EU offer to eliminate export subsidies

The “announcement(AFP story, via Yahoo)”:http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=18&u=/afp/20040510/bs_afp/eu_wto_trade_farm_subsidies_040510123333 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”:http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=18&u=/afp/20040510/bs_afp/eu_wto_trade_farm_subsidies_040510123333) 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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