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October 2001

New GSP scheme for developing countries

30 September 2001

 In June 2001, the Commission announced the finalization of the new unilateral GSP scheme (Generalized System of tariff Preferences) for developing countries which will run from January 2002 until December 2004.  The scope of this scheme will give some indication of the market access to be made available to those non-least developed ACP countries which decide against negotiating a reciprocal preferential trade arrangement with the EU under the terms of the Cotonou Agreement.

Editorial comment

 The new GSP scheme reduces imports duties by 3.5% on all items. This will serve to further erode the margins of preference between ACP suppliers under the Cotonou Agreement and other developing countries which export under GSP.  However, by narrowing the gap, the EU is reducing the punitive aspects of the reversion to GSP treatment option included in the Cotonou Agreement and reducing the costs of saying no to reciprocal preferential trade arrangements.  Through this new GSP regulation the EU is also implicitly introducing the concept of "graduation" in the application of GSP preferences to developing countries.

OECD wants more reform

30 September 2001

 In April 2001 the OECD released a series of reports outlining why the Uruguay Round Agreement has brought only modest benefits.  It highlighted how agricultural tariffs remain high (at an average of 40% compared to 4% for manufactured goods) and how price support levels also remained high.  It points out how, in the last 20 years, developing countries' share of world agricultural markets has remained stagnant, largely as a result of protectionist policies in OECD countries.This series of reports can be accessed via the web page listed below.

Editorial comment

 These reports provide useful background information on progress on the opening up of OECD markets and in the reform of agricultural policies of OECD countries (including the EU) and the effects of these developments on developing countries (including ACP developing countries).

Lamy wants ACP support for WTO negotiations

30 September 2001

EU Trade Commissioner Lamy used the occasion of the ACP Trade Ministers meeting in Nairobi on October 2nd 2001 to call for the ACP to fully support a new round of WTO negotiations.  Trade Commissioner Lamy placed considerable emphasis on the EU's commitment to ensuring that a new round of negotiations responded to developing countries needs and concerns, including implementation issues, improved market access trade related technical assistance and support for development. 

Editorial comment

This forms an integral part of an EU charm offensive to try and mobilize developing country support for a new round prior to the Doha Ministerial meeting.  It follows similar appeals in Mexico and at the Asia-Europe Ministerial meeting in Hanoi.  A noticeable feature is the increased reference to "support for development" as part of the agenda of concerns which need to be addressed.  This is consistent with the EU's wider REPA approach, which sees reciprocal preferential trade arrangements being linked to future EU aid programmes.

Moore asks African trade ministers to support new round

30 September 2001

Addressing African Trade Ministers on September 22nd 2001 in Abuja, WTO Director General, Mike Moore, called on African governments to support a new round of WTO negotiations. He pointed out how "opting for the status quo would not stop further trade negotiations taking place next year They would take place, but outside the WTO, with those not included bearing the costs of exclusion." He highlighted a recent study by the Tinbergen Institute which estimates that "developing countries would gain $155 billion a year from further trade liberalization", i.e. over three times what they receive in annual aid transfers. He pointed out how "OECD agricultural subsidies in dollar terms are two-thirds of Africa's total GDP," and asked his audience to "think of the gains to the global economy and Africa if these subsidies were removed".

Editorial comment

While the potential benefits to developing countries from further liberalization of developed country markets, and the elimination of agricultural subsidies would undoubtedly bring trade benefits to developing countries the reality is that OECD countries are actually expanding public subsidies in the agricultural sector and not reducing them (see articles on the EU Budget for 2002 and EU Criticism of US farm support). African and other ACP Trade Ministers undoubtedly would like to see real action on the part of OECD producers, in terms of reducing and eliminating agricultural subsidies, before committing themselves to a comprehensive round of trade negotiations. However given the criticisms of the Cairns Groups position by the EU (see article "Cairns Group Criticised") this is simply not on the cards at the moment. In the absence of such clear cut action, the benefits of trade liberalization for developing countries dependent upon agriculture may once again prove illusory.

When the elephants fight..

30 September 2001

On August 17th 2001 the EU Agriculture Commissioner Fischler highlighted the incoherence between the US decision to grant US$ 5.5 billion in farm relief aid and its demand that agricultural policies be more market orientated.  Fischler complained that this aid programme "inevitably impacted on production and hence prices in both the US and international markets".  He complained that these handouts served to remove US agriculture even further from market influences.  Fischler argued that it was unacceptable that US $ 30 billion of such aid can avoid WTO discipline because of weaknesses in WTO rules.  Fischler complained that at an annual average of US $ 11,000 per farmer this is almost three times the level received by EU farmers (US $ 4,500).

