Export assistance and agricultural trade reformBy David Harris

Export assistance and

agricultural trade reform

by David Harris

June 2015

RIRDC Publication No 15/057 RIRDC Project No PRJ-009684

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© 2015 Rural Industries Research and Development Corporation. All rights reserved. ISBN 978-1-74254-803-6 ISSN 1440-6845 Export Assistance and Agricultural Trade Reform Publication No. PRJ-009684 Project No. 15/057 The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances.

While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication.

The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors..

The Commonwealth of Australia does not necessarily endorse the views in this publication.

This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to the RIRDC Publications Manager on phone 02 6272 3186.

Researcher Contact Details Mr David Harris D. N. Harris & Associates 8 Irvine Street Glen Iris Victoria 3146 Phone: 03 9889 9879 Email: dnharris@hotkey.net.au

In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6271 4100 Fax: 02 6271 4199 Email: rirdc@rirdc.gov.au Web: http://www.rirdc.gov.au Electronically published by RIRDC in June 2015 Printed by Union Offset Printing, Canberra

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Foreword Export assistance through export subsidies and export financial support has been an issue of concern in agricultural trade for some time. It’s widely accepted these support measures have had substantial distortion effects on world trade. The issue is a key discussion point in the Doha WTO negotiations but so far an agreement has not been reached. It’s a source of some frustration for many of the world’s economies engaged in agricultural trade. Global trading conditions have been favourable in recent years and political economy pressures to use export assistance have abated. While the trade distorting effects of these measures have diminished, the volatile nature of global commodity prices is well known. There are likely be periods in the future when unfavourable conditions will re-emerge with renewed pressures for increased assistance. In 2007-08 the world economy experienced a period of very high food price inflation. It was followed by the recessionary effect of the Global Financial Crisis which coincided with weaker agricultural commodity prices. One of the responses was a re-activation of EU export subsidies for dairy products which triggered a corresponding reaction by the US to re-activate dairy export subsidies. At the same time there was an increase in the use of US export credit guarantees. These developments highlight the risks associated with the continued availability of these support measures. Exporters and producers in both importing and exporting markets have a strong interest in effective trade reform. To lock-in the benefits of a trading environment free of the distortions from export assistance it’s vital that a multilateral agreement is reached. But there are concerns the opportunity for lasting reform has been hindered by the impasse on other aspects of the WTO Doha trade negotiations. This study was undertaken to assess the trade distorting effects of export assistance. An appreciation of the way the measures distort trade outcomes is important. It shows why a WTO agreement on this issue should be vigorously pursued. The analysis focused on how the measures have distorted world trade in recent times. This is the primary consideration for a collective decision to commit to reform and achieve a permanent improvement in the global trading environment The project was funded from RIRDC core funds provided by the Australian Government. The project was funded through the Global Challenges R&D Program. This program addresses impediments and opportunities to the Australian agricultural sector. An important area of research for the program is international and domestic trade policy. This report is an addition to RIRDC’s diverse range of over 1800 research publications. Most of our publications are available for viewing, downloading or purchasing online through our website: www.rirdc.gov.au. Craig Burns Managing Director Rural Industries Research and Development Corporation

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Acknowledgements The author has been involved in research on the effects of trade related policy reforms on agriculture for many years. He has an extensive background in quantitative analysis of trade restrictions on global commodity markets. His professional experience was developed during periods of employment at the Australian Bureau of Agricultural and Resource Economics (ABARE), the Centre for International Economics (CIE), Bonlac Foods Ltd and the OECD Secretariat in Paris. This report examines an issue of interest to the Doha Round of WTO trade negotiations. In recent times the author has prepared reports on other issues associated with multilateral trade negotiations that may be of interest to the reader. These studies were funded and published by the Rural Industries Research and Development Corporation (RIRDC). They include reports on Special Safeguards and Agricultural Trade Liberalisation, Food Aid and Agricultural Trade Reform Agricultural Industry Support and Structural Adjustment and a recent study on Effective Administration of Agricultural Tariff Quotas. Copies of the reports are available on the RIRDC web site. Financial support for this project was provided by RIRDC and is gratefully acknowledged. A number of people from representative organisations and agencies provided background information and these contributions were greatly appreciated. The assistance of Ian Shaw in collecting data for the analysis is gratefully acknowledged.

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Contents Foreword ........................................................................................................................... iii Acknowledgements ........................................................................................................... iv Executive summary ........................................................................................................... vii 1. Introduction ................................................................................................................... 1

Project aim and objectives ................................................................................... 2 2. Use of export subsidies ................................................................................................ 4

Capacity for subsidised exports ........................................................................... 4 Global trading conditions and use of export subsidies ........................................ 6 Concessions for developing economies .............................................................. 12 Markets targeted for subsidised trade .................................................................. 14

3. Effects of subsidised exports ....................................................................................... 19

Rate of assistance from export subsidies ............................................................. 19 Pricing effects of export subsidies ....................................................................... 22 Economies affected by subsidised exports .......................................................... 25

4. Use of export financing support .................................................................................. 26

Availability of export finance support ................................................................. 26 Markets targeted for exports with finance support ............................................. 30

5. Effects of export finance support ................................................................................ 35

Rate of assistance from export credit guarantees ................................................ 35 Economies affected by export credit guarantees ................................................. 39

6. Conclusions ................................................................................................................... 42

Appendix A: Use of export subsidies in world trade ....................................... 45

Appendix B: EU market prices ............................................................................. 50

Appendix C: Destination of subsidised trade ...................................................... 51

Appendix D: Conceptual view of export subsidies ............................................ 62

Appendix E: Assistance from export subsidies ................................................... 65

Appendix F: EU export prices ............................................................................... 69

Appendix G: Economies affected by subsidised trade ....................................... 77

Appendix H: US trade with export credit guarantees ..................................... 84

Appendix I: Assistance from export credit guarantees .......................................... 91

Appendix J: Economies affected by export credit guarantees .............................. 101 References .......................................................................................................................... 104

