CAP and world trade [Archived]

The European Union is fully committed to the World Trade Organization (WTO) process for reducing trade-distorting agricultural subsidies and a progressive reform of agricultural policies. However, it also expects its WTO partners to take into account the European model of agriculture, which puts great emphasis on non-trade concerns, such as environmental protection, food security and rural development.

144 member states of the World Trade Organisation (WTO) agreed at their ministerial conference in Doha in November 2001 on a

mandate for negotiations on a range of subjects, including agriculture and services.

The Doha declaration sets 1 January 2005 as the date for completing all but two of the negotiations. Progress is to be reviewed at the Fifth Ministerial Conference in Cancun on 10-14 September 2003.

The negotiations take place in the Trade Negotiations Committee and its subsidiaries. Other work under the work programme takes place in other WTO councils and committees.

WTO negotiations on agriculture began in early 2000, under Article 20 of the WTO Agriculture Agreement. By November 2001 and the Doha Ministerial Conference, 121 governments had submitted a large number of negotiating proposals.

Europe is the world's largest importer of farm products, and the largest buyer from developing countries, which is to a large extent the result of the trade preferences. The EU also imports far more from developed countries, such as the US or the Cairns Group, than it exports.

The EU recently decided to give imports from the 48 poorest countries, including farm products, unlimited duty-free access to EU markets. In addition, the EU proposes improvements in the conditions related to trade preferences. Nevertheless, the EU has been often accused by development organisations and its trading partners alike of distorting trade with its high agricultural subsidies in export refunds, at the expense of the developing countries.

Many Third World countries share the view that the WTO has been dominated by developed countries and that current trade agreements are unfair to poor nations. They complain the WTO has left tariffs high on farm products exported by many poor countries, while allowing rich countries to subsidise agricultural exports. Officials from poor countries also complain that rich nations have failed to live up to pledges to grant preferential access to goods from poor countries. Developing countries insist that unfair terms of trade and the lack of market access for agricultural products from poor countries are among the most important causes of poverty.

According to the United Nations Conference for Trade and Development (UNCTAD) , the world's 48 poorest nations are failing to benefit from free trade and globalization and instead face worsening poverty.

Development and environmental NGOs argue that - contrary to what free trade apologists claim - more trade has meant more global and national inequality and more rapacious use of the world's resources, resulting in increased environmental degradation.

The objective of WTO negotiations on the liberalisation of agricultural trade is to establish a fair and market-oriented trading system through a programme of fundamental reform. The programme encompasses strengthened rules, and specific commitments on government support and protection for agriculture. The purpose is to correct and prevent restrictions and distortions in world agricultural markets.

The negotiations are aimed at:

  • granting better market access;
  • reduction, with a view of phasing out, of all forms of exports subsidies;
  • substantial reduction of trade-distorting domestic support.

The Doha declaration makes special and differential treatment for developing countries integral throughout the negotiations. It says the outcome should be effective in practice and should enable developing countries meet their needs, in particular in food security and rural development.

The WTO Agriculture Committee chairman, Stuart Harbinson, unveiled a first draft of the "modalities" paper on 12 February 2003. The draft was aimed as a starting point for the farm negotiations, bridging differences and searching for the compromises necessary for a final agreement. The "modalities" are targets (also numerical targets) for achieving the objectives of the negotiations. The objective of Harbinson's paper on modalities for the agriculture negotiations is to find a "middle ground", bundling the positions of WTO members. It calls for the elimination of all export subsidies over a 10-year period, a tariff reduction of as much as 60 per cent, a cut in domestic subsidies and a raise in import quotas.

Developed countries, the EU and U.S. in particular, dump underpriced exports on world markets artificially lowering world prices and destroying local food production. The Harbinson text maintains the current approach that legalises dumping, while, at the same time, it erodes developing countries' defence (tariffs and other border measures) against dumping.

