EU offer to eliminate export subsidies

The “announcement(AFP sto­ry, via Yahoo)”: by the EU’s agri­cul­ture com­mis­sion­er (Franz Fis­chler) that the Com­mis­sion would pro­pose to its Mem­ber States the elim­i­na­tion of six bil­lion dol­lars in export sub­si­dies seems to set the stage for agree­ment on agri­cul­tur­al reform in the Doha nego­ti­a­tions. It’s a dra­mat­ic move that encour­ages hope for renewed progress on the tough­est area of world trade reform. Up until now the Com­mis­sion has insist­ed that the Doha talks were about reduc­tion rather than elim­i­na­tion of export sup­ports. So this seems to be a step for­ward. But an expe­ri­enced EC Com­mis­sion watcher—or trade nego­tia­tor, for that matter—learns to be high­ly scep­ti­cal of dra­mat­ic ges­tures: it’s far too ear­ly to hang out more flags. The real impact won’t be known until we see the fine print of the Com­mis­sion pro­pos­al. Fis­chler’s announce­ment con­tains a pre­dictable demand for rec­i­p­ro­ca­tion or, if you like, a pre­dictable attempt to spread the blame: bq. “Our inter­na­tion­al part­ners have to make clear that they are ready to ful­ly match the EU on their forms of export sup­port such as export cred­its, abuse of food aid or state trad­ing enter­pris­es,” Fis­chler said Mon­day. (“AFP”: Although elim­i­na­tion of the sub­si­dies would lead to high­er and more sta­ble prices in some com­mod­i­ty mar­kets for at least a short peri­od, there’s much more to agri­cul­tur­al reform than the elim­i­na­tion of export sub­si­dies. It’s less than half the bat­tle for rea­sons I explained here[⇒ relat­ed sto­ry]. Almost everyone—even the EC Commission—has accept­ed for a long time that the export subi­si­dies had to go, even­tu­al­ly. The pres­sure on Europe (and the USA) from the devel­op­ing world [⇒ relat­ed sto­ry] over the export subi­dies has been intense. But mar­ket access reform is a much big­ger deal and a much hard­er nut to crack. The impact on inter­nal sup­ply bal­ances for prod­ucts such as dairy of the elim­i­na­tion of export sub­si­dies could make it less like­ly that the EU would join in any sub­stan­tial cuts in import bar­ri­ers for agri­cul­ture. This is how the OECD records the use of export sub­si­dies in 1998 (the data is report­ed with long delays)

Table 6. Export sub­si­dies in mil­lion US $, 1995–1998
1995 1996 1997 1998
Aus­tralia 0 0 0 1
Cana­da 37 4 0 0
EU 6,386 7,064 4,943 5,968
Hun­gary 41 18 10 12
Nor­way 83 78 102 77
USA 26 121 112 147

The anom­alous ‘export subisidy’ for Aus­tralia in 1998 appears to relate to the ter­mi­na­tion of a domes­tic sup­port pro­gram for dairy products.

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