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Charts A World indicator prices of beef, pig & chicken meat ..................................................... 8 B World indicator prices of WMP, SMP & WhP .............................................................. 8 C World indicator prices of cheese & butter ..................................................................... 8 D World indicator prices of wheat & corn ........................................................................ 9 E World indicator prices of rice & sugar ........................................................................... 9 F World indicator prices of soybean products ................................................................... 9 Tables 1 WTO expenditure caps for export subsidies ................................................................. 5 2 Subsidised export capacity for major suppliers ............................................................ 6 3 Subsidised exports and global trading conditions ......................................................... 10 4 Average usage rates of volume caps on subsidised exports ......................................... 11 5 Selected examples of average export subsidies ............................................................ 13 6 Major regional destinations for subsidised trade – Dairy products .............................. 16 7 Major regional destinations for subsidised trade – Meat products ............................... 17 8 Assistance from EU export subsidies ........................................................................... 20 9 Changes in EU export prices & world indicator prices – Dairy products .................... 23 10 Changes in EU export prices & world indicator prices – Meat products ..................... 24 11 Economies affected by EU subsidised exports ............................................................. 25 12 Use of export finance support in agricultural trade by major exporters ....................... 27 13 Export finance tenors used by the major exporters ....................................................... 29 14 Product composition of export finance support by major exporters ............................. 30 15 Change in US export credit guarantees for cereal & oilseed products ......................... 31 16 Major markets for US exports with credit guarantees – Cereal products ...................... 32 17 Major markets for US exports with credit guarantees – Oilseed products ................... 33 18 Assistance form US export credit guarantees – Cereal & oilseed products .................. 36 19 Changes in US exports with credit guarantees ............................................................. 39 20 Economies affected by US exports with credit guarantees ........................................... 41 21 Subsidised exports subject to WTO commitments ....................................................... 45 22 Quantity usage rates of export subsidy caps ................................................................. 46 23 Average export subsidy for trade with WTO commitments ......................................... 47 24 Unrestricted subsidised exports by WTO Members ..................................................... 48 25 Expenditures on unrestricted subsidised exports by WTO Members ........................... 48 26 Average export subsidy for unrestricted trade .............................................................. 49 27 EU market prices during the GFC ................................................................................ 50 28 Major regional trade supported by export subsidies – Dairy products ......................... 51 29 Major regional trade supported by export subsidies – Meat products ......................... 58 30 Market composition of regional trade ........................................................................... 61 31 EU assistance from export subsidies – Cereal & sugar products ................................. 65 32 EU assistance from export subsidies – Dairy products ................................................. 66 33 EU assistance from export subsidies – Meat products ................................................. 67 34 EU export prices for regional markets – Dairy products .............................................. 69 35 EU export prices for regional markets – Meat products ............................................... 74 36 Economies affected by EU export subsidies – Dairy products ..................................... 77 37 Economies affected by EU export subsidies – Meat products ...................................... 82 38 US exports with credit guarantees – Cereal products ................................................... 84 39 US exports with credit guarantees – Oilseed products .................................................. 87 40 Regional markets eligible for US export credit guarantees .......................................... 90 41 Assistance from US export credit guarantees – Cereal products .................................. 91 42 Assistance from US export credit guarantees – Oilseed products ................................ 96 43 Interest rates for short term credit finance in selected economies ................................ 100 44 Economies affected by US credit guarantees – Selected products ............................... 101

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Executive summary

What the report is about The report examines concerns about the distortion effects of two forms of export assistance – export subsidies and export finance support. Export subsidies are a highly trade distorting form of support. Indirectly they contribute to increased output and higher export supplies from economies that provide the assistance. This comes at the expense of distorting world trade. Subsidised trade increases global price volatility, lowers market returns and displaces trade by other export suppliers. Concerns about subsidised exports often skim over the differentiated distortion effects that can arise. Some import markets receive larger amounts of subsidised trade. They can experience a more direct, disproportionate price impact and a greater adjustment burden if commercial use of the subsidy leads to stronger competition for sales. When developing economies are targeted for subsidised sales it can have implications for industry growth and development. Export finance support is another concern in the provision of export assistance. Finance re-payment guarantees backed by governments are an export contingent input subsidy that lowers the transaction costs of imports. They create an incentive for importers to favour the export suppliers that offer the assistance which causes a displacement of competing exports into other markets.

Who is the report targeted at? The study provides an assessment of the trade distorting effects of export subsidies and export finance support. It was undertaken to show the impact of these kinds of assistance measures on exporting and importing economies. The analysis focused on how the measures distort world trade. It highlights the multilateral nature of the issue and the need for a WTO agreement that not only eliminates export subsidies but imposes disciplines on the use of export financing support. Exporter gains from FTA tariff concessions can be eroded by subsidised trade. Therefore effective disciplines on export support measures would be in the collective interests of all trading economies. The issue can’t be resolved through FTA or RTA negotiations. A multilateral agreement is needed which is a compelling reason for pursuing reform in the WTO Doha trade negotiations. The report is aimed at trade policy advisers and industry representatives in all trading economies. The analysis shows the trade distortion effects do not discriminate between the developed and developing economies. All types of economies are affected and the disciplines incorporated in a multilateral agreement need to apply to all types of economies. The findings of the analysis may be useful for future deliberations on a WTO Doha Round agreement on export competition.

Background In recent times export subsidy use has been well below the WTO allowances. The diminished use is a welcome development. But the fact remains the policy option remains in place. Many economies have dormant or eliminated programs that could be resurrected if trading conditions change. There are also a number of subsidy programs that remain active today, some without a clear WTO entitlement. Strong commodity prices have reduced the pressure for export assistance. But the volatility of traded product prices is well known. There are likely to be periods of unfavourable trading conditions in the future. Political pressures to use export subsidies and finance support to alleviate domestic adjustment concerns will resurface during these periods. The risk associated with the continued availability of these assistance measures is clearly illustrated by events in 2009.

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In 2007 and 2008 the world economy experienced a period of very high food price inflation. This was followed by the recessionary effects of the Global Financial Crisis (GFC) in 2009 which coincided with a weakening of traded product prices. One response was a re-activation of EU export subsidies for dairy products which triggered a corresponding re-activation of US dairy export subsidies. At the same time there was a substantial rise in the use of US export finance guarantees. Use of concessionary credit and risk products based on government guarantees is an issue of some concern. Export financing support has been the subject of WTO disputes and found to constitute an export subsidy. Previous research has shown assistance from credit guarantees is smaller than export subsidy support but it’s generally accepted to have similar trade distorting effect. Concerns have been raised about the potential for finance support to circumvent a loss of export subsidy allowances. The Agreement on Agriculture (AoA) allowed for unrestricted use of some forms of export subsidies by developing economies for a limited period. All forms of export subsidies have distortion effects and this includes export contingent input subsidies. There has been some growth in subsidised trade using the Article 9.4 exemption including strong growth in India’s sugar exports. Legal entitlement for the Article 9.4 exemption lapsed at the end of the AoA implementation period. But WTO notifications show use of the transitional exemption has not ceased. A further notable development is reports of India providing an export subsidy of around $US$65 per tonne for up to 1.4 million tonnes of sugar in 2014-15. There is no WTO entitlement for this assistance.

Aims/Objectives The aim of the study was to assess the trade distortion effects of export subsidies and export finance support to show why a WTO agreement on export competition should be vigorously pursued. The specific objectives were:

• review the use of export support measures in the context of fluctuating commodity prices; • examine the destination of trade supported by export assistance; • assess the differentiated distortion effects that can arise and the extent of spill-over effects; • a comparative evaluation of assistance from export subsidies and financing support; and • summarise the findings to establish the key considerations for reform.

