The Doha Development Agenda, Taking Stock A European Perspective

1. The Doha Development Agenda, Taking StockA European Perspective Rolf Moehler former Deputy Director-General for Agriculture of the European Commission

2. The European Union in 2004 Enlargement of the Union in May: • 10 new member states • 450 million European citizens • 10 mio more agricultural holdings • Agricultural area up by 50% A Constitutional Treaty has been agreed in June Elections of the European Parliament in June New Commission with President Barroso in November

3. Reaction to the Framework Agreement The Framework Agreement was well received because • on agriculture the EU locked in reform and obtained reform of US agricultural policy • on industrial products guidelines to cut tariffs have been established • On services a new round of negotiations has been agreed There is disappointment, however, that progress in agriculture has not been matched by more progress in industrial tariff and in services

4. Agriculture in the Framework Agreement Why has the EU welcomed the outcome on agriculture? • Parallelism between phasing out of export subsidies and other forms of export subsidisation • “Blue Box” and “Green Box” have been preserved • The impact of improved market access on the CAP can be cushioned by choosing “sensitive products”

5. Future Negotiating Position of the European Union The EU will • insist on parallelism in phasing out all forms of export subsidisation • have little flexibility on the “green box” and • be rather defensive on market access

6. The Basis of this Position is the CAP Reform 2003 Mr. Fischler wanted CAP reform to drive the WTO negotiations, The CAP reform means • Reduction of market price support • Single farm payment • Rural development This gives • flexibility on export subsidies and market access and • crucial role to “green” and “blue box”

7. Will the New Commission Make a Difference? • The new Commission has no choice but to build on the CAP as shaped by recent reforms • But further adjustments are necessary to meet the requirements of the Framework Agreement • Non-trade concerns will not go away

8. The Framework Agreement and the CAP Eventual elimination of export subsidies will require • further reduction of market price support for dairy, beef, probably cereals and rice although margin of manoeuvre for income compensation will shrink • reform of the sugar market organisation The combination of reduced AMS, “blue box” and “green box” is likely to keep the CAP afloat but the cotton panel has created a problem Market access will remain a difficult issue because of structural weaknessesthat have been compounded by enlargement

9. Reform of the Sugar Market Organisation • The reform of the sugar market organisation is overdue • So far it has resisted reform because of • Negligible budget expenditure • US sugar policy • Powerful lobby • Reform has been triggered by “Everything but Arms” initiative not the Doha Round

10. The Proposal of the Commission • Reduction of market price support by 33%; no intervention buying any more • Sugar production quotas (17.4 mio t) should be reduced by 2.8 million t • 60% income compensation of sugar beet producers by single farm payments • Preferential access for African, Caribbean, Pacific and Indian producers for 1. 3 mio t maintained but at reduced prices • Sugar production is expected to fall to 14.5 mio t and exports with export subsidies from 2.8 mio t to 0.8 mio t

11. The sugar case in the WTO • The Panel has found that • sugar exported without export subsidies (around 3 mio t so-called C-sugar) had benefited from export subsidisation • Export subsidies for sugar imported from African, Caribbean and Pacific countries and India were illegal. • The EU has appealed • Pending the appeal no decision will be taken on the reform proposal of the Commission

12. How Can the EU Be Expected to Deal with the WTO Sugar Case? If the Appellate Body confirms the ruling of the Panel • the proposal of the Commission shows already the way to go • quotas will have to be cut further to make up for the 3 mio t of C-sugar exports to disappear • Further price cuts are likely • Sugar production in a number of member states may disappear

13. How to deal with the ACP countries? • This is a major problem as many of these countries will not be competitive any more • A major restructuring programme is required • Assistance should not be left to the EU alone • It would be helpful if it could be agreed that ACP sugar could continue to be exported with export subsidies for a transitional period

14. Conclusion • CAP reform will remain the basis of the EU negotiating position • Structural weakness compounded by enlargement will limit flexibility on market access • The WTO sugar case can be dealt with in this framework • The special needs of ACP countries have to be addressed