CAFTA TRADE POLICY UPDATE
Issue 2006-12
March 27, 2006

Following is the latest edition of the Canadian Agri-Food Trade Alliance (CAFTA) Trade Policy Update. You are receiving this update either because you expressed an interest in receiving a weekly update on WTO and other trade negotiations, or because your name was suggested to CAFTA. Should you wish to discontinue receiving the Trade Policy Update, simply send an email to office@cafta.org requesting that your contact information be removed from the distribution list.

The Canadian Agri-Food Trade represents producers, processors and exporters of agriculture and agri-food products. Accounting for over 80% of Canada’s agriculture and food exports, and more than 50% of farm cash receipts, CAFTA’s members are united in their dependence on trade, and in their need for a liberalized international trading environment.

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Senior Officials Put Agriculture and NAMA Together Today – Senior officials from 11 countries (Australia, Brazil, Canada, China,Egypt, European Union, India, Japan, Malaysia, Norway, United States) meet in Geneva today to assess the state of the Doha Round negotiations and try to make some progress towards the deadline of April 30 for modalities in agriculture and non-agriculture market access (NAMA). Many believe that negotiations will not progress until negotiations on agriculture, and NAMA are undertaken together, and that is what the Senior officials will do today. The plans for the meeting were “on again – off again” all week as negotiators struggled with a lack of progress, and there isn’t a huge expectation for a breakthrough this week, but most agree that it is important that the issues be discussed together. The text from the Hong Kong Ministerial meeting contained a paragraph (paragraph 24 on agriculture) that directs negotiators to “ensure that there is a comparably high level of ambition in market access for Agriculture and NAMA”. Argentina tabled a paper (TN/AG/GEN/14) around that paragraph that shows that in current proposals, particularly those of the European Union, the ambition between NAMA and services is not comparable at all. For example, applying the reduction proposed by the EU on NAMA to a 35% tariff results in a 7.78% tariff. Applying the reduction proposed by the EU on Agriculture to that same 35% tariff results in a tariff of 19.25%. The paper states that the balance dictated by paragraph 24 be a foundation of the negotiations on both agriculture and NAMA. Negotiators stated that the paper did result in much discussion – and for some – consternation, when it was tabled, but it is unlikely that the ambition will be equal between agriculture and NAMA.

Chair Talks About Focusing on What is There Instead of What is Not – In a meeting with industry in Geneva last week, Agriculture negotiations Chairman Crawford Falconer said that he thinks that there is too much focus on what is not there yet in the agriculture negotiations – such as the lack of progress on sensitive products, and not enough focus on what is there – like the end date for export subsidy elimination, disciplines. Falconer said that countries need to start thinking about locking in what is there, and perhaps looking towards the next negotiation for what isn’t there. (editor’s note – this is very concerning to us, as there is currently nothing there on market access, which is a critical part of the package for CAFTA’s members.)

No Text Yet – Despite expectations that the Agriculture Chair would issue “reference papers” in a number of areas that could start the work on a text based negotiation, the papers were not presented at last week’s agriculture negotiating session. Negotiators have been expecting papers on Export Credit, Food Aid, Exporting State Trading Enterprises, Green Box, Blue Box and the Special Safeguard for developing countries, for two or three weeks. Now the Chair says that the papers will be provided before the next agriculture negotiating session which is currently scheduled for the week of April 17. There is a strong feeling that text is going to be required to focus the negotiations in order to get results. (editor’s note: The issues on which the reference papers have been promised, are not the really difficult ones. If they are not even on the table until mid April, what of the difficult issues around market access?)

Sum Up of Last Week and U.S. Uneasiness – last week was agriculture week in Geneva, and it wasn’t a very productive week for progress on ambition. While some small steps have been taken towards conversion on technical issues, without some direction on ambition, it’s very unlikely that agriculture will achieve modalities by the end of April. As the negotiators take small steps in technical areas of domestic support and export competition, the United States in particular is getting very anxious about the lack of progress on market access. Last week in Geneva, U.S. Chief Agriculture negotiator Dick Crowder made that quite clear in meetings with U.S. industry. He said that most of the focus has been on issues which are very difficult for the United States, such as product specific caps on trade distorting domestic support, and disciplines on the blue of domestic support, and on food aid. This has all come without a focus on market access, where the U.S. needs a great deal more ambition than is currently on the table. The U.S. is making it quite clear that if there isn’t some indication of increased ambition in market access, it will have to withdraw its offer on domestic support to revise the level of ambition.