Methods used Selected examples of the use of export subsidies and export finance guarantees were used to evaluate trade developments since 2005. Meat and dairy products were used in the review of export subsidies. Cereal and oilseed products were used in the assessment of export finance guarantees. These products were the primary focus of the respective support measures in the sample period. WTO notifications were a central element of the assessment of export subsidies. Data on trade flows, commodity prices and export prices were used to illustrate the trade distorting effects. Usage of export credit guarantees and program conditions were the basis of the assessment of export finance support. Data on trade flows and finance cost differentials provided supplementary information.

Key findings The total global allowance for export subsidy expenditures is US$12.2 billion and it’s dominated by allowances for a small group of developed economies. The capped concessions are generous and they remain a threat to the global trading environment. Use of the allowances has varied and in recent times it has declined. While this is a welcome development the policy option remains in place.

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A key factor in use of export subsidy allowances is changes in traded product prices. The subsidies have been extensively utilised in periods of relatively weak to moderate prices. The more recent decline in usage has coincided with a period of high prices. But developments associated with the food price crisis and GFC in the 2007-2009 period underline the risk for future trade disruptions. In 2009 the EU reactivated export subsidies for dairy products which triggered a corresponding re-activation of US dairy export subsidies. These developments weakened market returns for other export suppliers. EU export subsidies were suspended in 2008 during the food price crisis and there had been no subsidised sales of US dairy products since 2004. Ad hoc use of export subsidies is destabilising for commodity markets and the policy actions highlight the risk associated their availability. There has been some growth in the subsidised trade by developing economies using the Article 9.4 exemption in the AoA. As use of the capped export subsidies has declined, trade supported by the uncapped measures has became the major contributor to global trade distortion effects in some cases. The Article 9.4 exemption was a transitional concession that expired when the AoA implementation period ended. But WTO notifications show use of the transitional exemption has not ceased and there is no legal entitlement for the continued use of subsidy measures under Article 9.4. Growth in subsidised trade using the Article 9.4 exemption will undermine the spirit and intentions of a WTO agreement on export competition. There is no justifiable case for allowing the use of any form of export subsidy by either developed or developing economies and this includes export contingent input subsidies. The trade distortion effects that arise affect all other trading economies – developed and developing. Transitional exemptions provide a way to evade a ban on direct export subsidies. Therefore they should be included in the WTO policy reform effort. Concerns about subsidised exports can sometimes skim over the differentiated distortion effects that can arise. Some import markets receive large subsidised sales and experience a more direct impact. For example, before the food price crisis and GFC period the subsidised sales of butter and cheese trade shares were over 40% of total trade in Eastern Europe and the Middle East. In Africa subsidised sales of whole milk powder (WMP) and milk had regional trade shares exceeding 50%. There are numerous instances of a one-off surge in regional subsidised sales which can be traced back to specific markets. These trade developments suggest opportunistic sales encouraged by adjustments in subsidy rates. Examples where this may have occurred include US butter sales to most regions in 2008, EU skim milk powder (SMP) sales to Asia and the Middle East in 2009, US SMP sales to South America and the Middle East in 2008 and EU beef sales to Eastern Europe in the 2010-11 period. The targeting of less advanced developing economies is an adverse consequence of export subsidy programs. Opportunistic sales and price discounts will lower market returns for domestic suppliers of competing products and cause greater volatility. The distortion effects are detrimental for producer incomes and poverty alleviation. They also discourage investment for industry development. The level of assistance is a key factor in the trade distortion effect of export subsidies. If a subsidy is generous relative to the gap between accumulation costs and the world price there is a greater export incentive and more opportunities for discounting. EU illustrative examples show how the rate of assistance can vary. For example, in the 2005 to 2006 period:

• butter assistance was 66%, WMP was close to 30%, SMP was 7% and cheese was 25%; • meat product assistance was 17% for beef, 40% for ham and 30% for chicken meat; and • sugar assistance averaged around 118%.

High rates of assistance suggest an intent to enhance the export incentive. A comparison of changes in world prices and EU assistance shows this was the case at certain times. The subsidy adjustments were more aligned with increasing exports rather than maintaining a competitive position in world trade.

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Price discounting is another aspect of the trade distorting effect of export subsidies. Comparisons of EU export prices with a world price indictor show several instances of significantly different price movements. For example, world prices of WMP rose by almost 100% in 2007 but EU export prices increased by less than 50%. The divergence in price movements indicate some importing markets experienced more acute pricing impacts The effects of subsidised sales undermines the trading activities of many economies. Disruptions are not limited to a few major export suppliers or importers. Smaller economies also experience trade adjustment pressures. For example, 41 Middle East economies were affected by EU subsidised sales of meat products in the 2005-11 period and 32 economies were affected by subsidised dairy product sales. This highlights the multilateral nature of the issue and is a strong reason to pursue a collective agreement on reform in the WTO Doha Round negotiations. Export finance support is the other area of concern in the provision of export assistance. Trade with finance support is a very small portion of total trade by Australia, Brazil and New Zealand. It’s more significant for Canada and the US accounting for between 2% and 6% of total exports. The value of US trade with export finance support has averaged around US$3.1 billion since 2005. Canada’s trade with export finance support averaged around US$1.4 billion over the same period. The use of export finance support has grown. In the food price crisis and GFC periods the supported trade increased substantially. US exports with finance support increased by 112% in 2008 and 75% in 2009. Canada’s trade with finance support rose by almost 80% in 2008. Usage has largely remained at the relatively higher levels ever since. The growth may in part reflect the strength of traded product prices but this doesn’t fully explain the growth. There has been a sustained rise in the proportion of trade with export finance support. This indicates an increasing use of financing support. Most of the export finance support is provided in the form of re-payment guarantees on trade finance. Trade distortion effects are strongest in the global markets for cereal and oilseed products. The US is a large user of credit guarantees and at times they have been extensively used to support sales to specific markets. For example, in 2009 concessional finance on sales to Korea supported almost 80% of wheat exports, two thirds of the corn exports and 98% of the soybeans exports. US export finance guarantees have provided significant assistance. Rates of assistance were relatively high for the period from 2009 in most Central American markets and some South American markets. For example the average rate of assistance in Costa Rica, Dominican Republic, Colombia, Guatemala, Honduras, Peru and Venezuela was between 11% and 20%. The assistance was lower for most of the Asian markets. In Korea it averaged around 3% and in Indonesia it averaged 12%. The length of the tenor is a key factor in the value of a credit guarantee and its attraction to importers. The US currently has maximum tenors of 1.5 years compared with the 6 month tenors offered by most other exporters. Extended tenors can be highly beneficial for buyers. But the key factor affecting the value of the tenor period is the interest rate differential. The incentive to use the finance guarantees is weaker if the dollar value of the interest cost differential declines. The global economy has experienced a sustained period of low interest rates in the post-GFC period. The interest rate environment will change at some point. Should this lead to higher interest rates or a larger differential between the US and importing economies the dollar value of the support from GSM-102 guarantees will rise and the attraction of the supported finance will strengthen. In recent years shorter tenors in conjunction with low interest rates have reduce the financial benefit and usage of the GSM-102 guarantees. But short tenors may not be a complete solution. Lower tenors in FY 2011 did not translate into reduced US exports of wheat, corn and soybean meal with finance support. World commodity prices strengthened considerably in 2011. This suggests the level of traded product prices is another factor that will affect the attraction of using concessional finance.

