Inside US Trade / Vol. 18, No. 38
The European Union plans to present a position paper at next week's agriculture negotiating session in the World Trade Organization that targets the export practices of the chief critics of its agriculture policies, such as the U.S., Australia and Canada. The EU paper also calls for tighter international rules on the use of food aid by WTO members to ensure that donations are not used as export subsidies, according to a copy reprinted below.
The paper asks that any future agriculture negotiations that seek to reduce export subsidies also must deal with other forms of "trade distorting" export programs such as export credits and the use of state-trading enterprises (STEs) to market their crops. The EU said it is willing to "negotiate further reduction in export subsidies provided that all forms of support to exports of agricultural and food products are treated on a common footing."
According to the EU, new negotiations must increase the transparency and notification requirements with regard to the practices of STEs. The paper also suggests that stricter disciplines may be required to limit the anticompetitive effect of STEs in international trade of agriculture and food products.
The paper, which is being submitted on behalf of the EU and its member states, does not represent a formal negotiating proposal by the EU, for which the Commission would need a specific mandate from member states. The position paper was approved by member states on the 133 committee level, one EU official said.
In the paper, the EU defends its use of agricultural subsidies, saying that they are fully notified to the World Trade Organization. During the 1999 Seattle ministerial, which was to set up the terms of reference for new multilateral agriculture negotiations, the EU clashed with the U.S. and Cairns group of agriculture exporters who sought the elimination of agriculture export subsidies.
The EU paper says that export credits are not subject to any disciplines as agreed to in the Uruguay Round and highlights the lack of progress in talks on developing those disciplines in the Organization on Economic Cooperation and Development, implying that the U.S. is responsible for the delay.
According to the paper, the OECD talks "have so far been unsuccessful, notably due to the lack of willingness to agree on strict disciplines from the main user of export credits ... This has resulted in a great deal of flexibility for those WTO members that use this instrument to support their exports."
The EU presses for a speedy conclusion to the OECD talks and for the resolution to be incorporated into a future WTO agreement on agriculture in order to ensure that there is equal treatment of all export competition tools.
The U.S. signaled a willingness in OECD talks this summer to alter its export credit programs by reducing the length of the repayment terms for some commodities in order to bring them closer to the terms offered by commercial banks. But it was unclear whether the proposal would garner the support of trading partners or the firm backing of U.S. farm groups, leading to doubts as to whether it would lead to a resolution of the issue in the OECD this year (Inside U.S. Trade, Aug. 4, p. 14).
On STEs, the EU criticizes the lack of transparency of single-desk sellers that serve to market countries agricultural products internationally. The EU proposal calls for notification of STE practices and better disciplines in the WTO on certain practices.
"STEs can distort trade in several ways and, as a result, they can circumvent the export subsidy disciplines and commitments of the [Uruguay Round agreement]. Three highly trade-distorting practices of STEs, i.e. cross-subsidization, price-discrimination and price pooling, can be identified as 'hidden' export subsidies," the paper says.
On food aid, the proposal calls it a "disgrace" that developed nations increase food aid to dispose of surpluses when commodity prices are low and curtail it when prices rise and the aid is most needed by food importers. It calls for WTO rules on the transparency of food aid practices and disciplines so that aid does not serve to subsidize exports. Food aid should only be given as grants, the paper says.
"The EC believe that food aid should be given in fully grant form and that it should not be used as a market promotion tool to displace normal commercial transactions and local production. To that end, the EC are convinced that food aid in general would benefit from tighter rules and greater transparency in the WTO in order to avoid abuses of food aid practices," the paper says.
Canada has also been critical of U.S. practices on export credits and food aid, which it alleged stands in contrast to U.S. policy goals of significant agricultural reform (Inside U.S. Trade, July 14, p. 7).
It is unclear at this point whether the proposal will be the subject of discussion in the Sept. 28-29 agriculture talks, since it may have to line up behind two other EU papers that delegates did not get to discuss in the June session. Those papers address animal welfare and domestic support.
The EU, in cooperation with Mauritius, Switzerland, Japan, Korea and Norway, also will submit a joint paper on non-trade concerns which in the past it has raised to illustrate that agriculture has more functions than food production. The paper serves as an introduction to papers on non-trade concerns from the individual countries that will also be submitted.
c Inside Washington Publishers:
