EU plan weak, but it's a start

By BRIAN FALLOW

The European Union's proposals for agricultural trade liberalisation fall short of the ambitious reform called for when the Doha round was launched, Trade Minister Jim Sutton said yesterday.

However, he welcomed the fact that, now that Europe had agreed its opening position, the agriculture talks which are central to the World Trade Organisation negotiating round can now begin in earnest.

The EU is offering an average 45 per cent cut in export subsidies.

By contrast the Cairns Group of agricultural exporters, including New Zealand, are calling for the elimination of export subsidies altogether within three years for developed countries and six years for developing ones.

The United States proposes the elimination of export subsidies within five years.

Europe's proposals emphasise the need to give developing countries a better deal.

Its proposed 45 per cent cut in export subsidies is on average rather than across the board. References to specific commodities were removed from the proposal, reportedly at France's insistence.

Sutton said that export subsidies on sensitive products such as dairy and beef might not be touched.

"Similarly on market access and domestic support, the flexibility the European Commission is proposing will allow politically sensitive sectors to escape the reform process," Sutton said.

The EU, the largest importer of farm products, proposed to cut tariffs on its agricultural imports by 36 per cent on average and a minimum of 15 per cent.

But it rejects the "Swiss formula" favoured by the Cairns Group and the US whose effect is that countries whose tariffs are highest to start with face the deepest cuts. The EU prefers an approach that would share the burden of liberalisation more evenly among developed countries.

Sutton noted that the Europeans are proposing no expansion of tariff rate quota access.

Under tariff rate quotas, countries allow a limited quantity of imports of some product at a relatively low tariff and subject anything above that to much higher, generally prohibitive tariffs.

New Zealand's lamb and butter trades with Europe are constrained in that way.

The EU's proposal is silent on tariff rate quotas, apart from calling for greater transparency and reliability in managing them.

On trade-distorting domestic farm support the commission proposes a 55 per cent reduction in the level of support from that permitted under the Uruguay round.

However, a deal struck between France and Germany on the eve of a key summit on EU enlargement last October scuppered hopes of reform to the Common Agricultural Policy any time soon.

They agreed to cap the EU's agricultural spending (nearly half its total budget) at 2006 levels until 2013. But the deal effectively froze reform proposals until 2006 as well.

The European Commission continues to advocate reforms which would decouple agricultural subsidies from production, in favour of a direct payment to farmers.

British Prime Minister Tony Blair told the House of Commons after that summit that it had been agreed that the limit on agricultural spending would be without prejudice to the Doha talks and that fundamental CAP reform "remains on the agenda".