ELEVEN EU MEMBERS REJECT COMMISSION'S SUGAR REFORM

The EU's position in WTO farm trade talks was posed with another obstacle on 25 October, when 11 of its member states rejected the proposed reforms to EU sugar policy that the European Commission had put forward in June. The reform package would cut the guaranteed internal minimum prices for sugar to farmers and processing companies by 39 percent over two years starting from 2006. It would also compensate EU sugar beet farmers for 60 percent of the price cut, but only through direct payments decoupled from production. Furthermore, it offers grants to encourage less competitive producers to leave the sector through a four-year restructuring scheme. Currently, the EU internal price for sugar is three times above the world market price.

The 11 EU countries -- Greece, Spain, Portugal, Italy, Ireland, Finland, Poland, Hungary, Latvia, Lithuania and Slovenia -- have demanded lower price cuts, longer transition periods and higher compensation. These countries can block the planned reforms and could complicate the EU's negotiating position in the run-up to the Hong Kong Ministerial Conference in December.

Meanwhile, on 28 October, a WTO arbitrator gave the EU a 22 May 2006 deadline to curb its sugar exports in accordance with an April 2005 ruling by the WTO Appellate Body on a case brought by Australia, Brazil, and Thailand against its sugar regime. On 19 May 2005, the WTO Dispute Settlement Body ordered the EU to reduce its subsidised exports of sugar from approximately 5 million tonnes a year to 1.273 million tonnes, and slash export subsidies from an estimated 2 billion euros per year to a maximum of 499.1 million euros. After the EU and the complainants failed to reach an agreement by August on a reasonable implementation period for the EU to bring its sugar policy into compliance with WTO rules, they asked an arbitrator to do so.

An EU press release on the sugar reform is available at http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/776&format=HTML&aged=0&language=EN&guiLanguage=en

ICTSD reporting; "WTO Arbitrator Gives EU Until May To Implement Sugar Subsidies Ruling," WTO REPORTER, 31 October 2005; " Europe must agree on sugar reform, says Fischer Boel," FARMERS WEEKLY, 27 October 2005; "EU trade talks undermined as sugar reform blocked," EUOBSERVER, 26 October 2005.

CHINA, CHILE CONCLUDE GOODS-ONLY FTA

On 28 October, China and Chile agreed to establish a free trade agreement (FTA) on goods, concluding a process they started in November 2004. The agreement is expected to be formally signed at an Asia-Pacific Economic Cooperation (APEC) conference, scheduled for 18-19 November.

Once the deal enters into force, Chinese import tariffs on Chilean goods will be immediately cut by 92 percent. The remaining 8 percent -- mostly apples, grapes and salmon -- would see tariffs phased out over ten years. The agreement identifies 152 specific types of Chinese goods, primarily textiles, as sensitive products that will not be part of the deal. Chinese exports of machinery, computers, cars, cell phones and electronics will be tariff free.

The accord is the first of its kind between China and a non-Asian country. It brings together the world's largest producer (Chile) and consumer (China) of copper.

The tariff-cutting agreement advances the South American country's reported agenda to establish itself as Asia's gateway to the region. "We want to be a bridge between Latin America and Asia, to position ourselves as a platform for Asia to reach Latin America," said Chilean President Ricardo Lagos after the negotiations came to a close.

Chile has already established an FTA with South Korea (see BRIDGES Weekly, 8 April 2004), Singapore and Brunei. Talks with Japan are expected to begin in 2006.

Osvaldo Rosales, international trade director for the UN Economic Commission for Latin America and the Caribbean (CEPAL), praised the deal for simultaneously providing Chile with stronger economic ties with Asia and giving China better access to energy, minerals, food and raw materials.

Bilateral trade between the two booming economies -- USD 6 billion in 2004 -- is expected to increase sharply under the new accord. The agreement may subsequently be expanded to cover services and investment.

"Latest China-Chile FTA talks complete," CHINA DAILY, 1 November 2005; "UN official praises trade in cargo agreement between Chile, China," PEOPLE'S DAILY, 1 November 2005; "Chile, China to sign free trade accord," ASSOCIATED PRESS, 28 October 2005; "Chile-China Trade Pact Could be Signed in November," REUTERS, 20 September 2005, "Chilean President Applauds Trade in Cargo Agreement with China," XINHUA, 29 October 2005.

NINE AFRICAN TRADE MINISTERS ADOPT JOINT STATEMENT ON DOHA ROUND

Trade ministers from nine African countries jointly set out some of their views on what would be necessary for a pro-development outcome in the ongoing Doha Round talks, following a 27 October summit in Cairo. Describing African countries' regional and multilateral trade liberalisation processes as "mutually supportive," they recognised that negotiations must be inclusive and transparent.

The ministers called on developed countries and developing country Members "in a position to do so" to provide duty- and quota-free access to products from least-developed countries (LDCs). They called for help in building supply-side capacity and an aid for trade mechanism, specifying that Members should reach agreement on the latter at the Hong Kong Ministerial Conference in December.

They urged all WTO Members to redouble their efforts to step up the pace of the agriculture negotiations. Specifically, they demanded urgent action on domestic and export subsidies, a fixed date for an end to all cotton subsidies, and a decision to compensate cotton producers for the huge losses that they have suffered due to subsidies. The group also pointed out that net food importing developing countries and LDCs would need special and differential treatment (S&D). They also called for non-agricultural market access (NAMA) talks to be 'disentangled' from the farm trade negotiations to ensure that the talks advance by Hong Kong.

Ministers also made declarations on other important negotiating areas such as services. They expressed wariness about approaches to the services talks other than the bilateral request-offer process, and asked for an increased focus on the modes and sectors of export interest to developing countries, in particular, Mode 4, the crossborder movement of individual service providers.

The countries represented were Egypt, Kenya, Mauritius, Rwanda, Senegal, South Africa, Tunisia, Zambia, and Zimbabwe.

ICTSD reporting.