Whats New

Whats New

August 7, 2002 - International Trade News

WTO Update

On July 25, at the Quint meeting (Australia, Canada, EU, Japan and the US) in Japan, the US outlined an ambitious new WTO proposal to reform global agricultural trade and “level the playing field” for all countries.

  • Under the US market access proposal, 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 percent after five years. It also calls for substantial increases in tariff rate quota (TRQ’s) and tighter rules on TRQ administration.
  • On domestic support, the proposal calls for only two categories – trade distorting and non-trade distorting. Trade distorting support would be limited to 5% of the value of agricultural production, but non-trade distorting support would not be capped.
  • As for export subsidies, they would have to be completely eliminated within 5 years.

EU farm Commissioner Franz Fischler objected to the US proposal because he said it requires more from other countries than from the US. Canadian Federation of Agriculture President, Bob Friesen, was also sceptical saying that, “if the proposal is an attempt to divert criticism from Farm Bill excesses, it will fail,” (Western Producer, Aug. 1, 2002) adding that nobody would see this as a credible proposal. On the other hand, the American Sugar Alliance Chair, Dalton Yancey, said he was encouraged by the ambitious proposal but noted that it can only be successful if all WTO members abide by firm and timely commitments that will effectively address all significant trade-distorting practices in the affected commodity sectors.

Global Sugar Alliance Meets in Geneva to Urge Sugar Reform in the WTO

The Global Alliance for Sugar Trade Reform and Liberalisation (Global Sugar Alliance) was in Geneva and Brussels, June 13-19, to voice its support for multilateral trade reform and underline the urgent need to reform trade in sugar.

While in Geneva the group met with senior WTO officials including the incoming WTO Director General, Supachai Panitchpakdi; the Chair of the Agriculture Committee, Stuart Harbinson as well as WTO Secretariat staff and numerous Ambassadors and Mission staff. Global Alliance members also met with other groups supporting an aggressive outcome for agriculture in the Doha round, including the International Policy Council on Agriculture Food and Trade. The key message of the Global Sugar Alliance is that sugar must be treated equally and fairly with other commodities, recognizing that sugar escaped reform in the Uruguay round. The group supports a single undertaking that results in substantial and meaningful reductions in all trade-distorting sugar policies in line with the three pillars of trade reform outlined in the Doha mandate.

The group also met with EU officials in Brussels to discuss the EU Common Agricultural Policy (CAP) which, with its massive export subsidies on sugar, is a major contributor to the low sugar prices hurting world-price producers including developing countries (see Oxfam article below).

Following the meetings in Geneva and Brussels, the Sugar Alliance agreed to a number of specific follow-up actions. Recommendations specific to sugar will be advanced during the current “modalities” phase of the negotiations to ensure that market disparities in sugar are specifically addressed in this round. The group will ensure its presence in Geneva, working collaboratively with its Missions. They will also continue to liaise with the Cairns Group and other supportive governments and non-governmental organizations. The Global Sugar Alliance is comprised of major sugar producing countries with a common interest in liberalized trade in sugar. The countries include Australia, Brazil, Canada, Chile, Colombia, Guatemala, Honduras, India, South Africa and Thailand.

Oxfam Paper on EU Common Agricultural Policy (CAP) Reform

In June, Oxfam released a paper linking the agriculture policies of the EU and other industrialized countries with the plight of farmers in developing countries. According to Oxfam:

“The agricultural policies of Quad members – including of course the CAP – ensnare developing countries in a vicious circle from which escape is difficult. These policies combine high tariffs, thus closing domestic markets to competition, and enormous subsidies to production, leading to dumping of surplus production on world markets. This in turn results in a drop in world prices and unfair competition, endangering the livelihoods of hundreds of millions of poor farmers throughout the world.” (Time for Coherence, CAP Reform and Developing Countries – Oxfam, June 2002).

Oxfam noted that the EU’s system of subsidies is also geared to “improving the competitiveness of its products in international markets.” For example, they note that Europe now accounts for 18 per cent of total world sugar trade even though its production costs and price are far above world prices /costs:

“How is it possible for the EU to have such a large market share if production costs are, with rare exception, considerably higher than those in many other countries in the world? In reality, subsidies continue to support production and generate large surpluses of many products, such as wheat, sugar, and pork. This surplus production is exported outside the EU at prices under the costs of production. For instance, the export prices of wheat, powdered milk and, sugar are fixed at 46 percent, 50 percent, and 26 percent respectively of their production costs.”

The EU policy hurts global sugar producers, including many developing countries, who depend on sugar for export earnings. It also affects Canadian producers of refined sugar because the EU exports refined sugar, depressing its price in the international market. Not only is the EU market closed to refined sugar from Canada, but all other markets are also effectively closed because Canada cannot compete with subsidized EU sugar that is sold at roughly one quarter (26%) of the cost of production. This is one reason why the sugar industry (both here and internationally) is calling for multilateral trade reform rather than regional and bilateral trade deals. Only a multilateral agreement, including the EU and the US, can deal with the distortions caused by their sugar programs and offer real access opportunities.