Hostility between EU and US trade negotiators is reaching unprecedented levels following the indefinite suspension of global trade talks
Agricultural tariffs:
The United States currently has lower agricultural tariffs than the EU or advanced developing economies:
- US average bound tariff = 12%
- EU average bound tariff = 23%
- Global average bound tariff = 62%
- India’s average bound tariff = 114%
The US accuses the EU of blocking market access to developing countries and using sensitive products to counterbalance the level of new market access it is offering.
The EU responds, saying it is already the most open market in the world for agricultural exports from the developing world. Through its Everything But Arms system, the EU provides tariff and quota free access to all agricultural imports from the 50 Least Developed Countries (LDCs). And the EU absorbs more agricultural imports from the LDCs than the rest of the developed world combined, taking in 70% of agricultural exports from the LDCs, while the US absorbs just 17%.
Farm subsidies:
WTO rules identify different forms of trade distorting farm spending:
- Aggregate Measure of Support or Amber box support, which cover payments that are coupled to the price or production level,
- The de minimis box support, which is a limited farm support allowance to all WTO members
- Blue box support, which contains less trade-distorting subsidies, with reduced effects on production and prices.
The United States has fewer trade-distorting agricultural supports (AMS) than the EU:
- The Aggregate Measure of Support (AMS) in the US in 2005 was of $12.5 billion, with an WTO-allowed level of $19.1 billion
- AMS in the EU in 2005 is estimated at $33 billion with an allowed level of $88 billion
However, because by shifting payments from box to box it is possible to lower AMS levels but maintain trade-distorting payments in the other two boxes, and because the cuts proposed would be applied to the levels currently permitted by the WTO and not to the levels actually spent, the US offer would actually lead to an increase in its farm subsidies to $22.7bn.
This would still be below EU levels, but it is also worthy to note that the EU has 11 million farmers while the US has only 2 million.
Positions
EU Trade Commissioner Peter Mandelson refuted US accusations about the EU’s lack of ambition, saying: “To raise our envisaged average farm tariff cut from 39% to 50% is hardly putting nothing on the table”.
He also said that “other negotiators, to a greater or lesser extent, also showed flexibility on areas where they had acute defensive concerns, be it in agriculture or industrial tariffs…But the United States, I regret to say, showed no flexibility at all in the end on the issue of domestic subsidies in agriculture”.
He stressed the fact that the EU had finally managed to align their position with nearly all negotiating groups. Other than the Cairns Group and the US, negotiators recognised the important and painful concessions already made by the EU, he said.
The broad agreement reached between the EU, the G20, the G90 group of developing countries, and the G10 covered 80% of WTO membership, but despite this, he said, “the United States seems to be saying to the rest of the world: ‘we are right, you are isolated’”.
US Trade Representative Susan Schwab responded by saying that Mr. Mandelson’s statement was an attempt “to divert blame for the stalemate” and “is false and misleading”.
She reminded that the EU "has average agricultural tariffs twice those in the US and domestic supports three times greater than the U.S”.
She said the US had “put forward the most bold agriculture proposal advanced to date” but that the EU had been "unable to endorse the US proposal given substantial opposition from France and a few other member states with strong farm interests".
She acknowledged that the U.S. had made no new proposal at the fateful G-6 meeting which led to the collapse of the talks, but insisted this was because no other members had indicated any new flexibility in market access despite promises made at the earlier G-8 meeting (See EURACTIV 17 July 2006).
Michael Moore, WTO director general between 1999 and 2002, said "I think there is enough blame for everyone to share''. "Words are hard to take back" he said when asked about the exchange of hostilities between the EU and the US. "You just can't sit back and throw rocks at Japan, or rocks at the U.S. It just dirties the water." He urged the two powers to get things going again, saying "the bigger you are, the more responsibility you have... The U.S. needs to do something about domestic support and Europe has to do a lot more on market access."
Oxfam laid the blame on both parties, saying “the ‘development’ potential of the round has been lost because of the narrow self interest and stubbornness of the EU and the US”.
Following Peter Mandelson’s remarks, the NGO said: “Europe must accept its role in the five-years of failed negotiations at the WTO that led to this week’s chaotic end to the trade talks”. Indeed, while the EU did move closer to the position of the G20, Oxfam said “its offers on market access and domestic support were still insufficient to deliver a pro-development outcome”.
Background
On Monday 24 July 2006, WTO chief Pascal Lamy formally suspended the Doha Development Round, bringing five years of negotiations to an end (see EURACTIV 24 July 2006).
In the aftermath of this announcement, the EU and the US have been pointing fingers at each other, arguing over who is most to blame for the failure to conclude a deal on global trade liberalisation.
The EU’s initial offer consisted of:
- a 60% reduction on highest agriculture tariffs and an average tariff cut of 39%;
- higher protection for 8% of agricultural production considered as sensitive products
- a 70% cut in trade-distorting agricultural subsidies;
- total elimination of all kind of export subsidies for agriculture products by 2013,
- a maximum tariff rate of 10% for industrial products, 15% for developing countries
The US’s offer was:
- a 90% reduction on highest agriculture tariffs and an average tariff cut of 66%;
- a maximum tariff rate of 10% for industrial products, 15% for developing countries
- higher protection for only 1% of agricultural production considered as sensitive products
- a 53% cut in trade-distorting agricultural subsidies
Following negotiations with their G6 partners, Australia (representing the Cairns group of agricultural exporters), India and Brazil (representing the G20 group of developing countries) and Japan (representing the G10 group of net agricultural importers), the EU agreed to raise its average farm tariff cut to as close as possible to the G20 proposal of 54%.
It also accepted that developing countries maintain a maximum tariff rate of 20%, but was less willing to compromise on sensitive products.
The US did not present a new offer, saying that EU and G20 proposals were not ambitious enough and refusing to make further cuts in agricultural subsidies unless the EU and G20 extended their market access.
Timeline
- 24 July 2006: WTO chief Pascal Lamy officially suspended the Doha Development Round
-
1 July 2007: Expiry of the US Trade Promotion Authority Act (TPA) that allows the administration to present trade agreements to Congress for up or down votes, but not to amend it (See EURACTIV 26 June 2006).
Further Reading
Governments
- US Trade Representative's Office:Statement by Office of the US Trade Representative(25 July 2006)
EU Actors positions
- DG TRADE:Peter Mandelson: "We need to look ahead and to rebuild"(25 July 2006)
- DG TRADE:Peter Mandelson: "There is no more time left": Peter Mandelson statement to the press following suspension of WTO Doha negotiations(24 July 2006)
NGOs and Think-Tanks
- Oxfam:Oxfam says EU must change its mindset at WTO(25 July 2006)
Press articles
- Financial Times:US hits back at EU over Doha collapse(25 July 2006)
- Reuters:UPDATE 3-US, EU swap blame for trade talks failure(25 July 2006)
- Bloomberg:EU's Mandelson Says Differences With U.S. on WTO `Fundamental'(26 July 2006)
- Le Monde:Egoïsmes agricoles(25 July 2006)
- La Libre Belgique:C'est celui qui le dit qui l'est(26 July 2006)
- Reuters:USA weisen EU-Erklärung zu WTO-Gesprächen als falsch zurück(25 July 2006)
- Schwabmuenchner AllgemeineSchwerer Schlag für Welthand(26 July 2006)