Fischler on CAP reform and the EU position in the WTO

Speaking at the FAO ministerial meeting in Rome on December 1 st 2003 the Agriculture Commissioner Franz Fischler argued that insufficient attention was given at Cancun to market-access questions (particularly access for LDCs to the markets of more advanced developing countries), with undue attention instead being given to domestic-support policies in developed economies. He pointed out that ‘the WTO was never entrusted with the task to redesign and harmonise domestic policies and/or phase out all kinds of support, notably in agriculture'. He argued that ‘the task of the WTO is to ensure and monitor effective and fair trading rules and combat all those measures that distort trade'. Addressing the Istituto Italo Latino Americano also on December 1 st 2003 in Rome , Commissioner Fischler set out a spirited defence of the EU's position in the WTO agricultural negotiations. He expressed the view that the CAP had been unfairly singled out as the root cause of evil in agricultural talks. He outlined how substantial reform of the CAP designed to reduce the trade-distorting effects of EU agricultural-support programmes had been underway for ten years. He criticised the PSE (producer support estimate) measures of agricultural support as ignoring the very different trade effects of different types of agricultural support. He pointed out that in the wheat sector since 1992 ‘the three CAP pillars of trade-distorting support have fallen: price-support and tariffs by 42% and export subsidies by 93%', although over this time the PSE for EU wheat had remained at around the same level. This, argued Commissioner Fischler, demonstrated ‘the false impression' that the PSE measure gives. He pointed out that by the time the current process of CAP reform was fully implemented in 2008 ‘it will have reduced our most trade-distorting domestic support - our ‘amber box' measures - by 70% since 1992 … shifting support away from amber to the blue, and now green box as well, doesn't only mean a substantial reduction in trade distortion, it also means a more efficient transfer of support to our farmers, and a greater degree of transparency of our support measures'. However, the Commissioner made it clear that the EU was unwilling to accept any capping of green-box expenditures, since this ‘would compromise our ability to support sufficiently, and efficiently, a sustainable agricultural policy in an enlarged European Union'. He noted that despite the accusations of growing EU dumping, statistics showed a decline in the EU's share of the world wheat market from around 22% ten years ago to 12% today and a decline in the EU's share of the world sugar market from 19% ten years ago to 16% today. He asked why the EU should undertake such profound reforms if they were only to be penalised by international rules. He closed by appealing to other governments to match the EU's willingness to compromise on agricultural issues. Comment: Commissioner Fischler's comments demonstrate the extent to which the EU is unwilling to allow the WTO to establish rules which impinge upon its own rights to determine domestic agricultural-support policies. Since this also extends to what is defined as trade distorting and non-trade distorting forms of aid, this would suggest that there is little prospect of imposing substantive WTO disciplines on overall levels of EU agricultural support. The statistics used by Commissioner Fischler to make his case can equally be used to argue the contrary: the 42% decline in price support and tariffs shows just how closely these two policy tools were linked. The 93% reduction in export refunds, shows the extent to which systems of direct aid payments have allowed the gap between EU and world wheat prices to be closed, thereby in large part doing away with the need for export refunds. With regard to the EU's declining share in world markets for basic agricultural commodities, it should be noted that one major objective of CAP reform is to assist the EU in moving away from the export of basic agricultural commodities towards export of value-added food products, the export earnings of which have already for a number of years exceeded the value of basic agricultural exports. WTO ceilings on export refunds for value-added food products have in recent years constrained this continued growth, however. Reform of the dairy sector, and eventually, reform of the sugar sector will be necessary to substantially remove these constraints. The more efficient delivery of aid to EU farmers arising from the changes in EU systems of agricultural support is vitally important, for it allows on-farm production levels to be sustained at much lower cost to the EU budget.Speaking at the FAO ministerial meeting in Rome on December 1 st 2003 the..