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Strong commodity prices increase the dollar value of export transactions and the corresponding cost of credit finance. This means the value of the benefit from the interest cost differential is higher and the attraction of the supported finance to importers is stronger. Tenors of 1.5 years are not sufficient to remove the trade distortion effects of finance guarantees in measures such as the GSM-102 program, especially in periods of high interest rates and high prices for traded products. There is still a material financial incentive to use the finance and trade displacement effects will continue to arise. There is a risk that firmer global interest rates and strong commodity prices will lead to stronger demand for export finance guarantees. Restricting tenors to 6 months will be highly beneficial for global trading conditions as it will substantially diminish the attraction of the finance. But it will not fully remove the trade distortion effect as a limited financial advantage will still exist in some markets. The financial gain will be stronger in conditions of high interest rates and strong commodity prices. The rate of assistance from finance guarantees is significant and it has trade distorting effects in many markets. Policy reforms that impose disciplines on the use of export finance support are necessary and they need to be part of a WTO Doha Round agreement on export competition. Elimination of the trade distortion effects would require an end to all forms of export finance support. However, the proposed 6 month restriction on tenors for export credit support should significantly curtail the distortion effects and it should be adopted. Since 2009 there have been substantial US exports of wheat, corn and oilseed products with finance guarantees in most years. This suggests trade displacement effects have been a de-stabilising factor in global trading conditions. For example, US guaranteed sales of wheat averaged 2.7 million tonnes in the 2009-13 period. The corn trade was over 9 million tonnes in 2009 and averaged 3.7 million tonnes in the following three years. There were no subsidised exports in this period and US credit guarantees were the leading source of distortions in the world trade for cereal products. The effect of export finance guarantees undermines the trading activities of many economies. Large changes in the availability of guarantees are destabilising for the export trade of competing suppliers. But trade displacement effects are not limited to a few major export suppliers. Incursions of exports with credit support can also disrupt localised inter-regional sales by smaller exporting economies. For example, over the 2009-2013 period 26 exporting economies were affected by US cereal product sales with finance guarantees in Asian markets. In South America 12 export suppliers were affected by US credit supported sales and 5 export suppliers were affected by sales in Central America. This highlights the multilateral nature of the issue and the need for a WTO Doha Round agreement on export competition that includes disciplines on the use of export finance support.

Implications and recommendations for relevant stakeholders The long standing concerns about the use of export assistance are well founded. Export subsidies, export contingent input subsidies and export finance support have trade distorting effects. At times the distortion effects on commercially driven trade flows have been substantial. The WTO Doha negotiations provide an opportunity to permanently remove export subsidies and put disciplines on the use of export finance support. Allowances for export subsidies are an anomaly – trade subsidies for industrial products were outlawed in the 1950s. The treatment of export subsidies in the AoA was seen as an intermediate step on the way to elimination in future negotiations. The current benign pressure for using export subsidies should not be a reason to allow the matter to drift. Reduced use of export finance support in very recent times is largely due to the low interest rate environment. Commodity prices are volatile and economic conditions will change at some point.

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There are likely to be periods of unfavourable trading conditions in the future and political pressures to use export subsidies to alleviate domestic adjustment concerns will resurface. The risk associated with the continued availability of export subsidy allowances is clearly illustrated by events in 2009. A WTO agreement on export competition that prohibits the use of all forms of export subsidies would highly beneficial for agricultural commodity markets. The global economy has experienced a sustained period of low interest rates for some time. The interest rate environment will change at some point. Should it lead to higher interest rates or a larger differential between exporting and importing economies the attraction of export finance guarantees will strengthen and the trade distortion effect are likely to intensify. Disciplines on export finance support would be highly beneficial for the global trading environment and they need to be part of a WTO agreement on export competition. It’s in the collective interests of all trading economies to finalise and adopt a multilateral agreement that incorporates effective reforms on these two forms of export assistance. An agreement would be highly beneficial for exporters and for producers in both importing and exporting economies. All types of trading economies would benefit from the reforms – developed and developing. The adoption of an agreement on export competition can play a constructive role in advancing other aspects of the WTO Doha trade negotiations. A reluctance to commit to improved market access may in part reflect concerns about the potential for a re-emergence of large subsidised exports. Adoption of an agreement on export competition would lessen these concerns. This study has provided evidence of the trade distortion effects of export subsidies and export finance support. The results have highlighted the key issues for deliberations on the proposal for a multilateral agreement on export competition. These include:

• export subsidy allowances are generous and provide considerable scope for significant price discounting when global trading conditions deteriorate – a ban on export subsidies would eliminate a major source of instability in market returns for all export suppliers and producers in the importing economies;

• a ban on export subsidies would benefit all types of trading economies – developed and developing;

• export subsidies have unintended adverse consequences for longer term industry development, food security and poverty alleviation in the less advanced developing economies – a ban on export subsidies would be highly beneficial for these economies;

• continued use of the Article 9.4 transitory exemption for export contingent input subsidies by developing economies has no legal entitlement in the AoA and are a significant risk to the effectiveness of a ban on export subsidies – they have trade distortion effects that affect all other trading economies (developed and developing) and measures that use the Article 9.4 exemption should be included in the agreement to eliminate export subsidies;

• export finance support provides significant assistance and has significant trade distorting effects in many markets – disciplines on the use of finance support are necessary and they need to be part of an agreement; and

• elimination of the trade distortion effects of export finance support would require an end to all forms of government assistance but the proposed 6 month restriction on tenor periods will be highly beneficial for global trading conditions and it should be adopted.

