European Economic Policy

5121-EUROPEAN ECONOMIC POLICY

Assignment 2005

Name: JONATHAN

Surname: KJERSCHOW

Student i.d.: 933499

Answer to the four questions attached using ideally two pages per answer, providing the reader with all the relevant information in a synthetic way. Eventual tables and graphs supporting your arguments can be annexed right after the relevant answer, making clear in the answer the reference to them. Please provide the references / links to the web sites visited at the end.

Assignments exceeding 12 pages (excluding annexes) will be penalized.

Hint: all answers can be derived from the websites whose links are posted on the Learning Space. In particular, use as a starting point the Web portal www.europa.eu.int

You have to produce a paper printout of the Assignment and bring it in class no later than the 31st of May (last class of the course).

Electronic versions of the Assignment are not accepted.

The Assignment contributes for 35% of your final vote. Those who miss the deadline or fail to provide a paper printout in due time will lose the entire 35% of the final mark.

Question 1

(Learning Space Section 2 Ð'- EU Policies)

The last round of trade negotiations taking place within the World Trade Organization started in Doha in November 2001 and failed to reach an agreement in CancÐ"â„-n, 2003. One of the most controversial point to debate has been the trade liberalization of agricultural goods.

In this context, what is the current EU negotiating position in agriculture within the WTO? How does the EU try to conciliate a sustainable development with the respect of certain traditional values?

The current negotiating position of the European Union entails the following pillars :

Export competition: The EU is willing to accept further reductions in the form of export subsidies which were already ordered by the Uruguay round, an average of 45% is proposed.

Moreover the abuse of food aid as a surplus disposal or market promotion tool must be dealt with. As a result, WTO members are encouraged to, when possible, give direct contributions in cash. However the use of food aid when needed to meet actual food emergencies must be safeguarded. In addition the EU emphasizes that hidden subsidies must be covered which can be granted through State Trading Enterprises not in accordance with commercial practices and distorting free trade (i.e. through practices like price-pooling and cross subsidization).

Domestic support: A 55% reduction in the Aggregate Measurement of Support (AMS) starting from the final bound commitment level . To allow for fast progress the EC wants to keep the definition of domestic support and the Uruguay round reduction method. This will guarantee that all Members are subject to effective disciplines. In addition for developed countries, the de minimis exception that allows members not to include certain expenditure in the calculation of current AMS, will be subject to abolishment.

Market access: The EU is convinced that WTO members gain from increased trade and this belief can be regarded as the platform of their negotiating position. A tariff cut on all farm imports on average equal to 36%, a concept of "burden sharing" between developed countries and flexibility for developing countries. A commitment from developed countries to import at least 50% of their total imports from the developing countries will guarantee and easier market access at zero duty for the less developed countries (LDCs). Nevertheless the EU also wants that the Special Safeguard Clause remains as it has been a useful adjunct to the process of tariffication. This gives members the confidence to liberalize further and also protects them against sudden and unforeseen fluctuations in prices and volumes. The introduction of a "food security box" concerns the sensitive agricultural crops, and can be described as a special safeguard instrument to ensure food security to meet the developing countries concerns on sensitive agricultural crops.

Non trade concerns:

The EU is said to be committed to traditional values, recognised as societal goals such as the protection of the environment, landscapes and bio-diversity, consumers' safety, total development and animal welfare. The outcome of what can be regarded as an agricultural lottery is subject to factors further reaching than the pure market economy, factors such as history, geography, culture and weather. The Union therefore accentuates that the support granted for the achievement of the traditional values mentioned above should not be considered as trade distorting, as long as such measures are "well targeted, transparent and implemented in a no more than minimally trade-distorting manner."

Meassures to foster rural development should, according to the EU, be a part of the agreement on agricultural as it contributes to both the conservation of the environment and to the protection of people from natural disasters.

Food safety is a central aspect of the goal for consumers' safety. Consumers, on the one hand, need to be certain that the quality of the products released on the market is absolutely unquestionable, while the evaluation of the products' quality must be objective and not just another form of protectionism.

On Animal welfare the Commission has proposed the exemption of additional costs required to meet animal welfare standards, from the consideration of trade distortion.

To ensure an increased role of the LDCs, a number of farm and fishery products are subject to special differential treatment (SDT) in the union, guaranteeing them better market access. In total 142 countries and territories benefit from SDT. In connection with the process of strengthening the position of LDCs, the Everything But Arms (EBA) initiative must be taken into consideration. The EBA lead to the elimination of all duties and quotas for every kind of product (apart from weapons and arms) deriving from the World's 49 least developed countries. Lastly the Union has recently introduced a comprehensive reform of the common agricultural policy (CAP) in order to line up with the standards of the WTO. The total funding aimed at CAP remains unchanged with the 10 new member states, and thereby reducing the amount each state receives.