Key Issues Affecting World Agricultural Trade Policies: An OECD Perspective

1
Key IssuesAffecting World Agricultural Trade
PoliciesAn OECD Perspective

• Stefan Tangermann
• Director for Trade and Agriculture

ABARE Outlook Conference 2007
Canberra, 7 March 2007
2
Share of agriculture in world trade declines
Source OECD, based on UNCTAD/TRAINS/WITS
3
... and most 'agricultural' trade is in
processed products
processed
semi processed
horticulture
bulk
Source OECD, based on UNCTAD/TRAINS/WITS
4
The contradiction

• Economic weight of agriculture in world trade is
  small and declining
• but in the global trading regime, agriculture
  continues to cause trouble
• Why is agriculture so difficult in the DDA
  negotiations?
• A few hypotheses come to mind

5
Hypothesis 1 Uruguay Round left unfinished
business

• Agreement on Agriculture was breakthrough in
  setting new rules
• But did it change policies, markets?

6
Producer support remained high in many OECD
countries
Switzerland
Japan
EU
OECD
USA
Australia
New Zealand
Source OECD
7
Composition of producer support improvedOECD
average
Source OECD
8
Tariffs declined Simple average of all
agricultural products
MFN applied
effective applied
Source OECD, based on UNCTAD/TRAINS/WITS
9
Direct export subsidies declined
1/
1/
1/
1/ Not all countries have notified as yet for
this year Source ERS calculations from WTO
notifications
10
Hypothesis 2 Development focus added new
dimension

• 'Development Agenda' accounts for global
  realities
• Formation of G20 created new dynamic
• and gave agriculture negotiations
  specific weight
• But priorities differ across G20 countries

11
Farm support in major G20 countriesfar below
most OECD countriesPSE, 2003-05
Source OECD EU15 Brazil, China, South Africa
2002-04
12
South-South trade grows rapidly
3.7
3.8
41.9
1.7
1.8
-1.2
-12.2
-12.3
-32.7
Numbers in bars denote 2015 net trade quantities
in million tons
Source OECD
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Hypothesis 3 Starting positions were demanding

• G20 large reductions in OECD support and
  protection
• US big increase in market access to balance
  significant cut in domestic support
• EU 2003 CAP reform sets frame

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Composition of Producer Support in Major
Countries, 2003-05
Source OECD EU15.
15
Absolute Level and Composition of Farm Support in
Major Countries, 2002-04
Source OECD
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Hypothesis 4 DDA is about big cuts in
agriculture

• UR AoA set new rules, resulted in some reductions
  and policy adjustments
• but left water in commitments
• Production-linked support (price support, output
  and input payments) still high in many OECD
  countries
• Reduction rates considered in DDA are larger
  than in UR

17
WTO reduction commitments assist domestic policy
reform

• WTO negotiations are not about eliminating
  agricultural policies
• but about reducing market and trade distorting
  measures (tariffs, production-related subsidies,
  export competition measures)
• which do not perform well in achieving
  domestic objectives
• WTO negotiations and domestic policy reform go
  hand in hand

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CONCLUSIONS

• Difficulties in DDA negotiations on agriculture
  reflect primarily need to agree big reductions
• in line with domestic reform priorities
• Orders of magnitude considered compare positively
  to UR
• Gaps between negotiating positions are small
  relative to what can be achieved
• Low hanging fruit must be harvested