In order to inject new momentum into the WTO talks under the Doha Development Agenda, Commissioners Pascal Lamy and Franz Fischler have sent a letter to their WTO counterparts. In the letter the EU outlines three areas where it is ready to make further movement to contribute to the talks: 1) the EU is ready to put on the table all export subsidies, provided the EU gets full parallelism and a balanced overall package on agriculture, 2) new flexibility on Singapore issues and 3) a package on concessions for the poorest and weakest WTO members (essentially G-90). The EU calls on other WTO members to match this level of ambition so that the Doha Round can make real progress in July, by agreeing to modalities for the rest of the negotiations.
EU Trade Commissioner Pascal Lamy said: "The Doha Round is at the heart of the EU trade policy. With today's move we show we are ready to go the extra mile to ensure we conclude 50% of the round by 2004. But if we are to succeed, we cannot do it alone. All WTO Members developed and developing alike have to translate general expressions of political commitment into concrete movement on the substance if we want to get an agreement on modalities by July."
"This bold initiative proves that our commitment to the Doha Round is more than words. Agriculture is key to its success, so we are ready to show flexibility. Provided we get a balanced deal on market access, domestic support and non-trade concerns and strict parallelism on export competition, we are ready to put all the export subsidies on the table. This means that our American, Australian or Canadian partners have to make clear that they will fully match the EU on the forms of export support they use, such as export credits, abuse of food aid or state trading enterprises", Franz Fischler, EU Commissioner for Agriculture, Rural Development and Fisheries said.
A bolder move to achieve a balanced agreement on agriculture: tackling all forms of export support
There needs to be movement by all WTO partners on all three pillars, export support, domestic support and market access if we are to achieve a balanced outcome on agriculture.
It is clear that the objective of eliminating all forms of export subsidies is one which is shared by the great majority of participants. Before Cancun, the EU already offered to eliminate export subsidies on a list of products of interest to developing countries, and we subsequently made clear that there would be no a priori exclusions, so all our export subsidies are effectively on the table. However, the list approach has not worked. This is why the EU has taken the decision to be ready to move on export subsidies, if an acceptable outcome emerges on market access and domestic support and non-trade concerns, and if we get strict parallelism for all forms of export subsidisation in return.
The EU is also ready to play its part on domestic support, as shown by the recent reforms of the EU agricultural policy. The EU proposes a very substantial cut in trade-distorting subsidies, the elimination of the de minimis loophole support for developed countries, new rules which would prevent subsidising countries from transferring subsidies between and within boxes and greater transparency. The EU also needs a clear commitment that non-trade distorting green box subsidies remain free of restrictions. It is now up to other big subsidisers of agriculture, notably the US to show ambition and courage and follow the EU's lead.
On market access, the EU believes that tariff cuts on agricultural products can be achieved by means of a formula with a blend of sharp tariff cuts but at the same time providing for flexibility and balance to address sensitivities of the EU and especially of developing countries.
The EU also proposes early action on cotton, a vital commodity for many developing countries. Specifically, the EU proposes the elimination of all forms of export support, free and unfettered market access and to significantly reduce and if possible eliminate the most trade distorting domestic subsidies. The EU's recent reform is a clear indication of our commitment to such an approach.
A simpler approach to Singapore issues
The EU has already indicated its readiness to treat each of the four Singapore issues on its own merits, ie to keep within the Doha Agenda only those for which there is consensus to launch negotiations within the WTO. Today there seems to be a clear readiness to launch negotiations on trade facilitation. There is clearly no consensus to launch negotiations on investment and competition. The picture is less clear on transparency in public procurement, but the EU is ready to join the consensus view on this either way.
Further moves in favour of poorest and weakest developing countries (G-90): a round for free
The EU also proposes a special deal for the poorest (least developed) and weakest WTO countries – essentially the so-called G-90 group (an alliance of Least Developed countries and African, Caribbean and Pacific states). These countries would not be called upon to further open their markets while they would benefit from improved access to developed and rich developing markets for their agricultural and industrial products. Under the proposed plan vulnerable economies would benefit from improved access to all other markets, including the richer developing countries, which would compensate them for the erosion of the preferences that G-90 countries enjoy in certain developed countries, notably the EU.
