Biofuels such as ethanol, biodiesel and solid biomass are part of WTO discussions about "environmental goods", but they also play a major role in the debate about agricultural subsidies and tariffs. Here at the Biopact we want the US and the EU to reduce their agro-subsidies and to open their markets to energy farmers from the South. That is why these WTO talks and the EU's position are so important.
The EU Commission is preparing itself for a crucial ministerial meeting that will decide the fate of the Doha Development Round, that has been lagging on for 4 years without any results. After only minor advances were made in Hong Kong in December 2005, time is beginning to run out for negotiators to reach a deal on the full modalities of the final agreement. In a speech made in London on Friday 23rd June 2006, Commissioner for Trade, Peter Mandelson reminded his public of what was at stake with the current negotiations, underlining the huge cost of a failure.
He urged all WTO members to make concessions in order for a final deal to be struck, stressing that a truly beneficial deal for developing countries will not be achieved by simply improving access to the EU’s agricultural market.
The timeline for reaching a final agreement is severely constrained because, under the US trade promotion act (TPA) of 2002 which expires mid 2007, Congress must either accept or refuse the end result of the negotiations. Past that date, Congress will resume its power to amend the agreement as much as it wants, severely diminishing chances of acceptation. In order for the text to be presented to Congress in time, a final text must be reached before the end of 2006, which means that full modalities for agricultural and industrial trade opening must be reached before the end of July, when the WTO closes for the summer break.
Agricultural and industrial market opening:
There is a common understanding that agreement must be reached on these points before other important issues, such as services liberalisation, trade facilitation and the revision of WTO rules on anti-dumping, can be tackled. The key players in the debate are the EU, US and the G20 group of developing countries. Their demands are interlinked and each player will have to make a step towards the other if an agreement is to be reached:
* Cuts on agricultural subsidies: The US will have to commit to further cuts in trade-distorting subsidies if it wishes to achieve an ambitious result to the discussions.
* Increase in agricultural market access: Both the US and the G20 are demanding that the EU increase its commitment to reducing agricultural tariffs. So far the EU has promised an average cut of 39%, bringing its average agricultural tariff down to 12%, but has signalled that it could move ‘significantly’ (although not the whole way) towards the G20’s request of an average cut of 54% if both the G20 and US improve their own offers in other areas.
* Reducing industrial tariffs: The EU and the US will not make any additional commitments as long as emerging developing countries, such as Brazil, India and China, do not commit to giving real access to their manufactures – and also to their services - markets. The Ministerial meeting on June 28th 2006 will mainly attempt to achieve a broad agreement on these issues.
Respecting the “Development agenda”:
Although the main debate has stalled on the issues of agricultural and industrial trade liberalisation, many studies point to the fact that the main gains for developing countries will be derived from services liberalisation and trade facilitation, which still need to be discussed.
Numerous studies have been presented in the last months, assessing the economic impact of the Doha Round. Although they are all based on the same methodology, their results vary enormously. This is due to different assumptions on how markets react and on what the final outcome of the Round will be.
The report from the Carnegie Institute finds that “any of the plausible trade scenarios will produce only modest gains”, increasing global GDP by less than 0,2%. It suggests that about 90% of the gains for developing countries would come from the liberalisation of trade in manufactured goods.
The World Bank study, on the other hand, argues that agricultural liberalisation (including domestic support and cuts in export subsidies) could provide over two thirds of the total income gains.
Two other studies, from CEPII (Paris leading institute in international economics) and the Swedish National Board of Trade give a more balanced view, showing that the majority of the gains could be generated by tariff cuts in industrial products (around 60%) but that agricultural opening will also be beneficial (around 40% of the gains).
The Commission presented an overview of these different studies and underlined the fact that all studies show that the economic benefits linked to services or trade facilitation are potentially the most important in the Round. Commissioner Mandelson also underlined that the largest benefits for developing countries are likely to come, not from market access, but from work on trade facilitation (the reduction of trading costs), which could more than double the overall economic gains.
More at Euractiv.