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WTO Contstaints and the CAP: Domestic Support in EU 25 Agriculture

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  • Jean-Pierre Butault
  • Jean-Christophe Bureau

Abstract

The most recent EU notifications to the World Trade Organization regarding domestic support refer to the EU-15, i.e. before significant reforms of the direct payments as well as the reforms of the Mediterranean products, hops, sugar, etc. that took place after 2003. We estimate the actual level of domestic support, as measured by the WTO Aggregate Measure of Support (AMS), given the 2004 EU enlargement and the recent reforms of the Common Agricultural Policy (CAP). We then compare the different proposals for a new discipline on domestic support that were recently issued under the Doha Development Round and we assess the constraints imposed on the Common Agricultural Policy (CAP). The EU proposal prior to the 2005 Hong Kong WTO ministerial meeting was that the EU would cut its present AMS and Overall Trade Distorting Support (OTDS) ceilings by 70% in either case. We find that such a cut mainly consolidates under the WTO the significant changes made to EU domestic support policies since the conclusion of the Uruguay Round. However, there are some downside risks for the EU and much depends on the further negotiations on the details of the disciplines to be agreed (e.g. the base period for the OTDS reference). In addition, a 70% cut leave no freedom for counting some potentially controversial subsidies against the AMS if needed. Accession of Bulgarian and Romania will make the constraints more binding. The ability to meet the domestic support discipline of the EU offer relies on the assumption that its market access component will lead to a significant reduction in the remaining AMS (particularly important in the case of fruits and vegetables). Overall, the EU proposal regarding a cut in the AMS is binding, even though it requires rather minor and sectoral changes to the CAP. Proposals that beyond the EU ‘Hong Kong’ offer require reforming some common market organizations, but could be dealt with if the EU implemented a significant reform of the fruits and vegetables sector, that might give a larger degree of freedom regarding the AMS ceiling.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp171.

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Date of creation: 02 Aug 2006
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Handle: RePEc:iis:dispap:iiisdp171

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  1. Chantal Le Mouel, 2004. "Impacts of alternative agricultural income support schemes on multiple policy goals," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 125-148, June.
  2. Daniel A. Sumner, 2003. "Implications of the US Farm Bill of 2002 for agricultural trade and trade negotiations," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(1), pages 99-122, 03.
  3. Anderson, Kym & Martin, Will, 2005. "Agricultural trade reform and the Doha development agenda," Policy Research Working Paper Series 3607, The World Bank.
  4. Hart, Chad E. & Beghin, John C., 2006. "Rethinking Agricultural Domestic Support Under the World Trade Organization," Staff General Research Papers 12510, Iowa State University, Department of Economics.
  5. Brink, Lars, 2005. "WTO Constraints on U.S. and EU Domestic Support in Agriculture: Assessing the October 2005 Proposals," Working Papers 14601, International Agricultural Trade Research Consortium.
  6. Daniel A. Sumner, 2005. "Production and Trade Effects of Farm Subsidies: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1229-1230.
  7. Gohin, Alexandre & Bureau, Jean-Christophe, 2006. "WTO Discipline and the CAP: the Constraints on the EU Sugar Sector," Working Papers 18872, TRADEAG - Agricultural Trade Agreements.
  8. Alan Swinbank, 2005. "Developments in the Doha Round and WTO dispute settlement: some implications for EU agricultural policy," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 551-561, December.
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Cited by:
  1. Bureau, Dominique & Chalmin, Philippe, 2007. "Perspectives agricoles en France et en Europe," Economics Papers from University Paris Dauphine 123456789/1735, Paris Dauphine University.
  2. Anania, Giovanni, 2007. "Multilateral Negotiations, Preferential Trade Agreements and the CAP. What's Ahead?," Working Papers 7283, TRADEAG - Agricultural Trade Agreements.
  3. Giovanni Anania, 2007. "Multilateral trade negotiations, preferential trade agreements and European Union’s agricultural policies," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, July.

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