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1. Introduction Export assistance measures are a long standing issue of concern in global agricultural trade. Export subsidies, export contingent input subsidies and export finance support have trade distorting effects. The disruptions to commercial trade can be substantial. Recipients of the assistance gain an artificial competitive advantage that penalises other exporters and producers in importing markets. It’s generally accepted that export subsidies are the most trade distorting form of agricultural support. Indirectly they contribute to higher output and increased export supplies in the economies that provide the assistance. The subsidised trade increases global price volatility, lowers market returns and displaces trade by other export suppliers. These distortion effects have been a feature of global commodity markets since the late 1970s. Use of export subsidies has tended to be ad-hoc. Changes in product eligibility, subsidy levels and the rate of assistance caused significant shifts in the commercial incentive for exports. The resulting fluctuations in subsidised trade added a de-stabilising element to global trading conditions. The initial direct effect of providing subsidies is lower returns in the importing markets. This occurs through a combination of price discounting and increased product availability. Competing suppliers face lower prices which can lead to the displacement of exports into other markets – domestic or foreign. The lower returns can also curtail output in the importing markets. Ultimately the result is a lower average world price due to larger global export supplies. In effect the export subsidies transfer adjustment pressures from supported markets to producers in other markets. Price effects are amplified when there’s competition in providing the subsidies. If a suppler raises the subsidy level, others may respond with a matching increase to maintain competitiveness. Concerns about subsidised exports often skim over the differentiated distortion effects that can arise. Some import markets receive large amounts of subsidised trade. They can experience a more direct, disproportionate price impact and a greater adjustment burden if commercial use of the subsidy leads to stronger competition for sales. When developing economies are targeted by exporters the subsidised trade can have implications for industry growth and development. Competitive pressures and product substitution effects ensure the distorting consequences ultimately spread to other markets. Impacts are not quarantined to specific markets – there are spill-over effects. The impacts spread because of the trade displacement that occurs when other export suppliers elect to withdraw or reduce their market involvement rather than accept lower returns. It is often not appreciated that the consequences can spread across numerous exporting and importing markets. Small exporting economies engaged in localised regional trade are affected just as much as the major global export suppliers. Importing markets may also experience reductions in support. This occurs if tariff protection is eroded by the price effects of subsidised trade. Exporter gains from FTA tariff concessions can be eroded by subsidised trade. Therefore eradicating the use of export subsidies would seem to be in the collective interests of all trading economies. The issue can’t be resolved in FTA or RTA negotiations. A multilateral agreement is required and it’s a compelling reason for pursuing reform in the WTO Doha trade negotiations. Export finance support is another area of concern in the provision of export assistance. Concessionary credit based on government guarantees is also used to artificially enhance export competitiveness. It’s a form of assistance that has trade distorting effects similar to export subsidies.

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Finance guarantees are an export contingent input subsidy that lowers the transaction costs of imports. They create an incentive for importers to favour export suppliers offering the assistance. The primary distortion effect is a displacement of competing exports into other markets – domestic or foreign. This may have a spill-over effect on product returns for other export suppliers. There were no specific disciplines imposed on export financing support in the AoA. It has been the subject of WTO disputes and found to be an export subsidy. Previous research shows the assistance is significant but smaller than export subsidy support. The support distorts trade in markets eligible for the assistance and there are concerns about its potential to circumvent a ban on export subsidies. The Doha WTO negotiations provide an opportunity to eliminate export subsidies and put disciplines on export finance support. Allowances to subsidise exports are an anomaly – subsidies for industrial goods were outlawed in the 1950s. The treatment of export subsidies in the Agreement on Agriculture (AoA) was seen as an intermediate step on the way to elimination in future negotiations. An evaluation of the distortion effects of these export assistance measures is a worthwhile exercise to show why reform should be strongly pursued in the Doha negotiations. The current benign pressure for using export subsidies should not be a reason to allow the matter to drift. Commodity prices are notoriously volatile and economic conditions can change. It is important to have an appreciation of the distortion effects of these assistance measures. Numerous export suppliers are affected including small economies trading in regional areas. Commercial players target their use of export assistance to particular import markets. This can have industry development implications in developing economies and erode the potential for gains in food security.

Project aim and objectives Reform of export assistance can play a constructive role in the ‘three pillar’ approach to WTO trade negotiations. This approach involves concurrent discussions on export subsidy disciplines, market access and reduced domestic support. A reluctance to commit to improved market access may in part reflect concerns about the risk of a re-emergence of large subsidised exports. The adoption of an agreement on export competition would lessen concerns on liberalising market access. In recent times the use of export subsidies has been well below the allowances contained in the AoA. Changes in domestic support policies have contributed to this development. The EU is currently not providing export subsidies. Some other economies have gradually ended the availability of export support for particular products. The diminished use of export subsidies is a welcome development. But the fact remains the policy option remains in place and can be reactivated at any time. There are dormant or eliminated programs in many economies that could be resurrected if trading conditions change. There are also a number of subsidy programs that remain active today, some without a clear WTO entitlement.. Strong commodity prices have reduced the pressure for export assistance. But the volatility of traded product prices is well known. There are likely to be future periods when unfavourable global trading conditions re-emerge with related pressures for export subsidies and finance support. The risk associated with the continued availability of these measures is clearly illustrated by events in 2009. In 2007 and 2008 the world economy experienced a period of very high food price inflation. This was followed by the recessionary effects of the Global Financial Crisis (GFC) in 2009 which coincided with a weakening of traded product prices. One response was a re-activation of EU export subsidies for dairy products which triggered a corresponding re-activation of US dairy export subsidies. At the same time there was a substantial rise in the use of US export finance guarantees.

3

The aim of the study was to assess the trade distorting effects of export subsidies and export finance support to show why a WTO agreement on reform should be pursued. The analysis focused on how the measures distort trade and their implications for all types of trading economies. The specific objectives were:

• review the use of export support measures in the context of fluctuating commodity prices; • examine the destination of trade supported by export assistance; • assess the differentiated distortion effects that can arise and the extent of spill-over effects; • a comparative evaluation of assistance from export subsidies and financing support; and • summarise the findings to establish the key considerations for reform.

It was beyond the scope of the project to review the distortion effects in all product markets. Selected examples of the use of export subsidies and export credit guarantees were used to assess developments since 2005. Meat and dairy products were used to evaluate the effect of export subsidies. Cereal and oilseed products were used for the assessment of export finance support. These products were the primary focus of the respective assistance measures in the sample period. What matters most for deliberations on a multilateral agreement on export support measures are the external consequences in global commodity markets. Accordingly the analysis was focused on the key elements of the external distortion effects and has not considered the internal outcomes for the users of export support measures. Using the product examples, attention was focused on:

• rates of assistance provided by the respective support measures; • subsidy use by supported exporters and its distortion effects on market returns; • the volume, instability and market/regional concentration of supported trade; • unintended consequences for industry development in developing economies; • exporting economies affected by the trade displacement effects; and • importing economies affected by the domestic industry disruption effects.