WTO DG Says There is No Time to Lose – In a speech last week to the Committee on International Trade of the European Parliament, WTO Director General Pascal Lamy said that there is no time to lose in the Doha Round of negotiations. He told the committee: “The possibility of closing a deal – deciding on whether to succeed or to fail in the negotiations started over 4 years ago now — will be decided in the coming 40 days. We are only 40 days away from our end of April deadline. We all know what we must do to take these negotiations forward.” Lamy said that the April 30 deadline for modalities is an important step towards a completed deal by the end of 2006. He said that the 2006 deadline is not “not just a date picked out of the blue” but corresponds to the expiry of U.S. Trade Promotion Authority. He said that if a deal is not reached by the end of December, there will be three main losers: Developing countries would pay the biggest price of the loss of the “development round”. Next would be the smallest and weakest economies, for which the multilateral process acts as an “insurance policy” against the pressures exerted by the strong in bilateral trade accords. But he said the biggest loser would “undoubtedly be the WTO - the system that has served the collective interests of 150 different members, and that has ensured a trade opening that is adapted to changing realities and that is based on a consensus between us all.” Lamy’s speech can be found at http://www.wto.org/english/news_e/sppl_e/sppl21_e.htm

EU Might Take up the FTA Charge – In a speech to the European Committee on International Trade, EU Trade Commissioner Peter Mandelson said that he is in the process of “re-thinking” the EU strategy on bilateral trade agreements. He said that the EU is still convinced that the greatest benefits for the world lie with the multi-lateral approach of the WTO, and EU strategy has until now reflected that, but it could change. He told the Committee: “To focus attention on the DDA, the EU decided some time ago not to pursue any new FTA negotiations, except for those already launched or decided upon. Depending on the progress/outcome of the DDA this policy may have to be reconsidered. In any case, once the Doha negotiation is completed, we shall need to review our priorities.” He said he has launched a Vision Group with the ASEAN (Association of South-east Asian Nations) and a high level task force with India “to look into the possibilities of potential bilateral- or bi-regional trade deals.” http://europa.eu.int/comm/commission_barroso/mandelson/speeches_articles/temp_icentre.cfm?temp=sppm088_en

WTO DSB Adopts Appellate Body Ruling on Mexican Soft Drinks – During its meeting last Friday, the WTO Dispute Settlement Body adopted the ruling of the Appellate Body on Mexico’s tax measures on soft drinks and other beverages. The challenge against Mexico’s tax system was launched by the United States in March, 2004. The U.S. challenge was based on Mexico’s taxation of soft drinks and other beverages made with sweeteners other than cane sugar. Canada also joined the challenge. In October, 2005 the Dispute Panel ruled that Mexico’s soft drink and distribution taxes were inconsistent with their WTO obligations. Mexico appealed in December. The Appellate body upheld the panel decision at the beginning of March, and the DSB accepted that report last week. The U.S. issued a statement saying that it hopes that Mexico will move quickly to eliminate these taxes. http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds308_e.htm

Russian Accession Talks Moving Slowly – the committee working on the accession of Russia to the WTO met last week in Geneva, and reports are that very little progress was made in Russia’s 13 year bid to become a member of the WTO. The Chair of the accession negotiations Sefan Johannesson of Iceland said: “Unfortunately, we have not been making the progress that all of us would like.” He said that last week’s negotiations had only touched on 19 of the 47 outstanding policy issues. In addition to reaching a multilateral agreement on accession, Russia has to negotiate bilateral accession agreements – there are three left to go: the United States, Australia and Colombia.

