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![Page 1: Building on the July Framework Agreement: Advice and Cautions International Food & Agricultural Trade Policy Council International Agricultural.](https://reader030.fdocuments.net/reader030/viewer/2022032722/56649cea5503460f949b581f/html5/thumbnails/1.jpg)
Building on the July Framework Agreement:
Advice and Cautions
International Food & Agricultural Trade Policy Council
www.agritrade.org
International Agricultural Trade Research Consortium www.iatrcweb.org
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About the Project
• Funders: – William and Flora Hewlett Foundation– German Marshall Fund
• Collaborators: – International Agricultural Trade Research Consortium
• David Blandford, University of Pennsylvania (Domestic Support)• Linda Young, University of Montana (Export Competition)• Tim Josling, Stanford University (Market Access)• Mario Jales and Andre Nassar, ICONE (Market Access) • Ann Tutwiler, IPC (Market Access, Export Competition)
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Domestic Support: July Framework
• Positive – Discipline overall trade distorting support– Cap commodity specific and moderately trade distorting
support (Amber and Blue)– Refine non-trade distorting criteria (Green)– Harmonize level of support
• Negative – Relax criteria for moderately trade distorting support (Blue)
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Domestic Support: IPC Caution
• July Framework increases permitted support by 15% to 25% plus bound trade distorting support – New US base, 250% of current spending; – New EU base, 170% of current spending
• Reduction in permitted overall trade-distorting support must exceed 60% to be effective
• Reduction of components should equal or exceed overall reduction – To reduce “box shifting” from Amber to Blue or de minimis– Blue Box, de minimis will become important for many countries
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Green Box: Advice
• Revise criteria to prevent “updating” base acres/animals– Comply with cotton case
• Retain criteria to allow planting of all crops – Comply with cotton case
• Clarify role of environmental/social payments– Some may “increase” production
• Enhance monitoring with formal Ag Committee review • Do not cap Green Box payments
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Composition of Overall Trade-Distorting Support
Overall Trade Distorting Support
Amber Box Blue Box De Minimis
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Permitted Spending Under July Agreement Much Higher Than Current Spending Under
URAA
0
20000
40000
60000
80000
100000
120000
EuropeanUnion
Norway UnitedStates
Actual OTDS (URAA)
Permitted OTDS(DDR-Initial)
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URAA Actual versus DDA Permitted(60% reduction Amber; 50% reduction de minimis)
01000020000300004000050000
United States EuropeanUnion
Norway
Actual Amber Permitted Amber
Actual de minimis Permitted de minimis
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Blue Box: URAA Actual versus DDA Permitted
(5% Cap)
05000
10000
15000
20000
25000
United States EuropeanUnion
Norway
Actual Blue (URAA) Permitted Blue (DDR)
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July Framework Agreement Does “Harmonize” Support Levels
0
20
40
60
80
100
120
Percent OTDS/Production
Canada E.U. Japan Korea Norway U.S.
Actual OTDS/production Across the Board Tiered
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A “Cut” is not Necessarily a Cut
0
10000
20000
30000
40000
50000
60000
70000
Canada EuropeanUnion
Japan Korea Norway United States
Current OTDS Across the Board Tiered
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Big Cuts in Overall Support Needed to Require Policy Changes
Figure 9. Binding Percentage Reduction in OTDS
84%
76% 75%
51%
42%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japan Korea Canada US EU Norway
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Export Competition: July Framework
• Economic gains “modest” but political gains large• Gains for some countries, commodities large• Positive innovations
– Disciplines cover all forms of export competition– Eliminates subsidized export competition
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Export Competition: IPC Advice
• Export Subsidies– Implement down payment (20% to 50%) – Allow, but don’t require rapid phase-down for some commodities
• Food Aid: Do Not Convert to Cash Only – Count market development spending against export subsidy limits
• PL480, Title 1– Phase-out loans for food aid
• PL480, Title 1 – Prohibit monetization and phase out programme food aid
• PL480, Section 416B, Food for Progress– Channel food aid donations from stocks thru WFP
• 416 B
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Programme Food Aid Dwarfs Project, Emergency Food Aid
Emergency
Project
Programme
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Programme Food Aid Variable, Large Share Monetized
0
5
10
15
20
1990 1993 1997 1999 2002
Global Food Aid
Global ProgrammeMonetized Aid
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State Trading Entities
• Elimination of government financing, export subsidies, underwriting losses should remove distortions
• If monopoly power distorts markets, mandate co-existence– Allow private sector share of market to expand over time
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Export Credits
US
EU
Canada
• Reduce value of transactions covered over implementation period
