Agri-negotiators reserved on CAP reform, NGOs denounce it

EU agriculture ministers agreed in late June to reform the bloc’s controversial farm-subsidy scheme, long a bone of contention with trading partners which has held up progress in WTO agriculture talks. While the initiative met with a cautious response from trade negotiators, development activists assailed what they called “a very bad deal for developing countries, for European consumers and for small farmers.”

by Chakravarthi Raghavan

GENEVA: Agriculture negotiators at the WTO were reserved and  cautious in reacting to the decisions of the EU Agriculture Ministers at Luxembourg on the reform of the EU Common Agricultural Policy (CAP) and the domestic support to various sectors of agriculture.

However, members of the Cairns Group (of agricultural exporter countries), as well as the US Trade Representative and others, have put a positive spin on the move, looking on it as a step in the right direction of EC “engagement” with trading partners and negotiators at the WTO agriculture talks, with several of them (the USTR and Brazil in the Cairns Group, for example) emphasizing the “level of ambitions” needed for a deal.

Civil society groups and development activists - like the World Development Movement, Consumers International and Oxfam - however came out in strong criticism of the CAP reforms, and said that this will not help the developing countries nor will it break the logjam in the WTO negotiations in the runup to the trade body’s Ministerial Conference in Cancun this September.

(For more on the nature of the announced reforms, see following article.)

Implications for WTO talks

The caution and reserve of the negotiators is partly because, as some of them explained, it is difficult to judge how the announced CAP reform proposals, which mostly cover domestic support, will be translated into EC proposals at the WTO agriculture talks - on domestic support, market access and export subsidies.

Several developing-country negotiators, who were at the WTO for the agriculture talks (at the Special Sessions of the Committee on Agriculture), said that they found it difficult to judge the impact of the EC moves in terms of the WTO.

One of them noted that the EC reform proposals announced appear to envisage different methods of support (and reduction) for different commodities, and in some areas may result in reducing support. But there is also leeway for the EU member states, and much would depend on how they exercise the options.

However, the net effect of the reforms in several commodity areas is of preferences based on domestic support, and it will have an impact on the overall patterns of support and on production - but this will take some time to play itself out.

Some observers at the agriculture talks also suggested that in terms of ensuring major cutbacks in domestic support in the EC, a key to increased market access, perhaps the protagonists in the Cairns Group have reached the view that they can do very little by themselves to force the hand of the EC and much will depend on talks between the US and the EC.

However, unlike in the Uruguay Round, it may not be so easy or simple for any US-EC deal to be more or less forced down on the others, particularly the non-Cairns Group developing countries.

“Sleight of hand”

Among civil society groups, Consumers International (CI) Director-General Julian Edwards expressed the deep disappointment of consumers around the globe, and said the EC reforms are “another magician’s trick, a real sleight of hand” by EU Agriculture Ministers.

“It has nothing of substance to offer consumers in the developing world, the European Union or the accession countries,” CI said.

The deal excludes agricultural products of specific interest to poor developing countries, many of whose farmers depend on these products for their livelihood. Discussions on reforms to cotton, where EU subsidies are already the highest in the world, and tobacco have been delayed, and sugar is not even mentioned. Lack of immediate action on these commodities so close to the Cancun Ministerial of the WTO in September flies in the face of the EU’s claims to support a “development Round”, CI said.

Within the EU member countries, the CAP budget remains fixed at 43 billion euros or US$50 billion a year, and is geared totally for the benefit of the EU farmers rather than consumers and taxpayers. It will not reduce the cost of aid paid from taxation nor significantly reduce the price of food in the EU shopping basket.

It is unclear how the deal will affect consumers in the 10 accession countries. Their farmers have been offered gradual access to lower subsidies than in the 15 EU members. But how can these be paid for when the total CAP budget limits will not be increased and all the money is still committed for the farmers in the EU?

“This deal is riddled with delays and exceptions, which exposes it for the political fudge it really is,” says Edwards. “Without a greater commitment to EU reforms, there are no incentives for other countries, including the US, to tackle tariff barriers and subsidies at the WTO.

“This deal is anti-development, anti-trade and anti-consumer”.

Barry Coates, Director of the World Development Movement (WDM), referring to the reform proposals announced and the public statements of individual EU ministers, including the British agriculture secretary Margaret Beckett, to try to talk up the reform decisions, said “this is a very bad deal for developing countries, for European consumers and for small farmers.”

Rather than breaking the logjam in the WTO negotiations, the failure to deliver on real CAP reform could make a collapse of the Cancun meeting more likely, WDM said.

“The EU is desperately talking up a shoddy deal. It is pushing hard to launch new trade agreements, most controversially a free trade agreement on investment, against the wishes of developing countries at the WTO negotiations in Cancun. To demand that developing countries accept new free trade agreements in return for marginal and uncertain changes to the CAP is to add insult to injury.