There are several points of conflict between the EU and US position on agricultural trade liberalisation:

  • The EU says that the US proposals for WTO farm negotiations from July 2002 are unbalanced in the three trade areas of negotiation. On market access, the US proposal requires greater cuts of tariffs by other countries. On export competition, they require the elimination of direct export subsidies while avoiding any real commitment on trade-distorting export credits, or on abuse of food aid the US uses. On domestic support they want to reinvent the calculation to suit them. The EU also argues that the new US Farm Bill goes in the direction of more trade distortion instead of less. The EU is accusing the US of using hidden forms of agricultural export subsidies, such as export loans and food aid to dispose of surpluses, open up markets or drive out competitors.
  • The US accuses the EU that its agricultural export subsidies account for 90 per cent of the world total, and are a 100 times more than in the US. The US says that the EU, with roughly the same value of agricultural production as the United States, can provide 60 billion dollars in support a year, while the United States is limited to 19 billion dollars. The EU can support its farmers at a rate that is approximately 25 percent of the value of its agricultural production, Japan can provide support equal to 40 percent of its value of production, but the United States is limited to less than 10 percent of the value of its production, according to the US Department of Agriculture.

Many argue the latest missed WTO negotiation deadline is a consequence of the disagreement over Iraq that may spread further to the broader WTO talks, as well as other global economic meetings. EU Agriculture Commissioner Franz Fischler expressed regret that WTO members failed to meet the 31 March deadline to agree on the modalities for the WTO agriculture negotiations. Despite the obvious disappointment, Mr Fischler looked ahead with some degree of optimism "Several other WTO deadlines have been missed. We have to concentrate our attention on pursuing the negotiations to ensure that we can establish a comprehensive set of modalities and contribute to making the Cancun Ministerial Meeting in September a success."

EU Commissioners Pascal Lamy and Franz Fischler expressed their disappointment over the revised version of the agriculture "modalities" paper, tabled by the WTO agriculture negotiations chairman Stuart Harbinson on 18 March 2003. "We do not see this draft as bringing the WTO Members closer. Harbinson 2 is largely identical to the first draft. Several imbalances remain," said the two commissioners.

The WTO agriculture negotiations chairman Stuart Harbinson himself acknowledged the second draft made only minor changes in a limited number of areas as he received "insufficient collective guidance" from WTO Members and because "positions in key areas remained far apart." While agricultural exporting countries like Australia, the United States and Brazil said Harbinson's proposals did not go far enough, importers like the European Union and Japan said it was imbalanced in favour of the strongest exporters.

50 civil society groups from 30 countries gathered in Geneva on 21 February to express their disappointment with the current Harbinson draft modalities text. Friends of the Earth Europe, ROPPA (West African Peasants' Network), CAFOD (Catholic Agency for Overseas Development), UK and Broederlijk Delen, Belgium are among the signatories of a statement due to be sent to WTO negotiators shortly. At a press briefing on 24 February, they explained that although only 50 NGOs signed after the first meeting, many more civil society groups are expected to follow suit.

The EU is committed to further liberalisation of agricultural trade, provided that all countries, including the developing countries, and the EU can benefit from it. The Union is ready to further reduce trade-distorting domestic support and export refunds in the current round of WTO negotiations. However, the EU expects its trading partners to accept the same commitments. The EU insists that non-trade issues such as the protection of the environment, food safety and quality are addressed in WTO negotiations.

Under the United States proposal for reforming the rules of global agricultural trade, all WTO members would reduce tariffs using a formula that would demand greater reductions of high tariffs than low tariffs, and result in no tariff over 25 per cent. This would result in global average allowed agricultural tariffs falling from 62 per cent to 15 per cent. The US proposal on domestic support would simplify the current system: subsidies would be considered either trade distorting or non-trade distorting. Trade-distorting support would be capped at 5 percent of the value of agricultural production. This would result in a global reduction of over 100 billion dollars of allowed trade distorting support. Non-trade distorting support would not be limited as long as certain criteria are met.

The Cairns Group of 18 agricultural exporting countries, led by Australia, Argentina and Brazil, wants to see EU agricultural export subsidies eliminated over a period of five years, starting in 2005.

Key dates  
  • Start of WTO negotiations on agriculture: early 2000;
  • Formulas and other modalities for countries commitments: by 31 March 2003;
  • Countries comprehensive draft commitments: by 5th Ministerial Conference, 2003 (in Mexico);
  • 10-14 September 2003, Fifth Ministerial Conference, Cancun, Mexico: Countries' comprehensive draft commitments;
  • Deadline: by 1 January 2005.


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