The 2019 EU Trade Policy Review was recently published by the World Trade Organisation (WTO). The trade policy review process takes place every two years for major economies and is an important transparency tool. The country under review produces a policy report summarising major trade policy developments since the last review. A second report is written independently by the WTO Secretariat. These reports are then discussed by the full membership in the WTO’s Trade Policy Review Body. Indeed, the EU received more than 1,600 written questions from other WTO members on these reports to which it has provided written answers (unfortunately, the latter files are restricted and not publicly available on the WTO website).
An agenda item on the AGRI Committee’s last meeting in this Parliamentary term yesterday dealt with a presentation by DG AGRI’s Director for International Affairs John Clarke on the agricultural component of ongoing trade negotiations and other relevant issues of trade policy (starts at 16:23 on the meeting video). Amid a chorus of complaints from AGRI MEPs about poultry imports from Ukraine, tomato imports from Morocco and potential Brazilian tariffs on EU exports of garlic, Mr Clarke gave a robust and trenchant defence of the Commission’s role in managing international agricultural trade relations.
Among the items he covered was the EU response to the US imposition of countervailing and anti-dumping duties in 2018 on the import of Spanish ripe olives, confirming earlier preliminary determinations to impose provisional duties.
The EU submitted its latest domestic support notification to the WTO for the 2015/16 marketing year on 23 August last. This notification is interesting because it covers the first full year of operation of the new CAP in 2015, as the new direct payments architecture was first implemented in that year. This post examines the trends in domestic support in this and recent notifications, and speculates on how the figures might be affected by the Commission’s legislative proposals for the CAP announced on 1 June last.
Trend in overall domestic support
The broad trends in domestic support provided to EU agriculture according to the WTO classification is shown in the Figure below.
We are pleased to welcome this guest post by Lars Brink, who is an independent advisor working from Canada.
This post examines the concepts and calculations of the two different agricultural policy indicators called Market Price Support (MPS): the one is used by the Organization for Economic Cooperation and Development (OECD) in its measurement of producer support in its Producer Support Estimate (PSE) indicator, and the other is identified in the Agreement on Agriculture (AA) of the World Trade Organization (WTO) as part of the measurement of the Aggregate Measurement of Support (AMS) indicator.
Once the United Kingdom (UK) has withdrawn from the European Union, the UK by itself will be the entity for which support to agriculture is measured under the practices or rules of international organizations such as the OECD and the WTO.
The idea that the definition of CAP instruments has been (and still is) heavily constrained by World Trade Organisation rules is widespread. In debates on the post 2020 CAP, the issue of compatibility with WTO disciplines is raised each time coupled payments, countercyclical payments, support to production in less favoured areas, risk management or income stabilization schemes are discussed. An issue of particular interest (which this post focuses on) is environmental payments.
In a new study for the AGRI Committee of the European Parliament, Professor Alan Swinbank of the University of Reading turns this traditional focus on the impact of the CAP on world markets on its head. His study The Interactions between the EU’s External Action and the Common Agricultural Policy instead looks at how the external dimension of the EU – including trade policies pursued through the WTO and other international obligations and its development co-operation activities with neighbouring states and developing countries – have influenced the evolution of the CAP.
Domestic support and Bound Total AMS (Aggregate Measurement of Support) may not be high priority items, compared to market access, in terms of analysing trade distortions. Still, anything that touches on farm support and limits on such support attracts attention. This may apply also in a case of Brexit negotiations. This note is about the WTO domestic support commitment of the United Kingdom in case of a Brexit.
Following a first round of discussions on UK demands for a renegotiation of the terms of its membership of the EU at the European Council meeting last month, it now seems that the February meeting of the Council will agree on some package of measures and promises in response to UK Prime Minister David Cameron’s demands. It will then be up to Cameron to decide if this package is sufficient for him to campaign to stay in the EU in the referendum promised to take place before the end of 2017 and possibly later this year.
Even if Cameron decides to campaign in favour of staying in, there is no guarantee that the UK voters will follow him.
Export subsidies allowed EU exporters to grab market share in import markets from competing exporters, put downward pressure on the level of world market prices, and competed unfairly with local producers in many developing countries.