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External negotiations affecting regulated trade in sugar

External negotiations affecting regulated trade in sugar. TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIM E Marc ROSIERS 09.06.05. Table of contents. Non preferential Trade Multilateral agreements Uruguay Round Agreement on Agriculture Doha Development Agenda WTO Panel on the Sugar CMO

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External negotiations affecting regulated trade in sugar

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  1. External negotiations affecting regulated trade in sugar TOWARDS A MUTUALLY SUPPORTIVE SUGAR REGIME Marc ROSIERS 09.06.05

  2. 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

  3. Non Preferential Trade • Multilateral Agreements • Uruguay Round Agreement on Agriculture • Doha Development Agenda • WTO Panel no the Sugar CMO

  4. 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

  5. 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 ?

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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)

  11. 96 231 DDA – Market Access Import Price €/t 1.000 Intervention price+ storage costs+ regional support 700 €/t 800 600 Fixed Tarifs Additional Rights 400 385 €/t 200 World market price 0 0 50 100 150 200 250 300 350 400 450 500 World Market Price

  12. Non Preferential Trade • Multilateral Agreements • Uruguay Round Agreement on Agriculture • Doha Development Agenda • WTO Panel on the Sugar CMO

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. Preferential Trade • Preferential trade • Bilateral agreements • Unilateral agreements • Rules of origin

  19. 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

  20. Preferential Trade • Preferential imports • Bilateral agreements • Unilateral agreements • Rules of origin

  21. Preferential Trade • Bilateral agreements • EU-ACP • EU-SPS • EU-Balkan • EU-Mercosur • EU-Euromed • …

  22. 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

  23. 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

  24. 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

  25. 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

  26. Preferential Trade • Preferential imports • Bilateral agreements • Unilateral agreements • Rules of origin

  27. Preferential Trade • Preferential imports • Bilateral agreements • Unilateral agreements • Rules of origin

  28. 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

  29. 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

  30. 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)

  31. 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

  32. 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

  33. LEXIQUE

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