Update: EC’s market access claims

In his let­ter to Mem­ber States[⇒ relat­ed sto­ry], Pas­cal Lamy jus­ti­fies the Commission’s call for a ‘blend­ed for­mu­la’ for mar­ket access reforms in this way: bq. The aver­age applied farm tar­iff in the EU is 10.5%, while Brazil’s tar­iff is 30% and the tar­iff among devel­op­ing coun­tries is 60%. Approach­es on how to improve access to agri­cul­tur­al mar­kets dif­fer wide­ly, often reflect­ing the fact that tar­iff struc­tures are so dif­fer­ent among mem­bers. This is why a com­pro­mise between extreme posi­tions is inevitable. On the sur­face, this sounds rea­son­able and prac­ti­cal. But it ain’t so. That “10.5%” aver­age tar­iff on EU farm imports is a num­ber cal­cu­lat­ed by aver­ag­ing the weight­ed import tar­iff on thou­sands of tar­iff lines. The weight­ing increas­es or decreas­es the con­tri­bu­tion of each tar­iff line to the over­all aver­age in pro­por­tion to the vol­ume of imports under that tar­iff line. It’s a stan­dard trade sta­tis­ti­cal tool that attempts to ensure that the aver­age reflects the lev­el of tar­iff where imports are actu­al­ly tak­ing place. But weight­ed aver­ages have the unfor­tu­nate char­ac­ter­is­tic of down­play­ing the pres­ence of high­ly pro­tec­tive tar­iffs. In a tar­iff sched­ule such as that of the EU where there are a num­ber of very high ‘peak’ tar­iff rates dis­persed among a larg­er num­ber of low­er rates, the ‘peaks’ tend to dis­ap­pear in the cal­cu­la­tion of the weight­ed aver­age. The high­est tar­iffs reduce the vol­ume of imports in the mar­kets that they pro­tect and there­fore reduce the con­tri­bu­tion that tar­iff line makes to the cal­cu­la­tion of the aver­age.

Wheat 77 ne
Bar­ley 97 ne
Beef 45 77
Sug­ar 24 38
But­ter 130 19

ne = not esti­mat­ed

There are a large num­ber of these ‘peaks’ in the EU’s agri­cul­tur­al tar­iff that offer pro­tec­tion that is far greater than the lev­el need­ed to com­plete­ly pre­vent imports. This is, in part, a result of the way that non-tar­iff bar­ri­ers were turned in to tar­iffs in the last round of WTO nego­ti­a­tions. The use of a ‘blend­ed for­mu­la’ could allow the EU (and oth­ers) to avoid real reform of their agri­cul­tur­al pro­tec­tion, which is much high­er in prac­tice than the some­what phoney aver­age of 10.5% sug­gests. The table at left shows a more real­is­tic picutre of agri­cul­tur­al pro­tec­tion. It shows esti­mates of the min­i­mum cuts to bound tar­iff rates (in %) that would have to be made before any addi­tion­al imports would occur in major food mar­kets in the EU and USA. It is tak­en from “Agri­cul­ture Nego­ti­a­tions: the way for­ward from Can­cZn(PDF file about 100k)”:http://abareonlineshop.com/product.asp?prodid=12610, a pub­li­ca­tion of the Aus­tralian Bureau of Agri­cul­tur­al and Resource Eco­nom­ics (ABARE) that is avail­able for free down­load.

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