External negotiations affecting regulated trade in sugar
TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME
Marc ROSIERS09.06.05
09.06.052
Table of contents
Non preferential Trade– Multilateral agreements
Uruguay Round Agreement on Agriculture Doha Development Agenda WTO Panel on the Sugar CMO
Preferential Trade– Bilateral Agreements
EU-ACP EU-Mercosur EU-Euromed
– Unilateral Agreements Generalised System of Preferences
– Rules of Origin Conclusion
09.06.0510
Multilateral Agreements
– Uruguay Round Agreement on Agriculture
– Doha Development Agenda
– WTO Panel no the Sugar CMO
Non Preferential Trade
09.06.0511
DDA – Calender
Doha Agenda 14.11.01 Modalities
– Cancun – 5th Ministerial Conference 10-14.09.03 failure
– Geneva – Framework agreement of 31.07.04– Hong Kong – 6th Ministerial Conference 13-18.12.05
“approximation” Definition of the lists by product
– Agreement on the lists by product (31.12.06) Ratification by the member states– 2007
– USA Trade Promotion Authority (TPA) end of 30.06.07 Implementation starting 01.01.08
09.06.0512
DDA – Domestic Support
Framework Agreement of July 2004– Domestic Support - general
Amber Box– Amber Box = guaranteed minimal price– Substantial reduction of the «Average Measure of Support »
(AMS) Blue Box
– Blue Box = support linked to production– Limited at 5% of the average total value of the agricultural
production for the historic reference period Green Box
– Green Box = support decoupled of the production– Integration of “non-trade concerns”, revision of the criteria ?
09.06.0513
DDA – Domestic Support
Framework Agreement of July 2004– Domestic Support - sugar
EU Commission : Proposals for sugar CMO– Domestic EU price is not guaranteed anymore (reference price)
and drops by 40 % = 385 €/t sugar (25,05 €/t beet + decoupled support)
– Absolute reduction of amber box– Shift from amber box to the blue and green boxes
09.06.0514
DDA – export competition
Framework Agreement of July 2004– Export competition – in general
Elimination of export subsidies in parallel with the abolition of comparable practices such as export credits, food aid and “state trading enterprises”
– Export competition - sugar Elimination of export subsidies
– Sugar• 1.273.500t -> 0 t• period : ?
– Transformed Sugar (Sugar outside Annex 1)• The export subsidies for high-value added products are maintained
09.06.0515
DDA – Market Access
Framework Agreement of July 2004– Market Access – in general
reduction of fixed import tariffs (specific)– On the basis of “bound rates”– Tiered formula
distribution in ranges according to ‘Equivalents Ad Valorem’ (EAV)
much needs still to be defined– Sensitive products
Maintenance of additional import tariffs (safeguard clause) still to be negotiated
09.06.0516
DDA – Market Access
Framework Agreement of July 2004– Market Access - sugar
reduction in fixed tariffs (specific)– AVE on the basis of world market prices (Paris agreement)
• 419/200 = 209 %
– Sugar in the largest tier (Hypothesis > 90%)• Average reduction : - 60%
- 200 €/t + 168 €/t (419 - 60%) = 368 €/t 385 €/t• Without additional rights, the community preference is
meaningless• - 200 €/t + 168 €/t (419 - 60%) = 368 €/t + 17 €/t = 385 €/t
385 €/t• Alternative : sugar as a sensitive product
09.06.0517
DDA – Market Access
Framework Agreement of July 2004– Market Access - sugar
reduction in fixed tariffs (specific)– Sugar = sensitive product
• Minimal reduction : - 45%- 200 €/t + 231 €/t (419 - 45%) = 431 €/t 385 €/t
• Without additional rights, the community preference is meaningless - prevision €/$ =1,45 en 2006 (€/$ =1,60 en 2007/08)- 200 $/t / 1,45 = 138 €/t (200 $/t / 1,60 = 125 €/t)- 138 €/t + 231 €/t(419 - 45%) = 369 €/t + 17 €/t = 385 €/t 385 €/t
• TRQ (MFN) = imports with O tariff for at least 10% of the EU consumption (= 1.600.000t)
09.06.0518
World market price
Fixed Tarifs
Intervention price+ storage costs+ regional support700 €/t
0 50 100 150 200 250 300 350 400 450 5000
200
400
600
800
1.000
Import Price €/t
World Market Price
DDA – Market Access
385 €/tAdditional Rights
231
96
09.06.0519
Multilateral Agreements
– Uruguay Round Agreement on Agriculture– Doha Development Agenda
– WTO Panel on the Sugar CMO
Non Preferential Trade
09.06.0521
WTO Panel on the Sugar CMO
Three elements of the dispute– The footnote regarding the reexports of ACP sugar
is not valid– The C sugar is produced under the cost of
production– The C sugar exports = subsidized exports
One requirement– Immediate stop of EU exports after condemnation
09.06.0522
WTO Panel on the Sugar CMO
Four answers– Yes
The footnote has no legal value and does not influence the legal EU commitments
– Yes The C beet producers receive an export subsidy as a result of a
governmental measure that allows the sale of C beet to C sugar producers under the average cost of production
– Yes The C sugar producers receive an export subsidy as a result of a
governmental measure in the form of a transfer of financial means via cross subsidising in the sugar CMO
– Yes The EU has between 14 and 18 months to implement the WTO panel
decisions
09.06.0523
WTO Panel on the Sugar CMO
Impact on the Sugar CMO– The EU confirms its obligations vis-vis ACP
countries Export subsidies for quantities imported from ACP/India sugar
becomes impossible in the existing CMO commitments. The internal market has to absorb it.
