REVIEW OF EU TRADE POLICY REVEALS "SUBSTANTIAL" BARRIERS TO AG IMPORTS REMAIN

A report prepared for the WTO's biannual review of EU trade policy, held on 26 and 28 February, has identified 'substantial' barriers to imports of agricultural goods. Tariffs for some products have even risen since the last review in 2004, despite pressure on the EU to reduce tariff barriers as part of the Doha round of trade negotiations. During the meeting of the Trade Policy Review Body, Members further complained that the EU maintains an unwieldy number of regional trade agreements and trade preferences.

The trade policy review report, prepared by the WTO Secretariat, indicated that the simple average tariff rate for agricultural products, as defined by the WTO, had risen from 16.5 percent in 2004 to 18.6 percent in 2006. In contrast, non-agricultural products faced an average tariff of only four percent in 2006. The report also noted that "some 5.4 percent of all agricultural tariff lines are subject to rates higher than 50 percent". Products with relatively high tariff protection were "almost exclusively" agricultural or processed food, the report said, giving examples of a number of products that were protected by tariffs of between one hundred and over four hundred percent.

The report further stated that the "reduction / elimination of export subsidies and tariffs on agricultural imports would benefit EU consumers, improve resource allocation, and significantly contribute to the promotion of the world economy".

It noted that the EU had taken steps to reduce the market-distorting effects of its Common Agricultural Policy, by implementing the reforms that were agreed on in 2003. These "somewhat augmented the exposure of farmers to world market signals". Policies which have the most production-distorting effects -- market price support, output payments, and input subsidies -- therefore dropped to 63.8 percent of support to producers in 2005, down from 71.1 percent in 2003.

According to the report, "border protection and domestic support, together with limited liberalisation under preferential agreements, have insulated certain products from competition and contributed to surpluses". Subsidies had therefore become "indispensable" for exports of some of the surpluses, the report stated, whilst noting that ongoing reforms seek to "reorient" this policy.

Nonetheless, the report noted that the EU was the world's leading trader (exporter and importer) of agricultural products, and that it had an external trade deficit of EUR2.5 billion in food and agricultural products.

The report also highlighted the broader institutional context in which EU trade policy operates. In particular, it noted the implications of the accession of ten new EU Members in May 2004. It also underscored the fact that the EU's "extensive network" of regional trade agreements and unilateral trade preferences meant that only nine WTO Members traded with the EU under its most-favoured nation (MFN) tariff.

Several Members picked up on this last point in the WTO meeting that was held to discuss the report. They raised concerns about the extensive network of agreements that the EU has already concluded, as well as the trading bloc's decision to launch new negotiations that could further complicate its regime and divert trade. The EU is currently negotiating a series of 'Economic Partnership Agreements' with countries from the African, Caribbean and Pacific grouping, with the aim of concluding WTO-compatible trade agreements by the end of this year (see BRIDGES Weekly, 14 February 2007).

In his concluding comments, Trade Policy Review Body Chair Vesa Himanen (Finland) indicated that, while Members "have shown appreciation to the EC for maintaining its market largely open", at the same time "the main area where many Members would like to have the EC's positive and prompt response is agriculture". He noted that "Members encourage the EC to pursue its trade liberalisation policy… on a multilateral basis", and that "liberalisation of agriculture would, inter alia, reinforce its support for developing countries".

To access the documents related to the EU Trade Policy Review, visit http://www.wto.org/english/tratop_e/tpr_e/tp278_e.htm

ICTSD reporting.