Developing countries launch special and differential treatment paper

30 September 2001

In September 2001 twelve developing countries formed the Like Minded Group (LMG) and circulated a paper setting out proposals for a Framework Agreement on Special and Differential Treatment. According to the LMG proposal this should involve fuller implementation and re-balancing of the WTO Agreements which currently favour the interests of developed country members. In the short term it calls for all existing S&D treatment provisions to be implemented. Five ACP countries: Dominican Republic, Kenya, Tanzania, Uganda and Zimbabwe, signed up to this LMG position.

Editorial comment

The reality facing developing countries is that the WTO provisions on special and differential treatment are largely best endeavour clauses, which do not carry the same weight as other WTO commitments when it comes to reconciling different commitments entered into under WTO agreements.  This means that developing countries commonly find their rights to special and differential treatment being subordinated to other WTO principles.  In the case of the ACP, the principle of non-discrimination is given far greater weight in considering questions of the WTO compatibility of trade arrangements than the right of developing countries to special and differential treatment.

Place name piracy

30 September 2001

The EU wants to end the use of designations such as Parma Ham and Champagne, if these products are not produced in the Parma or Champagne regions.  The EU is keen to link market access arrangements to agreements protecting against what it considers piratical use of geographical designations.At the third special session of the WTO Committee on Agriculture in Geneva at the end of September 2001, the EU tabled proposals to protect "geographical indications". 

Editorial comment

In the recent South Africa-EU trade negotiations, disagreements over the use of geographical designations for Port and Sherry held up wider trade negotiations.  ACP countries can expect the EU increasingly to link market access agreements to protection of geographical designations of origin.  This could effect ACP producers who have developed specialized products where geographical designations have taken on a more general usage (e.g. Sherry, Parma Ham, Port etc).

Cairns Group criticised

30 September 2001

Speaking in September at a Conference on European Agriculture, Commissioner Fischler criticised the "extreme position" of the Cairns Group, which wants to subject agricultural trade to the same disciplines as other trade.  He highlighted how the EU was willing to say "Yes" to further liberalization if all countries move in the same direction and "Yes" to further reductions in export subsidies, providing this was part of a broader approach, but was not willing to accept agriculture being treated in the same way as other sectors.

Editorial comment

As the Commissioner has pointed out, CAP reform is not driven by WTO negotiations, rather the process of CAP reform determines EU positions in the WTO. Thus the EU is willing to accept further liberalisation and further reductions in export refunds because the process of CAP reform in certain sectors is reducing the EU's need for them. The EU also wants to see other countries reduce their tariffs on agricultural exports, and move to direct aid payments to make EU exports more "competitive". If third country markets are opened up under these conditions then EU exporters potentially have a lot to gain. This needs to be borne in mind as ACP countries seek to determine their responses to EU positions in the WTO. Put simply, with high levels of direct aid EU farmers will be able to live with liberalization, but can ACP farmers live with liberalization when they have no access to such direct aid programmes?

Irony in a green box

30 September 2001

At the third special session of the WTO Committee on Agriculture in Geneva at the end of September 2001, the EU tabled a paper seeking to promote greater use of Green Box Measures, which are seen as none-trade distorting.

EU agriculture expenditures soars

30 September 2001

Editorial comment

While recent OECD analysis has asserted that agricultural reform will decrease costs and free up budget resources, this is far from the case for the EU. Against this background, EU statements to the effect that the reform process is doing away with the trade distortions traditionally associated with the CAP must be proved empirically rather than simply asserted. The growing volume of public aid deployed in support of agricultural producers in the EU is at the heart of the decline in EU basic agricultural prices and the consequent improvement in the competitiveness of European agricultural and processed agricultural exports.

EU announces approval of support for rural development programmes

30 September 2001

Editorial comment

Given the growing importance of value added food product exports in the EU's total external trade in agricultural products, these publicly financed programmes of assistance to improving processing and marketing of basic agricultural products could provide further assistance to the competitiveness of European exports of value added food products to developing country markets.

Meat and bone meal ban

30 September 2001

On June 19th the temporary ban on the use of meat and bone meal (MBM) in animal feed was extended by the EU Agriculture Council.  The Council also confirmed that from October 1st 2001certification of an effective MBM ban will be required on all imports of beef into the EU and that further full tracing of the herd and dam of origin will be necessary for live imports. In addition BSE-related restrictions will be extended to tallow, gelatine and pet food from October 1st 2001.  This will mainly require the removal of all specified risk material from carcasses.

Editorial comment

The requirement to certify full implementation of the meat and bone meal ban, and to implement traceability schemes on ACP beef exported to the EU, will increase the costs incurred by ACP suppliers in producing beef for export to the EU.  These increased costs will need to be carried in the face of declining prices for beef on EU markets.