1,600 million of tons 0 t
– The C sugar exports is subject to the limitations for the quota sugar
The July framework foresees the elimination of export subsidies for sugar
3,000 millions of tons 0 t
09.06.0524
WTO Panel on the Sugar CMO
Impact on the Sugar CMO– reduction of the quotas (-16%)
Current Quotas (UE 25) 17.400– Elimination of export subsidies -1.273– Elimination of ACP re-exports -1.600– Sub total -2.873
14.827– reduction of production (-29%)
Current Production (UE 25) 20.400– Elimination of export subsidies -1.273– Elimination of ACP re-exports -1.600– Elimination of C sugar exports -3.000– Sub total -5.873
14.827
09.06.0525
WTO Panel on the Sugar CMO
Impact on the Sugar CMO– Implementation of the URAA commitments on the
footnote is legally defendable 1.600t – 21% = 1.264t
– What with the « accidental C sugar production »? Is this part of « governmental measures »?
– Impact of the Panel on the agricultural negotiations process
If domestic support : export of one kg/litre support becomes a form of cross subsidisation forbidden to export
Many countries/ products are in the same situation Necessity for a negotiated definition of cross-subsidising
09.06.0526
Preferential Trade
Preferential trade
Bilateral agreements Unilateral agreements Rules of origin
09.06.0527
Preferential Trade
Sugar preferential imports [04/05]– Imports from ACP countries 1.304.700
20 ACP countries
– Imports SPS 146.606 20 ACP countries
– Imports EBA 129.750 49 LDC (of which 37 ACP)
– Imports under MFN 81.000 Cuba, Brazil, …
– Imports of the Balkan countries 200.000 Albania, Bosnia Herzegovina, Serbia Montenegro, Fyrom
– Total preferential imports 1.862.056
09.06.0528
Preferential Trade
Preferential imports
Bilateral agreements
Unilateral agreements Rules of origin
09.06.0529
Preferential Trade
Bilateral agreements– EU-ACP– EU-SPS– EU-Balkan– EU-Mercosur– EU-Euromed– …
09.06.0530
EU-ACP
Today– The sugar protocol (Cotonou agreement)– Quota at O tariff, guaranteed price
In the framework of the « Economic partnership Agreements » (EPA) negotiations are ongoing with 6 groups of countries
Aim : creation of a free trade zone between the EU and the six regions– Every zone becomes a common market with an
Common External Tariff
09.06.0531
EU-ACP
Impact on sugar– Confirmation of the EU commitment to import 1,6 million tons– Action plan with measures following the EU Sugar CMO
Impact of the negotiations at the WTO– Erosion of preferences– Possibility to introduce a special safeguard clause for
protecting against imports of third countries Protection against the volatility of the world market prices
stabilisation of the internal market
09.06.0532
EU-Mercosur
Aim of the negotiations– reduction of the import tariffs for almost all
products and services over a period of 10 years Offer Mercosur
– 83,5% of UE imports– Products divided in 5 categories
A : immediate elimination of tariffs B : progressive elimination over 8 years C : progressive elimination over 10 years D : progressive elimination over 10 years with different pace than C E : progressive elimination over 10 years with different pace than C
and D
09.06.0533
EU-Mercosur
EU Offer – 91% of the Mercosur imports
E : sensitive products– No tariff reduction, but TRQ– 1.000.000 m3 bio ethanol
– “Single pocket” negotiations Explicit linkage between the preferential and multilateral trade
negotiations of the DDA Example : TRQ bio ethanol in 2 steps
– Step 1 : immediately– Step 2 : according to the DDA negotiations
Calendar– Normally an agreement in October 2004– Linkage with the agricultural negotiations of the WTO
09.06.0535
Preferential Trade
Preferential imports Bilateral agreements
Unilateral agreements
Rules of origin
09.06.0538
Preferential Trade
Preferential imports Bilateral agreements Unilateral agreements
Rules of origin
09.06.0539
Preferential Trade
Revision of the Rules of Origin– Calendar
16.03.05 : Communication of the EU Commission 28.04.05 : Project of regulation Discussions in the “Customs Code Committee” Agreement expected in the autumn 2005 Implementation
– First GSP – Followed by ACP – APE negotiations– Followed by successive implementation of other agreements
09.06.0540
Preferential Trade
Revision of the Rules of Origin– Proposals of the EU Commission
Definition of preferential origin on the basis of added value approach
– Net production costs– Definition of added value thresholds– Elimination of the list of minimal transformation
Modifications of customs procedures for the control of preferential origin
– The importer takes the commercial risk– List of registered exporters– Control of economic operators and the origin of products by
customs authorities
09.06.0544
Preferential Trade
Revision of the Rules of Origin– Impact on sugar : position
Maintaining a list of sufficient transformation– If impossible, definition of industrial transformation aiming at
excluding simple mixing or refining Ban of regional cumulation with countries that do not benefit
from a preferential trade agreement Thresholds for added value : as high as possible
Possible alternative : the only sugar produced on the basis of locally produced commodities can obtain the origin (cfr NAFTA approach)
09.06.0545
Preferential Trade
The UE : from net exporter to a net importer
05/06 06/07 09/10– Imports 1.800 2.400 3.800
ACP 1.400 1.400 1.400 LDC 200 800 2.200 Balkan 200 200 200
– Exports 5.800 100 100 Quota 1.200 100 100 ACP 1.600 0 0 C 3.000 0 0
– Import (-)export (+) +4.000 -2.300 -3.700
09.06.0546
Conclusion
Impact of external negotiations on a regulated sugar market– Liberalisation = deregulation– Price
Reduction in tariffs alignment of prices on the WMP Safeguard clause reduction of uncertainty
– Volume Regulation of supply (quotas) replaced by a regulation by
prices EU is moving from a position of net exporter to a net
importer reduction of European production
09.06.0547
LEXIQUE