Update: more detail of the EC proposals

The text of the EC Trade Com­mis­sion­er’s let­ter to Mem­ber States[⇒ relat­ed sto­ry] has now been released. In it Lamy explains the ori­gins of the lat­est EC pro­pos­al. bq. It is clear that the objec­tive of elim­i­nat­ing all forms of export sub­si­dies is one which is shared by the great major­i­ty of par­tic­i­pants. Before Can­cun, the EU already offered to elim­i­nate export sub­si­dies on a list of prod­ucts of inter­est to devel­op­ing coun­tries, and we sub­se­quent­ly made clear that there would be no a pri­ori exclu­sions, so all our export sub­si­dies are effec­tive­ly on the table. How­ev­er, the list approach has not worked. This is why the EU has tak­en the deci­sion to be ready to move on export sub­si­dies, if an accept­able out­come emerges on mar­ket access and domes­tic sup­port and non-trade con­cerns, and if we get strict par­al­lelism for all forms of export sub­sidi­s­a­tion in return. (“EU Trade Directorate”:http://europa.eu.int/comm/trade/issues/newround/pr100504_en.htm) The “accept­able out­come” on mar­ket access is elab­o­rat­ed lat­er in Lamy’s let­ter: bq. The EU believes that a blend­ed for­mu­la could, with the nec­es­sary mod­i­fi­ca­tions, meet the con­cerns of all par­tic­i­pants as well as sen­si­tiv­i­ties of devel­op­ing coun­tries. Such a blend­ed for­mu­la could include sharp tar­iff cuts, while at the same time pro­vid­ing flex­i­bil­i­ties for coun­tries to address their most sen­si­tive tar­iffs through a com­bi­na­tion of tar­iff cuts and Tar­iff Rate Quo­tas (TRQ) expan­sion. A “blend­ed for­mu­la” is an approach sim­i­lar to that put for­ward by the EC and USA at the Can­cún Min­is­te­r­i­al Meet­ing. I pro­vid­ed a [[wrong­Mar­ke­tAc­cessEU-USA detailed analy­sis]] of that pro­pos­al in an ear­li­er post­ing. Briefly, a blend­ed foru­mu­la con­tains dif­fer­ent approach­es to cut­ting tar­iffs and expand­ing tar­iff quo­tas includ­ing * sim­ple aver­age cuts to tar­iffs
* ‘har­mo­niz­ing’ tar­iff cuts that cut the high­est rates faster than low­er rates
* safe har­bors for so-called “sen­si­tive” (that is, high­ly pro­tect­ed) prod­ucts which would escape sig­nif­i­cant reform
* expan­sion of tar­iff quo­tas The biggest prob­lem with a blend­ed for­mu­la is that it becomes a menu of options for each par­tic­i­pat­ing econ­o­my, open­ing up oppor­tu­ni­ties to achieve appar­ent reform with min­i­mum actu­al change. This has been the main game played by the indus­tri­al countries—with the con­nivance of high-farm-pro­tec­tion devel­op­ing coun­tries such as India—since the 1960s. I have lit­tle doubt the EC will com­bine it’s ges­ture on export sub­si­dies with demands for an accom­mo­dat­ing ‘blend’.

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