The EU and the WTO Doha Round: a quick history

The EU and the WTO Doha Round: a quick history

Thanks to the lead taken by the EU, this round was launched in Doha in November 2001. After the collapse of the WTO talks in Cancun in September 2003, however, the Doha Round looked destined to remain locked in a stalemate.

After the European Union reviewed its policy towards the Doha Round and reconfirmed that the WTO remains the EU’s number one trade priority, it again took the lead which led to the framework agreement reached in Geneva on 31 July. Instrumental in this has been the additional flexibility which the EU has shown on agriculture and on the Singapore issues.

The EU recognises that the Doha Development Agenda offers the best way forward for the integration of developing countries into the world trading system and the benefits of globalisation.

Reform of the CAP

In the lead up to the Cancun WTO meeting, the European Union was the only major subsidiser to introduce fundamental reform of its system of domestic support for agriculture. The reforms proposed for the Common Agricultural Policy (CAP), introduced in Europe after WWII to encourage food and crop production in the face of a starving populace, constituted the biggest changes to the system for more than a decade.

The most significant change would see the vast majority of subsidies paid independently from the volume of production in the form of a ‘single farm payment’. The rationale was that severing the link between subsidies and production would make EU farmers more competitive and market oriented, avoiding a recurrence of the ‘wine lakes and butter mountains’ scenario of the mid-eighties.

The key elements of the New CAP are:

- A single farm payment for EU farmers, independent from production; limited coupled payments may be maintained to avoid abandonment of production,

- This payment will be linked to the respect of environmental, food safety, animal and plant health and animal welfare standards as well as the requirement to keep all farmland in good agricultural condition,

- A strengthened rural development policy with more EU money,

- A reduction in direct payments for bigger farms to finance the new rural development policy,

- Revisions to the market policy of the CAP

The next move – EU export subsidies on the table

On 9 May, 2004, the EU sought to break the post-Cancun deadlock by offering to eliminate its agricultural export subsidies. EU Trade Commissioner, Pascal Lamy, and Agriculture Commissioner, Franz Fischler, wrote an open letter to the other WTO Members, acknowledging that in order for the Round to move forward, the world’s heaviest subsidisers would have to take the lead on agriculture.

Offering to continue to reduce domestic support for EU farmers, the Commissioners said the EU would eliminate all export subsidies as long as there is “full parallelism” on all forms of export competition including export credits, food aid and State Trading Enterprises (STEs).

The EU committed on 10 May, 2004 to:

- Put all export subsidies on the table, provided they get full parallelism and a balanced overall package on agriculture,

- Show continued flexibility on the Singapore Issues (Investment, Competition, Transparency in Government Procurement and Trade Facilitation),

- Work towards a package of concessions for the poorest and weakest WTO members (essentially the G-90 group of countries). The EU called on other WTO Members to match this level of ambition so as to agree on a set of modalities for the July meeting and the rest of the negotiations.

The EU’s dramatic move was welcomed as a breakthrough for the troubled negotiations with Australian Trade Minister, Mark Vaile, stating that such an opportunity should not be neglected. “If we don't take this gesture from the European Union and try and move forward with it as positively as we can, we'll be abrogating our responsibilities to the Organisation and the global community and particularly those least developed countries and developing economies that desperately need improvements in the global trading system,” he said.

The added sweetener – EU sugar reform

The EU’s sugar regime has long been fiercely criticised by many countries, including Australia, for misallocating resources, hampering competition, harming developing countries and giving consumers, taxpayers and the environment a raw deal.

In another bid to spur negotiation and movement on world agricultural trade, the EU announced on 14 July that it would be radically reforming its sugar system so as to create a regime which is more market-, consumer- and trade- friendly.

The reform proposed substantially cutting back sugar exports and export refunds, the abolishment of intervention, reductions to EU sugar production and the internal sugar price as well as the granting of a de-coupled payment to sugar beet farmers.

These are the main changes proposed:

- Reduction of the institutional support prices from €632/t to €421/t in two steps over three years

- Reduction of the minimum price for sugar beet from €43.6/t to €27.4/t in two steps over three years

- Abolishing public intervention, replaced by a private storage scheme

- Reduction of EU production quota by 2.8 million t (from 17.4 million t to 14.6 million t) over four years

- Reduction of subsidised exports by 2 million t (from 2.4 million t to 0.4 million t)

- New, decoupled payment for sugar beet farmers to partially compensate (60 percent) income losses

- Quotas transferable between operators of different Member States

- Conversion scheme of €250/t for factories leaving the sector.

Broad targets – the EU’s ultimate aims for the WTO

The EU has three key objectives for the Doha Round in 2004:

- All Doha Development Agenda issues need to be addressed in a way that reflects the interests of all WTO Members

- To better integrate Developing Countries in world trade

- Make a significant contribution to sustainable development

Some handy facts – EU and world trade

 The European Union is the world’s largest trading entity, it has also been Australia’s largest economic partner for the past 12 years.

 The EU is the world’s biggest exporter and importer of services, accounting for 24% of world trade in services.
 Australia’s annual exports of food to the EU over the last eight years since the Uruguay Round have increased by 151 percent, while imports have increased by 103 percent

 American agricultural aid now represents 48 percent of total US agriculture production value, compared to 46 percent in the EU.
 34 percent of total Sub-Saharan African exports are imported into the EU, compared to just 16 percent into the US.
 The European Union is now the largest importer of agricultural products from the developing world, importing more agricultural products from developing countries than the US, Canada, Japan and Australia combined.

 Since 1990, EU imports from developing countries have more than doubled.

 Of the agricultural goods imported from the Least Developed Countries (LDCs) in 2002 by the US, Japan, Canada and the European Union, the EU had clearly the largest share at 74.2 percent, US (13.6%), Japan (11.5%), Canada (0.7%).

“The successful outcome of the Doha Development Agenda is the EU’s number one trade priority. It will boost global economic growth by further liberalising trade and investment and by the dynamic economic gains that strengthened WTO rules will bring. But just as important it will ensure that developing countries are truly part of the world trade system and help all countries to go down the path of sustainable development.”

- Pascal Lamy, EU Trade Commissioner

© Scoop Media