EU import tariff1,118 Possible tariff cut which does not impact on EU market price (tariff overhang ) 55%64%

13. Effect of tariff cuts on white sugar price EU support price (based on Commission July 2005 reform proposal) €386 Estimated world market price€210 Current EU import tariff€419 Possible tariff cut which does not impact on EU market price (tariff overhang ) 63%

14. Domestic support - EU situation 2001 (end Uruguay Round, before Mid-Term Review) Amber BoxUS dollars Bound AMS65,383 Market Price Support25,085 Direct Payments12,117 less De Minimis411 Current AMS36,791 Degree of AMS Overhang44% Blue Box $ Millions21,262 % Value of Agricultural Production7% Green Box19,452 Overall Distorting Support (ODS) Bound ODS87,056 Current ODS58,464 Degree of ODS Overhang33%

15. Fischler reforms (EU15): Switch 90%? of existing blue box expenditure into the green box Shift €4.2 billion (cotton, tobacco, etc.) from amber to blue/green Milk reforms strip €1.9 billion from amber box, and add (dairy premium) €0.4 billion to blue/green Sugar reforms strip €3.5 billion from amber box, and add €1.3 billion to blue/green (EU15 income support) Rice, fruit and vegetables…..

16. Commitments on blue and amber boxes: EU will make the biggest AMS cuts under the tiered formula – could afford up to 70% Blue box limited to 5% of value of agricultural production –achievable, provided most of the Single Payment is in the green box Overall limit on all trade-distorting support (80% of base entitlement): achievable for EU15 Product specific AMS limits

17. Source: Kutas, G. EU Negotiating Room in Domestic Support after the 2003 CAP Reform and Enlargement

20. Politics of the endgame - EU Mandelson and the mandate –Can the French/Irish block a deal? Timing –Incentives for an early deal –German presidency Its acceptable deal –Looking for concessions on NAMA, services and rules (anti-dumping, trade facilitation and Geographical Indications)

21. Politics of the endgame - US The US position –Bush and political will –Timing - Trade Promotion Authority Attitudes of the new US Congress –The new Farm Bill –The biofuels factor –Its acceptable deal

22. Politics of the endgame – G20 Context of strengthening world market prices Brazil – now experiencing exchange rate appreciation China – accepted tight restraints on trade policy on accession in 2001 India – concerned to protect its defensive interests

23. Alternatives to Doha

24. Doha fails to conclude? URAA lives on, without the protection of the Peace Clause Regional integration agreements –e.g. Mercosur It would be wrong to conclude that the mosaic of agricultural policies across the world, post-1995, is a stable set –policies are being challenged, and changed This would continue even if there was no conclusion to the Doha Round

25. Litigation as a source of pressure for changes in rules The significance of the WTO Dispute Settlement Understanding The WTO panel process Some important agricultural cases –EU sugar –EU bananas –US cotton –EU GSP

26. Panel Findings on Sugar and Cotton US Upland Cotton (Brazil) –Production flexibility contract payments (1996 Farm Bill) and Direct payments (2002 Farm Bill) are not eligible for the green box because fruit & vegetables cannot be grown on the land EU Sugar (Australia, Brazil, Thailand) –C sugar exports are subsidised –ACP and Indian re-exports are wrongly excluded from EU totals

27. Does the Single Payment fit in the green box? Restrictions on fruit and vegetables: see Upland Cotton Annex 2, 6(d): ‘The amount of such payments in any given year shall not be related to, or based on, the factors of production employed in any year after the base period’ –But an annual claim on farmland in agricultural production or kept in good environmental condition

28. Doha concludes 2007? Implementation into early 2010s, when export subsidies finally eliminated Further CAP reform before end of the decade?

29. Future challenges for Irish agriculture Decoupling WTO reduced protection Rural development