Implications of EU MBM ban

30 September 2001

On July 21st 2001 the European Commission issued a memorandum providing Guidance to Third Countries on the Implications of the Meat and Bone Meal ban.  This memo covers the animal feed rules which will need to be applied to animals slaughtered for export to the EU and thus has important implications for ACP beef exports to the EU market.

Zimbabwe access to EU market under threat

30 September 2001

 Press reports indicate that Zimbabwe's access to the EU beef market could be under threat from two developments stemming from the ongoing political and economic crisis in the country.  The first threat arises from the breakdown of foot and mouth disease controls and livestock identification schemes as a result of land invasions.  This could increase the risk of foot mouth disease spreading to commercial beef herds and hence lead to the pre-emptive closure of the EU market on the basis of the threat of foot and mouth disease from Zimbabwean exports to the EU market.  The second threat arises from the need to import maize as a result of declining domestic production.  It is feared that GM crops could be imported for food and feed purposes.  If this were to occur then Zimbabwe would lose its GM free status and face the closure of the EU beef market to Zimbabwean exports.

 On August 21st 2001, as a result of a breakdown in foot and mouth disease controls and land occupations involving the cutting of fences an outbreak of foot and mouth disease was reported in Zimbabwe and exports of beef to the EU were immediately terminated.

Editorial comment

 Developments in Zimbabwe highlight the growing importance that SPS related issues will have on the ACP beef export trade to the EU market.

Pessimism rules in EU beef market

30 September 2001

At the 23rd July 2001 EU Agricultural Council meeting, Agriculture Commissioner Fischler gave a pessimistic report on the state of the EU beef market.  After an initial recovery in the Spring, the EU beef market was once again depressed.  The discovery of BSE in Greece had not helped matters and a difficult autumn was predicted. With regard to exports, the volume of export licences looked promising but certain major markets remained closed (Egypt, Saudi Arabia, Indonesia, Philippines).

Editorial comment

This Commission briefing indicates increased activity by European beef traders in the context of the continued closure of major markets.  The question arisesas to how many of the exports licences will be destined for ACP markets already served by ACP beef producer "sCP beef producing countries should closely monitor the development of beef exports in the coming months.

Beef market update

30 September 2001

This report reviews the state of the EU beef market including: prices; consumption and production, the 'purchase for destruction' scheme, the operation of special market measures and trade with third countries.  It points out that while the Russian market has been re-opened, the Egyptian market remains closed and, as a result, EU beef exports are at half their normal levels.

Further reductions in EU intervention price

30 September 2001

Editorial comment

This further shift towards higher levels of direct aid and lower intervention prices will be likely to lead to a reduction in EU market prices, even after the effects of the October BSE scare have worn off.  This will reduce the income earned from ACP beef exports to the EU market andreduce the unit value of export refunds needed to bridge the gap between EU and world market prices, making it less expensive for the EU to export beef to third country markets with the benefit of export refunds.

EU agriculture council agrees new 7 point plan for beef sector

30 September 2001

The new 7-point plan for the beef sector is designed to promote more extensive forms of beef production and help restore consumer confidence in how beef is produced.  It involves revision of stocking density limits; headage limits; a reduction in national limits on special beef premiums; reduction in the number of suckler cows eligible for suckler cow premium; adjustment of the premium rights reserve system; an increase in the ceiling for intervention buying (350,000 tonnes to 500,000 tonnes) for 2001 ( for a guide to the terms used see Basic Issues Section).

Editorial comment

The EU is attempting to limit production with a view to bringing the EU beef market back into balance.  However this is likely to lead to increased levels of direct payments per animal, enabling EU beef farmers to live more easily with depressed prices.  Lower prices will result in lower returns for ACP beef exporters.

Commission authorizes € 418 million pay out to beef farmers

30 September 2001

Editorial comment

Depending on the nature of the special aid packages being put together this could have an impact on the conditions under which EU beef is exported.

Quotas ignored - questions asked

30 September 2001

On the 25th July 2001 the Commission announced it was taking action against French banana importers who had imported above and beyond their tariff quota (50,000 tonnes in place of 4,000 tonnes).  The Commission is concerned that the new rules for the management of tariff rate quota's in the banana sector should be properly adhered to, in order to avoid further challenges to the new regime.

Editorial comment

Widespread abuse of the management of tariff quota arrangements could lead to new challenges to the revised banana regime. ACP banana suppliers should note this warning.

New standards?

30 September 2001

The European Commission is currently drawing up a White Paper on Food Safety as well as a general food law which will include a proposal for the establishment of a European Food Safety Agency. 

Editorial comment

This paper will provide the basis for sanitary standards for imported products and could provide insights into likely future obligations on ACP exporters.

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