4

2. Use of export subsidies A major outcome of the AoA from the Uruguay Round was a commitment to reduce the use of export subsidies. Caps were imposed on subsidy expenditures and the volume of subsidised trade. There was a lengthy transition period of progressive reductions to the final commitments. The caps were mostly product specific and the introduction of new export subsidies was prohibited. An exception was the exclusion of some forms of export subsidies used by developing economies. There were no volume or expenditure caps on the subsidies which could be applied at any time. Some economies continue to make use of this exception even though the legal entitlement has lapsed.

Capacity for subsidised exports There are 18 WTO members with 428 commitments to cap the use of export subsidies (WTO 2013b). They mostly apply to specific product categories. Exceptions are two commitments applying to ‘all products’ and five applying to ‘incorporated products’. The number of commitments is not a measure of the use of trade subsidies. Many export subsidy allowances have been dormant since the AoA was implemented. Others have been subsequently suspended or eliminated by unilateral policy changes. Dormant export subsidy programs can be reactivated or resurrected in a new form at any time. Apart from expenditure and volume caps the only constraint is product coverage. In many cases the export subsidy commitments specify the composition of a product category eligible for support. This may exclude some category items or forms of a product. Some economies were extensive users of export subsidies when the AoA was negotiated and have allowances for several product categories. Notable examples include:

• the EU has allowances for 20 product categories; • the US has 14 product allowances; • Canada and Norway have 11 product allowances each; and • Switzerland has 5 product allowances.

The total number of commitments can give a misleading perspective on the potential for disrupting trade. Some economies have aggregate product allowances and others have disaggregated allowances. For example, Turkey has 40 specific allowances including several for fruit and vegetable products. A primary product perspective would suggest Turkey had allowances for 30 product categories. The total global allowance for export subsidy expenditures is US$12.2 billion (table 1). It’s a generous concession and underlines the potential for disrupting trade in agricultural products. Cereal products account for about a third of the available allowances. Dairy products account for another 30% and meat products account for 20%. The EU has by far the greatest capacity for subsidised trade with 80% of the available allowances for agricultural products – US$9.7 billion. They have allowances for all the major product categories. The US and Canada also retain a significant capacity for subsidised exports. Their capacity is concentrated in cereal and oilseed products. An aggregated perspective shows:

• the EU, US and Canada have 93% of the export subsidy allowances for cereal products; • they also have 89% of the allowances for subsidised dairy trade; and • the EU and US have 98% of the capacity for subsidised trade in meat products.

5

1. WTO expenditure caps for export subsidies #

EU US Canada Mexico Brazil Other Total

US$ million

Meat products 2 365 38 .. .. 8 48 2 459

96% 2% .. .. 0% 2%

Dairy products 3 075 117 73 .. 0.1 388 3 652

84% 3% 2% .. 0% 11%

Cereal products 3 156 412 248 125 0.0 157 4 098

77% 10% 6% 3% 0% 4%

Oilseed products 57 14 41 .. 5 7 123

46% 11% 33% .. 4% 5%

Sugar 683 .. .. 422 42 21 1 168

58% .. .. 36% 4% 2%

Other products * 404 .. 2 6 17 224 654

62% .. 0% 1% 3% 34%

Total 9 740 581 364 553 72 845 12 154

80% 5% 3% 5% 1% 7%

# WTO members with annual caps on subsidised export expenditures. Source: WTO notifications. Expenditure caps valued at average 2014 exchange rates, year ended December 31.* Includes fruit, vegetables, cotton & olive oil. WTO allowances on the volume of subsidised trade shows the commodity markets facing the higher risk. Wheat and coarse grains have the highest capacity for subsidised trade (table 2). There’s 40.2 million tonnes of allowances for wheat and 20.3 million tonnes for coarse grains. Substantial capacity also exists for sugar, oilseeds, beef and dairy products. The EU retains most of capacity for subsidised trade in meat and dairy products with 80% of the available allowances for dairy products and 88% for beef. In cereal products the EU has 38% of the wheat capacity and 52% of the coarse grain capacity. The EU also has 27% of the allowances for sugar. Other capacity levels worth noting include:

• the US has more than a third of the allowances for wheat; • Canada has 22% of the wheat allowances, 18% for coarse grain and 78% for oilseeds; • Brazil has 30% of the sugar allowances and over half the capacity in vegetable oil; • Mexico has 25% of the capacity for sugar.

A small number of developed economies dominate the capacity for subsidised trade. The allowances are a generous concession that remain a threat to the global trading environment. The overall scale of the concessions reflects the 1986-90 base period in the AoA and the limited ambition of the reduction commitments – capacity was cut by a third from a high starting point.

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2. Subsidised export capacity for major suppliers #

EU US Canada Mexico Brazil Other Total

'000 t

Meat products Beef 990 18 .. .. 92 23 1 122

Pig meat 588 0.4 .. .. .. 5 594

Poultry meat 431 28 .. .. 84 3 546

Sheep meat .. .. .. .. .. 20 20..

Dairy products .. Butter 412 21 4 .. .. 48 484

Cheese 332 3 9 .. .. 69 413

SMP 323 68 45 .. .. 71 508

Other products 1 009 0.0 30 .. 10 130 1 179

Cereal products Wheat 15 364 14 522 8 852 332 .. 1 111 40 180

Coarse grain 10 530 1 561 3 618 2 951 15 1 645 20 320

Rice 98 39 .. .. .. 321 458

Oilseed products Oilseeds 442 .. 1 749 .. .. 64 2 255

Vegetable oil .. 141 93 .. 475 117 826

Oilcake .. .. 217 .. 63 2 282

Other products Sugar 1 374 .. .. 1 260 1 497 928 5 060

Fruit & vegetables 1 552 .. 80 142 609 3 300 5 683

Other * 115 .. .. .. 3 99 217

# WTO members with annual caps on subsidised export volumes. Source: WTO notifications. Marketing year ended July 31 for Canada, June 30 for US & Australia and September 30 for Israel. Marketing year ended June 30 for EU except sugar (September 30) & rice (August 31). Calendar year ended December 31 for Norway, Switzerland, Turkey, Mexico, South Africa, Brazil, Colombia, Venezuela Indonesia & Iceland. Calendar year ended December 31 for Uruguay except rice (year beginning March).* Includes cotton & olive oil.

Global trading conditions and use of export subsidies Use of export subsidy allowances has varied considerably since the AoA implementation period finished. Many have not been utilised. In 2000 there were six economies using their allowances for dairy products. Other active use of allowances included two for beef and pig meat, three for poultry, one for cereal products, two for sugar and four for fruit and vegetables. While the number of active allowances was small, the volume of subsidised trade was substantial in most products (see Appendix A). The EU made extensive use of its allowances for meat, dairy and cereal products and was also an active user of its allowances for sugar, fruit and vegetables.

