1. Impact on EU agriculture of Falconer’s draft modalities DG for Agriculture and Rural Development European Commission

2. 13 March 2008 2 Measuring the impact of Falconer’s proposal…  … by using of the OECD Aglink model… –Partial equilibrium, large country and product coverage –Model available to co-operators –But weak for trade simulations  … and improved its EU trade component –Replacing exogenous imports with import equations –Developing import equations for high and low quality for beef and poultry

3. 13 March 2008 3  The OECD AGLINK model… –Partial equilibrium –Models explicitly 14 countries/regions, mainly in the OECD area –Covers the majority of products of temperate climate Description of the model used

4. 13 March 2008 4  … and the FAO COSIMO component… –Adding 32 developing countries –Planning to cover more products, mainly tropical ... result in a large model of world agriculture –7380 equations provide results for production, consumption, imports, exports, domestic and world market prices –Results are provided for each year of the projection period (2005- 2014), allowing for adjustment path Description of the model used

5. 13 March 2008 5 Scenario 1: The EU’s offer of October 2005  Export competition –export subsidies to be phased-out  Domestic support –70 % cuts for EU, 60 % cuts for US in AMS and total support –80 % cut in de minimis –new blue box disciplines to come from disciplines in support price gap –5% ceiling part of the framework agreement as recognition of reform  Market access –thresholds at 30/60/90, cuts at 35/45/50/60 –flexibility in lower band, formula for TRQ expansion, Deviation for SePs: 50% (mid-point of EU sliding scale)

6. 13 March 2008 6 Scenario 2: Falconer’s proposal of 8 February 2008  Export competition –export subsidies to be phased-out  Domestic support –70 % AMS cuts for EU, 60 % cuts for US –80% OTDS cut for EU, 70% cut for the US –50 % cut in de minimis –new blue box disciplines and cap  Market access –thresholds at 20/50/75, middle range cuts at 50/57.5/63.5/69.5 –SePs: deviation of 2/3 rd, 4% of partially allocated DC

7. 13 March 2008 7 Scenario 3: G20 full proposal  Export competition –export subsidies to be phased-out  Domestic support (not included) –80 % AMS cuts for EU, 70 % cuts for US –80% OTDS cut for EU, 75% cut for the US –D.m.: same as overall –new blue box disciplines, cap and reduction  Market access –thresholds at 20/50/75, cuts at 45/55/65/75 –SePs: deviation of 30%, 6% of DC of full sector

8. 13 March 2008 8 Caveats of analysis  Domestic support –positive impact from US domestic support commitments on cereals, cotton and oilseeds missing  Export subsidies –positive impact from STE, export credit and food aid disciplines on cereals and dairy missing  Market access –full tariff cut scenario will affect all players and markets, which means substantial potential gains for EU exports

9. 13 March 2008 9 Impact on EU imports

10. 13 March 2008 10 Impact on EU imports

11. 13 March 2008 11 Impact on EU exports (cereals)

12. 13 March 2008 12 Impact on EU exports (meats)

13. 13 March 2008 13 Impact on EU exports

14. 13 March 2008 14 Impact on EU prices (cereals)

15. 13 March 2008 15 Impact on EU prices (meats)

16. 13 March 2008 16 Impact on EU prices (dairy)

17. 13 March 2008 17 Impact on EU production (cereals)

18. 13 March 2008 18 Impact on EU production (meats)

19. 13 March 2008 19 Impact on EU production (dairy)

20. 13 March 2008 20 Conclusions – Overall impact of Falconer’s proposal not significantly different from EU’s offer; –New medium-term projections for prices and exchange rate will play a key role; –Impact underestimates EU’s potential gains stemming from increased MA for EU products.