• Create international credit program to address liquidity constraints – (LDCs, NFIDCs, financial
crises, emergencies)
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Market Access: July Framework
• Most important, least defined pillar– Approximately 92% of economic gains from lower tariffs in
industrialized and developing countries
• Positive Innovations– Tiered (harmonizing) reductions– Possible cap on tariff peaks– Addresses tariff escalation
• Negative Innovations– Special, sensitive products– Expansion of TRQs not mandated
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Market Access: IPC Caution
• Large cuts in bound tariffs needed to affect trade• Formula should be simple, linear reduction
– not URAA formula of average/minimum cuts
• Three to four bands sufficient for tariff cuts• Tariff cap needs to be 100%
– Or impose harmonizing (Swiss) cut on peak tariffs
• Sensitive should be limited to a (small) share of consumption or production
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Tariff Overhang in Developing Countries
Product Market Applied Rate Bound RateTariff
OverhangEquivalent
Cut
India 100% 150% 50% 33%Nigeria 10% 150% 140% 93%Brazil 16% 35% 19% 54%India 100% 150% 50% 33%Nigeria 10% 150% 140% 93%Brazil 16% 35% 19% 54%India 30% 100% 70% 70%Australia 5% 20% 15% 75%Brazil 20% 35% 15% 43%India 30% 100% 70% 70%Brazil 10% 35% 25% 71%Chile 6% 25% 19% 76%Mexico 20% 45% 25% 56%Philippines 10% 35% 25% 71%Brazil 12% 55% 43% 78%South Africa 5% 82% 77% 94%Indonesia 6% 25% 19% 76%Egypt 32% 60% 28% 47%Brazil 10% 35% 25% 71%South Africa 15% 37% 22% 59%Mexico 20% 45% 25% 56%Romania 20% 115% 95% 83%Brazil 10% 55% 45% 82%Mexico 20% 45% 25% 56%Nigeria 10% 150% 140% 93%India 70% 100% 30% 30%Brazil 12% 55% 43% 78%Egypt 12% 20% 8% 40%Brazil 27% 55% 28% 51%
Raw Sugar
White Sugar
Ethanol
Soybean Meal
Bovine Meat(chilled boneless
cuts)
Powder Milk
Poultry Meat(frozen boneless cuts)
Swine Meat(frozen boneless cuts)
Rice (milled)
Elaboration: ICONE
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Bound Tariff Structures: Developed Countries
3 bands and 100% cap
0153045607590
105120135150165180195210225240255270285300315330345360375390405420435450
0
10
0
20
0
30
0
40
0
50
0
60
0
70
0
80
0
90
0
10
00
11
00
12
00
13
00
14
00
15
00
16
00
17
00
18
00
19
00
20
00
21
00
# of tariff lines
Tar
iff
Rat
es
Japan
USA
EU
Switzerland
Norway
Canada
40%
50%
60%100% cap
Elaboration: ICONE
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Bound Tariff Structures: Developing Countries 3 bands and 150% cap
0
30
60
90
120
150
180
210
240
270
300
330
360
390
0 40 80 120
160
200
240
280
320
360
400
440
480
520
560
600
640
680
720
760
800
840
880
920
960
1000
1040
# of tariff lines
Tar
iff
Rat
es
India
Brazil
Mexico
Kenya
Cameroon
Indonesia
China
46%
26%
33%
150% cap
Elaboration: ICONE
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Tariff Peaks
CountryTotal # of tariff lines
# of tariff lines >=50%
# of tariff lines >=100%
# of tariff lines >=150%
European Union 2,200 259 69 16
Japan 1,806 395 307 272
Switzerland 2,111 752 450 285
United States 1,769 84 27 14
Brazil 959 148 - -
Cameroon 831 831 - -
India 690 633 584 243
Kenya 665 665 665 -
Mexico 1,080 84 67 48
Developing Countries
Developed Countries
Elaboration: ICONE
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Selection of Sensitive Products
Elaboration: ICONE
# of Over-Quota Tariff Lines
Sensitive Products as a % of Total # of Tariff Lines
European Union 271 12%
United States 196 11%
Japan 111 8%
Switzerland 432 20%
Norway 381 30%
Mexico 90 8%
Applied Rate >= Bound Rate
Sensitive Products as a % of Total # of Tariff Lines
India 35 5%
Mexico 119 10%
Indonesia 26 2%
Brazil 5 1%
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Tariff Rate Quotas
• TRQs prevalent, less than ideal measure– Used by 43 of 144 WTO members
– In OECD, 43% of trade covered by TRQs
– In some developing countries, 99% of trade covered by TRQs
– Average fill rate, 60% (improve TRQ administration)
• Expand or Establish TRQs – If large reductions in tariffs not possible
– On Sensitive, Special Products
• Reduce in-quota tariffs alongside other tariff cuts
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Developing Country Issues
• Impose same tariff cuts over longer timeframe – or shallower cuts over same timeframe
• Base Special Products on concrete criteria– Impose half of required tariff cut – Limit to small share of consumption, production
• Special Safeguard Measure– Base volume trigger on moving average of import levels– Allow on products with bound tariffs below specified percent
• Industrial and high income developing countries should provide duty and quota free access to LDCs
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Other Issues
• Geographic indications: discussion should be launched under TRIPS regarding whether, how to protect intellectual property (patents, GIs) in foods
• Sectoral initiatives: higher than average cuts in tariffs, domestic support, export competition should be encouraged
• Differential Export Taxes: Discipline alongside export subsidies– Distort export markets,
– Distort domestic markets
– Penalize producers
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Conclusions
• Framework incorporates more than adequate flexibility • Challenge will be to make real progress in opening
markets and reducing trade distorting subsidies• Progress needs to be made on each pillar to ensure
real reforms• Negotiators have 6 months to deliver 2 years work—
– Momentum of last July must be regained – Deadline for Schedules: Hong Kong plus 4 months