Presentation Transcript
WTO Negotiations: Drivers for Change in Canada’s Grain Industry: WTO Negotiations: Drivers for Change in Canada’s Grain Industry Canada Grains Council Annual Meeting
April 12, 2005
Winnipeg, Manitoba, Canada
James Rude
Slide2: Setting the Context Doha Developmental Agenda (DDA) is the 9th Round of multilateral trade negotiations through the WTO/GATT
Over the course of these negotiations a number of deadlines have been missed
July 2004 Framework Agreement sets out the general outline that will be used to complete the negotiations
Currently negotiators are attempting to reach a consensus on a draft text of modalities by the December 2005 Hong Kong Ministerial meeting
Probably the final effective date for an agreement is in 2007 when the US President’s trade negotiating authority expires
Basic Elements of July Framework Agreement: Basic Elements of July Framework Agreement Elimination of export subsidies by an end date yet to be negotiated
Direct and some indirect subsidies (credit, food aid, STEs)
Most detailed of the disciplines
Harmonization formulas to be used to reduce domestic support and tariffs
Depths of cuts are yet to be determined, but higher levels of protection are to be reduced by more than lower levels
Domestic support will be subject to some new disciplines
The objective for negotiating market access is substantial improvement, but negotiators are more concerned with maintaining protection than creating opportunities for healthy competition
Export Competition: Export Competition Direct export subsidies to be eliminated by an unspecified date
Elimination may not occur until 2015-2017
EU has 91% of remaining direct export subsidies
What is the probability that EU cereals intervention price is less than US Gulf price of SRW wheat? 15-30%
Empirical estimates show small impacts for cereals
Disciplines on export credit programs
Elimination of credit programs over 6 months
Minimum benchmarks for interest rates, insurance premiums, cash payments  premiums biggest problem for CWB
US accounts for 46% government supported credit and it accounts for 88% of subsidy element of these programs (OECD 2001) …modest improvement in traded prices
Export Competition - STEs: Export Competition - STEs Disciplines for exporting STEs eliminate government guaranteed borrowing and underwriting of losses
Government guarantees for CWB: 1) initial payments; 2)borrowing; and 3) credit sales
What is the impact for single desk selling, price pooling, and initial payments?
Since the CWB has few assets loss of government guarantee will increase borrowing costs
In 2003 CWB borrowing $6.4 billion, but only $558 million was for operating expenses and new credit
Is it possible to establish a contingency fund to backstop initial payment?
Move old re-scheduled debt to Federal books
Provide capital infusion to CWB
Adopt AWB model
Slide6: Export Competition: STE Monopoly Status
Future right to single desk selling is to be negotiated
Banning single desks for exporting STEs creates an anomaly in the WTO’s disciplines on STEs
Should exporter STEs be disciplined differently form importer STEs? Should agricultural STEs be disciplined differently than non-agricultural STEs? There are no strictures on monopoly status:
Developing country agricultural exporting STEs
All agricultural importing STEs
All non-ag STEs
More likely that this issue will be used as a negotiating chip to seek concessions elsewhere
Framework Agreement on Domestic Support: Framework Agreement on Domestic Support Addresses total support (amber box plus blue box plus de minimis)
20%cut in first year
Harmonization formula (bigger cuts for higher levels of domestic support relative to total production)
Blue box redefined and capped at 5% total production
Total AMS subject to cuts with a tiered formula
bigger cuts for countries with higher levels of domestic support relative to total production
Caps on product specific support; no commitment for product specific reductions
Green box is to be reviewed and clarified
Bottom line is that domestic support in US and EU is unlikely to face effective binding reduction commitments
Market Access: Market Access Agreement calls for substantial improvement in market access
reduce average tariff level
reduce tariff dispersion and escalation (harmonization)
Framework Agreement introduces three new types of agricultural products
Normal products: cut highest tariffs more than lower tariffs Sensitive Products: less aggressive tariff cuts but a combination of tariff cuts and quota expansion (the smaller the tariff cut the bigger the quota expansion
Special products: developing countries nominate product lines than are offered even greater flexibility in terms of tariff liberalization
Again the impact on Canada’s grain sector will likely be limited