The description of a Fortress Europe has often been applied to the CAP. But just as the CAP has undergone significant internal reform since the first faltering steps under Commissioner MacSharry in 1992, there have also been substantial changes to the CAP’s external trade regime. The EU still maintains high tariffs on specific agricultural imports, but in fact the majority of the EU’s agricultural imports (including here fish as well as highly processed products like beverages and tobacco products) enter the EU duty-free, either because the Most Favoured Nation (MFN) tariff is zero, or because the EU has granted duty-free preferential access.
Breakdown by import regime
Eurostat now classifies EU external trade by the nature of the import regime (MFN or preferential) under which a particular product is imported. The table below shows the data for agricultural imports (defined as products in the HS tariff classification chapters 1 through 24) for the latest year 2007. All food and agricultural imports in that year amounted to €87.7 billion. Of that total, 55.6% entered under MFN tariffs, 42.0% under a preferential regime, and the remaining 2.4% could not be classified.
More significantly, of the 55.6% which entered under MFN tariffs, 32.9% entered duty-free (because the MFN tariff was zero), 22.2% entered under a positive MFN tariff and the remaining 0.6% could not be classified. The big categories of duty-free MFN imports included animal fodder, oilseeds, tropical beverages and cereals. Products where imports faced positive tariffs included fruits, meat, animal fats, fish and cereals.
Preferential trade regimes
The remaining 42% of food imports came from countries eligible for a preferential tariff. Eurostat does not distinguish further which preferential regime was used. All developing countries are eligible for the Generalised System of Preferences, although agricultural preferences under the GSP are limited (for example, in the case of CAP products protected by mixed tariffs, i.e. a tariff with both an ad valorem and a specific component, the GSP preference usually covers only the ad valorem element which is usually the least important).
But other developing countries can export to the EU under more favourable terms. The 50 Least Developed Countries have duty-free access under the EU’s Everything But Arms scheme since 2001 (with transitional exceptions for sugar and rice), while African, Caribbean and Pacific countries in 2007 had more generous access terms under the Cotonou Agreement (in 2008, the majority of these countries too are able to export duty-free to the EU under the terms of the Economic Partnership Agreements they signed with the EU at the end of 2007). Other developing countries benefit from easier access to the EU under various free trade agreements, including some Mediterranean countries, Chile, South Africa, Mexico and countries of the Andean Pact.
Not all exports from countries eligible for preferential access make use of the preferential trade regime. It costs money and time to become familiar with the terms of preferential trade agreements and not all exports meet the strict rules of origin which the EU applies. So of the 42% of exports from countries eligible for preferential treatment, 6.6% entered under positive MFN tariffs. While some of these may be processed food products which did not meet the EU’s rules of origin, it is likely that in most cases the applicable MFN tariffs were less than 5%, so it did not pay the exporter to apply for preferential status.
Of the remainder, 21.4% of total agricultural imports entered duty-free under preferential arrangements of one kind or another, while the remaining 11.4% entered under a positive but preferential tariff.
In total, in 2007 54.5% of the EU’s food and agricultural imports entered duty-free, 40.1% faced import tariffs and the remainder could not be classified.
These figures flatter the EU to the extent that the MFN tariffs in force may be prohibitive, so that the value of imports is kept low. Sugar is a good example. Thus the protective effect of the EU’s external trade regime for food products is greater than these figures indicate.
Trade negotiations and preferences
However, the importance of preferential access to the EU market for many developing countries has complicated the Doha Round negotiations on market access. Preferential access is only valuable to the extent that it gives the beneficiary a significant margin of preference over other exporters. Thus, those developing countries with preferential access are loathe to see significant tariff reductions by the EU because they would lead to the erosion of the value of their preferences.
COPA-COGECA among other farm groups makes use of this argument to challenge Commissioner Mandelson’s claim that a successful outcome of the Doha Round would benefit developing countries. The poorest developing countries indeed have little to gain from the agricultural negotiations (though not all rich countries grant preferential access to the same extent as the EU, and for some commodities, such as cotton, they would gain from disciplines on trade-distorting subsidies rather than more liberal market access). For some countries, preference erosion could even leave them worse off.
Reform of the EU’s agricultural trade regime in the Doha Round will lead to both winners and losers among its trading partners. The EU must be conscious of the need to look after the losers, especially those poorer developing countries often dependent on one or two export commodities with preferential market access.