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