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Other economies were also active users of export subsidies in 2000. The US, Canada, Switzerland and Norway made substantial use of their dairy product allowances. Norway was an active user of its beef allowance. Switzerland made extensive use of its fruit and vegetable allowances. In most cases the high rates of utilisation of the allowances persisted for several years. In more recent times the use of export subsidies has declined and usage rates have been well below the AoA caps. Policy reforms in other areas have been a contributing factor in some cases. For example, removal of minimum prices reduces the pressure to use export subsidies provided internal prices are free to adjust to changes in market conditions. The EU does not currently provide export subsidies and some other economies have ended their support for particular products. The risk posed by the continued availability of the allowances is closely linked to future developments in world market prices. A subsidy is required to off-set the gap between internal product accumulation prices and returns from export sales. If world prices are unfavourable it leads to lower exports and pressure for a higher subsidy. Favourable prices have the opposite effect. There’s been no significant reduction in import protection by users of export subsidies over the past 14 years. Internal market prices are supported by these trade barriers. In general they are less volatile than globally traded product prices. This would suggest that a key factor in use of the export subsidy allowances is changes in global commodity prices. Another factor that can affect use of the allowances is exchange rate movements. A strong valued or appreciating currency reduces export returns. This can lead to lower subsidised exports and pressure for a higher subsidy. A weak or depreciating currency has the opposite effect. Exchange rate movements are limited in comparison to those in traded product prices. The change is also generally a country specific event whereas a traded product price change impacts on all export suppliers. This would suggest subsidised exports and subsidy rates are more responsive to movements in traded product prices. A re-emergence of larger subsidised exports is possible if there’s a sustained contraction in traded product prices. It’s instructive to examine the use of allowances in the context of global trading conditions. World prices for most products show significant variability since the year 2000. Initially there was a lengthy period of weak to moderate prices. This was followed by two major developments – an inflationary period for food prices and the Global Financial Crisis (GFC). During the 2007-2008 period there was a strong surge in agricultural commodity prices. In some cases prices rose to exceptional levels which heightened food security concerns. This period was generally referred to as the ‘food price crisis’. The concerns about high food prices dissipated in the wake of the recessionary effects of the GFC. There was a substantial decline in traded products prices for most agricultural commodities in 2009. The period of extensive use of export subsidy allowances coincided with a period of relatively weak to moderate prices for traded products. More recently the decline in the use of allowances has coincided with strong prices. This is evident in the longer term movements in world indicator prices:

• beef and pig meat prices were flat early in the decade, strengthened in the food price crisis, weakened in the GFC period and have been relatively strong for the past 5 years (chart A);

• chicken meat prices followed a similar pattern but with no decline in the GFC period; • milk and whey powder prices were weak and subdued until they surged during the food price

crisis, declined sharply in the GFC and have been relatively strong ever since (chart B); • pricing developments for butter and cheese were broadly similar although the price fall in the

GFC period was less noticeable for butter (chart C); • cereal prices were weak and subdued in the first half of the decade, surged in the food price

crisis, slumped in the GFC and have been relatively strong ever since (chart D);

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0

1000

2000

3000

4000

5000

2000 2002 2004 2006 2008 2010 2012 2014

A. World  indicator  prices  of  beef,  pig  &  chicken  meat

US  bone-­‐in  ham  20-­‐23  lb,  fob  Iowa US  whole  broilers  2.5-­‐3.0  lb,  fob  Georgia

US  90CL  cow  beef  imports,  fas  Australia

GFC

Sources:USDA  2014a,  FAO  2015,  WB  2014

US$/t

0

1000

2000

3000

4000

5000

2000 2002 2004 2006 2008 2010 2012 2014

B. World  indicator  prices  of  WMP,  SMP  &  WhP

WMP,  fob  West  Europe SMP,  fob  West  Europe Whey  powder,  fob  West  Europe

Source:  USDA  2015a

GFCUS$/t

0

2000

4000

6000

2000 2002 2004 2006 2008 2010 2012 2014

C. World  indicator  prices  of  cheese  &  butter

Butter,  fob  West  Europe  ports Cheddar  cheese,  fob  Oceania  ports

GFCUS$/t

Source:  USDA  2015a

9

0

100

200

300

400

2000 2002 2004 2006 2008 2010 2012 2014

D. World  indicator  prices  of  wheat  &  corn

US  soft  red  wheat,  fob  Gulf US  hard  red  wheat,  fob  Gulf US  No.  2  yellow  corn,  fob  Gulf

Sources:USDA  2014c,  WB  2014

GFCUS$/t

0

200

400

600

800

2000 2002 2004 2006 2008 2010 2012 2014

E. World  indicator  prices  of  rice  &  sugar

Raw  sugar  exports,  fob  Caribbean  ports Thai  5%  broken  milled  rice,  fob  Bangkok

Sources:WB  2014

GFCUS$/t

0

500

1000

1500

2000 2002 2004 2006 2008 2010 2012 2014

F. World  indicator  prices  of  soybean  products

EU  soybean  oil  exports,  fob  Netherlands EU  soybean  meal  imports,  cif  Rotterdam

US  No.  2  yellow  soybeans,  fas  Gulf  ports

Sources:  USDA  2014e,  WB 2014

GFCUS$/t

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3. Subsidised exports and global trading conditions #

Numberof active 2000 to 2007 to 2009 2010 to

exporters * 2006 2008 ** GFC 2012

'000 t '000 t '000 t '000 t

Meat products Beef 2 422 98 82 176

Pig meat 2 179 256 137 65

Poultry meat 2 239 208 194 240

Sheep meat 1 0.4 0 0 0

Dairy products *** Butter 4 277 131 103 30

Cheese 4 336 166 152 60

SMP 3 281 13 155 58

Other dairy products **** 5 932 268 478 143

Cereal & other products Wheat 1 7 920 412 0 0

Coarse grain 1 6 434 673 0 0

Rice 1 98 0 0 0

Sugar 2 933 1 348 0 0

Fruit & vegetables 3 855 394 19 8

* Active users of export subsidy allowances - excludes Turkey due to lack of Source: WTO notifications. notifications since 2000. See Appendix A for annual subsidised exports by individual suppliers.** Period of strong rise in commodity prices generally referred to as the 'food price crisis'.*** Unavailable subsidised export notifications for Canadian dairy trade (2001 to 2003) represented by estimates based on total notified exports.**** Includes Swiss subsidised exports of milk > 6% butter fat, cheese, milk powders & yoghurt.

Average annual subsidised exports:

• rice prices were also weak and flat before surging in the food price crisis and declining in the GFC period – prices have been relatively firm since then (chart E);

• sugar is an exception with no price decline in the GFC period – prices have weakened more recently but remain favourable compared with the first half of the decade (chart E); and

• prices of soybean products followed a similar pattern to the other products with soybean oil experiencing considerable fluctuations in prices (chart F).