In addition to providing movement on these three issues, the letter also:
reiterates a call for a substantial cut in tariffs on trade in industrial products, according to a general and simple formula with a limited set of exceptions.
urges other WTO members to help the EU to move forward the negotiations to open trade in services, which are currently stalled. More and better offers are needed.
The EU hopes that this opportunity to move ahead will not be missed. It also looks forward to the r esponse of other WTO Members in terms of new ideas and additional flexibilities so that framework modalities (which is what WTO members wanted to achieve in Cancun in September 2003) can be adopted by July this year.
2004: A Window of Opportunity
Following the collapse of the Cancun Ministerial conference in September 2003, the EU committed to reviving the Doha Round of world trade talks. Its policy of focusing on the multilateral, showing real flexibility and working to achieve swift results was set out in the Commission Communication of 28 November 2003 (‘Reviving the DDA Negotiations- the EU Perspective') and endorsed by EU Member States on 9 December 2003.
The EU believes that 2004 is not- and cannot afford to be- a lost year for trade policy. To this end, strong alliance- building efforts have been maintained with all WTO members, and intensive contacts have particularly been made with developing country groups such as the G20 and G90.
Speed is now of the essence and there is not much time left. We need consensus within the WTO by July on ‘Cancun-like modalities' (that is, a framework for an agreement without numbers) in the key areas of Agriculture, Non-Agricultural Market Access (NAMA), Singapore Issues and Development. This is clearly a brief window of opportunity, and it is crucial to translate the political will within the WTO into concrete negotiations and decisions, both in Geneva and at the Ministerial events of the coming two months, including the OECD Ministerial on 13-14 May and the WTO General Council meeting on 17 May.
Domestic farm support
Thanks to its reforms, the EU is in a position to offer steep cuts (70%) in trade distorting farm support. Other rich countries have to follow. To match the EU's lead, the US will have to reform its trade distorting 2002 Farm Bill worth US$ 20 billion a year.
The EU uses export subsidies to support its exports. The amount of exports subsidies have fallen from 25% of the value of farm exports in 1992 to 5.2% in 2001 and in absolute terms from €10 billion to €2.8 billion a year. All these levels of support will fall further following the CAP Reform of 2003 which will make EU support to agriculture even more trade friendly.
During the same period, other forms of export support have not ceased to increase.
In 2003 the US used US$ 3.2 billion in export credits to give their exporters an unfair advantage on the world market. The US also uses billions every year on export subsidisation under the guise of “food aid”, which increases at times of surplus in the US. Canada, Australia and New Zealand's state trading monopolies or the export taxes that Argentina applies to soya and soybean flour, are some of other potent examples. The EU's willingness to move forward on export subsidies is conditioned on full parallelism in addressing all forms of export support.
Closing loopholes for trade distorting support
Existing loopholes which leave trade distorting farm support untouched, such as the “de minimis” rule, must be closed once and for all. The US currently spends US$ 8 billion under the “de minimis” rule. The EU believes that de minimis support should be eliminated for developed countries.
How to cut farm tariffs?
The average applied farm tariff in the EU is 10.5%, while Brazil's tariff is 30% and the tariff among developing countries is 60%. Approaches on how to improve access to agricultural markets differ widely, often reflecting the fact that tariff structures are so different among members. This is why a compromise between extreme positions is inevitable.
The EU believes that a blended formula could, with the necessary modifications, meet the concerns of all participants as well as sensitivities of developing countries. Such a blended formula could include sharp tariff cuts, while at the same time providing flexibilities for countries to address their most sensitive tariffs through a combination of tariff cuts and Tariff Rate Quotas (TRQ) expansion.
Trade in non-agricultural products represents over 80% of world trade in goods today. Cutting down tariffs in this sector, thus, is likely to provide substantial trading opportunities to developed and developing countries alike.
Services represent between half and two thirds of countries economies today. Within the WTO countries agree to open trade in services on the basis of requests and offers to other WTO members. Each country decides the sectors it wants to open to international trade. WTO negotiations are not concerned with defining the mission of public services, their organisation or their financing. Nor does it concern deregulation or privatisation. The EU has received 42 offers and 40 requests.
It concerns the creation of new rules on trade facilitation, transparency in government procurement, investments and competition. These four issues were included in the Doha Development Agenda. However, WTO members agreed to launch negotiations on these issues subject to an agreement on their modalities. Given the failure of Cancun no agreement has yet been reached on such modalities.