Bridges Weekly Trade News Digest • Volume 13 • Number 13 • 8th April 2009

WTO Urges EU to Liberalise Agriculture, Services Sectors

Discuss this articleShare your views with other visitors, and read what they have to say

The European Union, the world’s leading exporter and second-largest importer of goods, will play a key role in shortening and reversing the current global economic slowdown, the WTO said in a report released Monday. But Brussels should further liberalise its services and agricultural sectors to stimulate the bloc’s recovery from the losses that it has suffered in the global financial and economic crisis.

WTO delegates had a chance to discuss the Trade Policy Review, or TPR, at a meeting of the WTO’s Trade Policy Review Body held on 6 and 8 April.

The EU’s Common Agricultural Policy (CAP), which sets tariff and subsidy levels in the European farm sector, drew scrutiny from the WTO. The global trade body urged Brussels to both simplify its agricultural tariffs and lower its tariff rates on agricultural goods.

But the report noted that the EU had already made some progress on this front. CAP reforms passed in 2003 increased the market-orientation and competitiveness of the sugar, fruit and vegetables, and wine subsectors and eliminated export subsidies of fruits, vegetables, and wine. Between 2007 and 2008, CAP expenditures increased in agriculture and rural development by €2 billion, for a total of roughly €54 billion within the EU’s 27 member countries. More than half (58 percent) of those payments are doled out to farmers under the EU’s Single Payment Scheme and qualify as ‘green box’ payments under WTO rules, meaning that they are intended to be minimally trade distorting and can be increaesd without limit.

Export subsidies for farm goods continue to be one of the EU’s most controversial breaches of WTO principles. In January, the EU, citing the global economic crisis, reinstated export subsidies for some dairy products and increased spending on poultry. The move drew heavy criticism from the WTO Membership.

Brazil, in its response to the EU’s policy review, called EU export subsidies in the agriculture sector a “throwback to the past,” and urged deeper reforms. The EU’s levels of agricultural subsidies “should be reason for embarrassment,” Brazil said, adding that the reintroduction of export subsidies for European dairy products sent “the wrong signal at the worst possible time.”

But a European representative said in response that Brussels remains willing to cut overall trade distorting support by 80 percent and to give up export subsidies entirely.

The WTO also called for further liberalisation of the services sector, which the report called the backbone of the European economy. While the EU has made progress in opening up its telecoms and postal industries, significant regulatory and administrative hurdles continue to obstruct the flow of services trade among the EU’s member states. Many services, including tourism, distribution, construction and engineering, lack a common market policy within the 27-member bloc, the report said.

But the report commended the EU for its active membership in the WTO, calling the bloc “a major force” behind the Doha Round negotiations.

The WTO secretariat conducts periodic reviews of all of its Members’ trade policies. This was the ninth such review for the EU.

ICTSD reporting.

*This article was modified from the original version, which incorrectly characertised the WTO classification of the EU’s agriculture subsidies.

One response to “WTO Urges EU to Liberalise Agriculture, Services Sectors”

Jacques Berthelot 8th April 2009 at 20:20
The WTO Secretariat endorses the EU’s recurrent claim that the on-going CAP reform since 2003 is increasing its “market orientation” forgetting that the prices of almost all its ag products are no longer market prices given the huge level of its domestic subsidies. In fact the EU is not a “market economy” for agriculture and the CAP could be prosecuted on this ground at the WTO. Most EU agricultural products are not sold on its internal market “in the ordinary course of trade” but are sold at a price “less than its normal value”.
The ICTSD is erring about the WTO status of the Single Payment Scheme that the EU has wrongly notified in the green box for €14.7 billion for 2005-06 because of the Appellate Body precedent of 3 March 2005 in the US cotton case that the US direct payments are not in the green box. Indeed the EU production restrictions are much more numerous than in the US: besides also on fruits and vegetables, you have milk and sugarbeet (production quotas), wine (plantation rights), and caps on cotton, tobacco and olive oil.
ICTSD makes a slip of the pen in saying that blue payments can be increased without limits, which holds only for genuine green subsidies.
And the EU and ICTSD figures for the EU budget forget the Members’ State aids which accounted for €12.7 billion in 2007.