Bridges Trade BioRes • Volume 4 • Number 8 • 30th April 2004
AGRICULTURE: COTTON DISPUTE, EU CAP REFORM, WTO AG NEGOTIATIONS
AGRICULTURE: COTTON DISPUTE, EU CAP REFORM, WTO AG NEGOTIATIONS
Brazil claims victory in WTO dispute on US cotton
Brazil has claimed victory on an interim report issued by the WTO panel on 26 April in a challenge against subsidies maintained by the US for its cotton producers (see BRIDGES Weekly, 18 March 2003). Clodoaldo Hugueney, Brazil’s lead WTO negotiator, noted that the WTO panel agreed with important elements of their argument and said, "this panel is going to show how important it is that you really change this policy of developed nations". At a press briefing on 27 April, Scott McClellan, White House spokesperson, insisted that the subsidies did not encourage overproduction as they were "decoupled" from farmers’ yields. He added that the decision would have "no immediate impact" on the subsidy programs. The US may submit a request to the panel to review particular aspects of the interim report. However, in practice conclusions of panels are not substantially changed as a result of such requests. The final report is expected to be issued on 18 June and the US has already stated that they would appeal the ruling if it remains unchanged from the interim report. Although this dispute was initiated before the expiry of the so-called "peace clause", where Members agreed to refrain from challenging each other’s domestic agricultural subsidies, there is speculation that a positive ruling for Brazil in this case may open the floodgates for challenges against developed country subsidies.
EU Reforming Agriculture Sectors
Following months of intensive negotiations and discussion on the reform of the Common Agricultural Policy (CAP), the EU Council of Ministers, on 22 April, agreed to reform subsidies in the olive oil, tobacco, cotton and hops sectors. While hops reforms will start in 2005, reforms for the three other products will start from 2006. Franz Fischler, Agriculture Commissioner of the EU, said the new policy was "geared towards a competitive, environmentally friendly and quality oriented farming sector" (see BRIDGES Trade BioRes, 28 November 2003). For the sectors in question, a significant part of the current production-linked payments will be transferred to the de-coupled single payments (subsidies provided independently of farmers’ yields). The EU member states will still have the right to grant a certain percentage of production-linked subsidies. The percentage is limited at 60 percent for tobacco, 40 percent for olive oil, 35 percent for cotton and 25 percent for hops. In addition, a transition period of four years, before fully de-coupling, has been scheduled for tobacco. A part of the current tobacco price-premium will be used to finance restructuring programmes in affected regions from 2010. Fischler further commented, "these reforms send a clear message to our trading partners, especially the developing countries". However, a recent report by the Overseas Development Institute (ODI) concludes that the CAP reforms would not alleviate the problems faced by cotton-exporting developing countries, as they do not provide sufficient incentives for farmers to move away from cotton production.
Negotiations on agriculture inconclusive
The second post-Cancun negotiating week of the Committee on Agriculture (CoA) special (negotiating) session, meeting from the 20-23 April has been concluded without any substantive progress, The talks have been primarily focused on market access, which is widely considered as being the most difficult issue in the agriculture negotiations (BRIDGES Weekly, 22 April 2004). The dozens of past meetings have revealed that major differences between Members persist with regards to the formula for the tariff reductions on agricultural products. The EC has however signalled some openness to replacing their proposed formula with the formula proposed by the G-20 — but only if measures were agreed on protecting the EU’s sensitive sectors. CoA special session Chair Timothy Groser expressed some disappointment about the outcome, saying on Friday that his "modest expectations" had not really been met. If a constructive atmosphere has generally been noted, a G-10 source mentioned that he was "not quite sure it’s a setback…but there are certainly more divergent views". The next agriculture negotiations are scheduled for 2-4 June, 23-25 June and 14-16 July. For a more detailed report of the meeting see BRIDGES Weekly, 28 April 2004.
ICTSD reporting; "CAP reform continued: EU agrees on more competitive and trade-friendly tobacco, olive, cotton and hops regimes," EU PRESS RELEASE, 22 April 2004; "Brazil Says Wins WTO Ruling on US Cotton", FINANCIAL TIMES, 27 April 2004; "Ditching the Peace", THE ECONOMIST, 1 January 2004.