EU to Spend $C 11 Million on Export Promotion - The European Union said Tuesday it would pay for half of a 16 million euro ($C 22 million) international promotion campaign to sell European-produced foods such as fruits, cheese and wine in 11 countries, including the United States, China, Japan and Canada. The European Commission said it had approved eight promotion and information programs that will focus on selling regional specialties such as dried fruits and olives from Greece, salami, and pecorino cheese from Italy, and wines from Portugal.Under EU rules, member states can apply for EU co-funding of up to 50 percent of food promotion campaigns.EU Agriculture Commissioner Mariann Fischer Boel said boosting sales of European-produced food products was "a major challenge," amid tough competition from other world producers. The commission said the promotion campaigns would focus on the quality and hygiene, nutrition and "environment-friendliness" of European produce. The promotion plans also include raising awareness of EU rules protecting geographic food names such as Parma ham, or Roquefort cheese, which must be produced in their native regions using traditional methods. Other countries where the EU campaigns will be launched include Australia, India, Brazil, Russia, Ukraine, Norway and Switzerland

US/EU Sign Off on EU Expansion – Last week the United States and the European Union officially signed off on a compensation agreement on EU expansion. When the EU expanded to include 10 new member states , those states - mainly in Eastern Europe - were required to change their import tariff regimes to conform with Brussels' rules, resulting in some higher tariffs. International Trade law requires that when tariff regimes are changed, negotiations must be undertaken with those with substantial interests, and the EU has been negotiating with many countries including the U.S. and Canada.. The USTR release following the agreement said that the EU will reduce tariffs goods such as chemicals and fish, and expand tariff quotas for otherexports like boneless ham, poultry and chocolate. The changes will go into effect no later than July 1. Canadian negotiators said that our negotiations with the EU are proceeding and they expect agreement soon.

US TPR – the WTO Trade Policy Review body reviewed the policies and practices of the United States last week. In its report the TPR said that the United States remains a leading driver of the global economy and a key player in talks on liberalizing global commerce, but there are concerns that Washington could get sidetracked by bilateral trade deals. The report warned that "the increasing number of FTAs in which the United States participates raises concerns about administrative resources being distracted away from the multilateral system, trade or investment diversion, and interests being created that could complicate multilateral negotiations." The report said that the U.S. had just three FTAs in 2001 but the total had reached 15 by the end of 2005. A further 12 FTAs where under negotiation at the start of 2006. US Trade Representative Rob Portman said the administration, while remaining committed to the Doha Round, had no intention of eschewing bilateral deals. He said: "We will continue to pursue FTAs because they complement these multilateral efforts to bring down barriers”. The TPR, while saying that trade partners benefit from the U.S.’s mostly open trading environment, there are still some issues to deal with. According to the report: "Nevertheless, market access barriers and other distorting measures, notably subsidies, persist in a few but important areas," said the WTO, adding that tackling these would benefit US consumers and taxpayers and also would boost the global economy.

Prices Drop in January (again) - Prices farmers received for their commodities fell in January 2006 from the same month a year earlier as prices for both crops and livestock dropped. Overall, producers received prices for crops that were 4.8% below levels in January 2005, continuing the downward trend in year-over-year price changes since the summer of 2003, according to the Farm Product Price Index (FPPI). Farmers received lower prices for all crops except potatoes and vegetables. Prices for livestock and animal products dropped 3.2% from the January 2005 level, only the third decline since June 2005. Hog and poultry prices continued their year-over-year slide, pulling down the overall livestock and animal product index, despite persistent strength in cattle, calf and dairy prices. http://www.statcan.ca/Daily/English/060327/d060327c.htm

UPCOMING EVENTS

Senior Officials Meeting – Senior Officials from 11 countries meet in Geneva over the next two days. Today (Monday), the meeting focused on a joint agriculture and NAMA session.

Vietnam Accession – the working group on the accession of Vietnam to the WTO meets today in Geneva

Cotton Sub-Committee – of the negotiating committee on Agriculture meets today in Geneva

TNC – the Trade Negotiations Committee of the WTO, which oversees the negotiations, meets tomorrow Tuesday March 28 in Geneva.

Trilateral Leaders’ Meeting – Prime Minister Stephen Harper will meet with his counterparts United States President George Bush and Mexican President Vicente Fox in Cancun for trilateral meetings from Wednesday March 29 through Friday March 31. Foreign Affairs Minister Peter Mackay will accompany the Prime Minister.