“Reform of CAP is vital and what has been agreed falls a very long way short of what is needed to stop the agricultural dumping that destroys the livelihoods of small farmers in the poorest countries. Developing countries should not be asked to give anything in return for reduction in export subsidies they were promised years ago. In effect the EU is asking them to pay twice.”

If the EU continues to ignore developing-country demands on agriculture while pushing new free trade agreements, said Coates, “we could easily see a Seattle style collapse in Cancun. We desperately need fair international trade rules. The alternative is law of the jungle. The EU proclaims its support for multilateralism, yet it is playing fast and loose with the world trade system.”

At the informal Special Session of the WTO Committee on Agriculture on 26-27 June, delegates were preoccupied outside the meeting in trying to understand the CAP reforms. No substantive comments on the reforms were made at the session because most delegates, like everyone else in the WTO building, were trying to make sense of the technical details with the limited information available.

Some delegations made polite remarks that they welcomed the fact that the EU Ministers had reached an agreement and that they hoped this would provide hope for the future negotiations.

But delegations felt it was too early to make real comments because they were waiting for three pieces of information which were not yet available:

   l  What the EU Ministers really agreed to, including the flexibilities allowed to each member state in implementing the decoupling and other measures.

   l  How the agricultural reform agreement would actually be implemented by the various member states, since countries have the flexibility to decouple completely or by a limited extent.  The actual implementation would for example determine the extent to which the amount of domestic support in the form of “blue box” subsidies would change, and this would for example influence the extent of commitments the EC could offer in terms of stricter disciplines in the blue box.

   l  Most important to the WTO negotiators here is what the new EC position would be in WTO terms, especially in relation to its ability to improve its offer on domestic support.


No change in positions

On 26 June, the Agriculture Committee meeting heard the views of WTO members on three issues:  market access, special safeguard (SSG) for developing countries and special products (SP) for developing countries.

Delegations were sticking to their previous positions, so there was nothing really new in terms of any change in policy or movement, according to diplomats.

On tariff reduction, delegations were split between those supporting a Swiss harmonization approach, many countries (77 at present count) supporting the Uruguay Round approach (with tariffs to be cut by an average percentage), and some favouring a version of the harmonization approach put forward by the agriculture Special Session chairman, Stuart Harbinson.

The US and Australia pointed out that applied tariff rates are significantly lower than bound rates in several developing countries, so that substantial reductions are needed in these countries in order to give improvements in market access.

Barbados made a linkage between the issues, stating that the degree of tariff cuts that developing countries could make would depend on their ability to make use of SSG and SP mechanisms.

Australia asked countries that support the Uruguay Round approach how they could use this approach and yet ask for and expect the reduction of tariff peaks and escalation.  Barbados replied that it was not contradictory to hold both positions.

On the SSG mechanism for developing countries, the old question was raised on whether there should be objective criteria for countries to use it or whether its use would be left to the countries’ discretion.  Among others, Indonesia spoke in favour of the self-selection approach.

Colombia suggested a linkage in that countries that reduce tariffs significantly should be allowed greater use of the SSG mechanism.  Australia and Chile agreed that the use of SSG should be linked to the degree of liberalization.

Another issue was whether developing countries should apply SSG only to products of developed countries.  Some countries said that the mechanism should only apply to developed countries’ products since only these countries subsidized their products and the SSG could counter the subsidies.

Australia defended its role as a developed-country exporter by saying it did not want to be discriminated against.  On the other hand, Barbados, as a developing-country importer, wanted to be able to use SSG on products of all countries, as it was also worried about surges in imports from other developing countries.

On the relation between the proposed new SSG for developing countries and the existing SSG in the Agriculture Agreement, there were three views:  the two should coexist;  the existing SSG under Article 5 should cease and be replaced by the new one; and the existing Article 5 should be modified to accommodate the new SSG.

On “special products” that developing countries could specify and for which only small tariff reductions would apply, Australia and the US threw cold water on the idea.

Australia said it had looked at the 20 top agricultural imports from some developing countries to find out the effects if the top 10 of these products had SP status. It said that the 10 products would cover more than half the imports of these countries. It said that the trade-weighted average bound rate of the 10 products was over 60% in Korea and over 160% in India. Thus, said Australia, if there was only a low reduction rate for these designated special products, there would hardly be any reduction.

The US disagreed with the idea of designating some products as special products.  In its view, potential problems faced by liberalizing developing countries could be dealt with through the SSG mechanism.

India, Korea, China, Barbados and Indonesia were among the countries speaking strongly for a provision on special products.  India said it should become an essential pillar of negotiations. It did not want criteria to be established for selecting special products and the coverage of SP should be broad. (SUNS5373)