The Doha Endgame

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The Doha Endgame

• SS Economics of Food Markets Alan Matthews

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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

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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

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Implications of a Doha Agreement for the CAP
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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?

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The EUs 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
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Comparison of EU banded offer with Swiss 60
formula
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Market accessEffect 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
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Market accessEffect 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
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Market accessEffect of tariff cuts on butter
prices, /tonne
Unfavourable world market Favourable world market
EU market price (2008) 2,247 2,247
Estimated world market price 1,170 1,575
Current EU import tariff 1,896 1,896
Possible tariff cut which does not impact on EU market price (tariff overhang ) 36 54
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Market accessEffect of tariff cuts on SMP
prices, /tonne
Unfavourable world market Favourable world market
EU market price (2008) 1,782 1,782
Estimated world market price 1,650 1,800
Current EU import tariff 1,118 1,118
Possible tariff cut which does not impact on EU market price (tariff overhang ) 55 64
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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
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Domestic support - EU situation 2001 (end Uruguay
Round, before Mid-Term Review)
Amber Box US dollars
Bound AMS 65,383
Market Price Support 25,085
Direct Payments 12,117
less De Minimis 411
Current AMS 36,791
Degree of AMS Overhang 44
Blue Box
Millions 21,262
Value of Agricultural Production 7
Green Box 19,452
Overall Distorting Support (ODS)
Bound ODS 87,056
Current ODS 58,464
Degree of ODS Overhang 33
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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..

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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

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

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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

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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

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Alternatives to Doha
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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

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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

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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

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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

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Doha concludes 2007?

• Implementation into early 2010s, when export
  subsidies finally eliminated
• Further CAP reform before end of the decade?

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Future challenges for Irish agriculture