The changes in indicator prices tell a broadly similar story with instability an obvious feature. Another notable feature is the corresponding changes in the use of export subsidies. Subsidised trade declined substantially during the food price crisis – sugar and pig meat were exceptions (table 3). The contrast with the large volumes of subsidised trade over the 2000-2006 period is especially noticeable and it confirms the importance of traded product prices in the usage of export subsidy allowances. Pressures to utilise the allowances re-surfaced during the price decline in the GFC period. For some products the GFC had an income contraction effect on demand which probably contributed to lower prices. But this was not the only factor affecting prices. A supply response to the earlier surge in food prices increased output and there was a recovery in the stock holdings of cereal products.

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4. Average usage rates of volume caps on subsidised exports #

2000 to 2007 to 2009 2010 to2006 2008 * GFC 2012

Meat products ≥ 50% usage rate 3 0 0 2

< 50% usage rate 4 4 4 2

not active .. 3 3 3

Dairy products ≥ 50% usage rate 12 2 3 2

< 50% usage rate 4 8 10 11

not active .. 6 3 3

Cereal & other products ≥ 50% usage rate 6 2 1 0

< 50% usage rate 2 4 1 1

not active .. 2 6 7

# Average annual usage rates by WTO members with active use of allowances. Source: WTO notifications. See Appendix A for annual usage rates of individual export suppliers.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'. Despite the moderation in prices there was no increase in subsidised trade in the GFC period for most products. In part this reflected the more subdued demand in global trading conditions. Another factor is that prices did not decline to levels experienced in the first half of the decade. The subsequent price recovery in the post-GFC period has seen a further moderation in the use of export subsidies. Utilisation of WTO volume caps has varied with the pricing developments for internationally traded products. Usage rates of 50% or more declined for all product categories during the food price crisis (table 4). A number of the allowances became inactive. In the GFC period there was an increase in the number of active allowances for dairy products. For meat products there was no change in the number of active allowances. The other factor that affects use of the allowances is market conditions in the economies that provide the assistance. Declining returns due to production growth or weak demand creates pressure for policy adjustments to encourage higher exports. Subsidies may be re-activated or increased to give exporters a greater capacity for price discounting in global markets. Developments in the EU during the GFC period provides a useful example to illustrate the risk of continued availability of export subsidy allowances. The GFC hit the world economy in September 2009. Just prior to that the food price crisis had caused a major escalation in commodity prices. The effect was mostly felt in the 2007-08 marketing year. Appendix B provides a review of EU market prices during this period. The review of EU prices shows:

• dairy product prices up 22% in 2007-08 then down 23% in the following year; • cereal product prices rose by more than 50% and then fell by 36%; and • meat product prices were up 4% followed by a 2% rise in 2008-09.

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In 2008 the EU had ceased providing export subsidies for dairy products. After the GFC emerged EU domestic market conditions weakened. The policy response was a re-activation of export subsidies for dairy products in 2009. This occurred at a time of weakening prices on world markets. The EU policy action triggered a corresponding response by the US to re-activate dairy export subsidies. When the US decision was announced it was explicitly linked to the EU re-activation of export subsidies. Ad hoc use of the allowances is destabilising for commodity markets. Similarly, policy decisions on subsidy rates can intensify the distortion effects. For example, maintaining or increasing subsidy rates in periods of rising traded product prices enhances the incentive for exports. There’s a greater capacity for price discounting and it can encourage extending the subsidised trade into new markets. The GFC was an unusual event and not the sole cause of increasing subsidised exports. The key point is that changes in markets conditions, both domestically and internationally, is the driver of political pressures to use the export subsidy allowances. Traded prices for some products have weakened in recent times. This may become a concern for export subsidy use if trading conditions deteriorate.

Concessions for developing economies The AoA allowed for unrestricted use of some forms of export subsidies by developing economies for a limited period. Article 9.4 established an exemption from usage commitments for export contingent input subsidies on internal transport costs and other cost reduction measures. The exemption was a transitional concession that expired at the end of the AoA implementation period. Some developing economies have made, and continue to make use of the Article 9.4 transitional exemption:

• India has unconstrained export subsidies supporting trade in sugar; • Korea and India have unrestricted export subsidies for trade in fruit and vegetables; and • Mexico has unconstrained export subsidies supporting trade in wheat.

All forms of export subsidies have trade distortion effects and this includes export contingent input subsidies which can enhance trade competitiveness by reducing costs. There were no expenditure or volume caps on the use of Article 9.4 measures in the AoA. Trade supported by these measures added to the trade distortion effects of the capped export subsidies. As the assistance was typically available for any volume of exports it acted as an incentive to encourage trade growth. The trade distortion effects of using subsidies with the Article 9.4 exemption will rise and fall with changes in export volumes. If export returns are favourable and trade grows there are larger distortion effects. If returns are unfavourable and trade declines the distortion effects are diminished. WTO notifications indicate expenditures on measures using the Article 9.4 exemption were relatively small (see Appendix A). There was no significant growth in expenditures apart from one exception. India’s support for sugar exports increased significantly – US$88 million was spent in 2009 compared with US$9 million in 2005. This assistance was notified as internal transport subsidies. However, there was some growth in the volume of subsidised trade using the transitional exemption and the strong growth in India’s sugar exports over the 2007-2009 period was a notable development. Use of the capped export subsidy allowances has been wound back in recent times due to the strength of traded product prices. This has meant trade supported by measures with the Article 9.4 exemption has become the major contributor to global trade distortion effects in some cases. Canada has continued to provide export subsidies for dairy products. But it’s worth noting that since 2009 India has been the only supplier of subsidised sugar exports with sales of 3.4 million tonnes in 2009. Mexico has also been the sole supplier of subsidised wheat exports with sales of 0.7 million tonnes in 2009.

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5. Selected examples of average export subsidies #

Beef Pig Butter SMP Cheese Sugar Wheat Fruit &meat vegetables

US$/t US$/t US$/t US$/t US$/t US$/t US$/t US$/t

Capped assistance EU 666 341 1 455 443 606 480 23 38

US .. .. 2 290 323 782 .. .. .. Canada .. .. 4 011 2 687 2 492 .. .. .. Norway 5 175 3 077 1 757 .. 1 895 .. .. .. Israel .. .. .. .. .. .. .. 162

Swiss .. .. .. .. .. .. .. 1 023

Uncapped assistance India .. .. .. .. .. 22 .. 171

Mexico .. .. .. .. .. .. 30 .. Korea .. .. .. .. .. .. .. 241

Morocco .. .. .. .. .. .. .. 110

# Subsidy rate derived from WTO notifications as the ratio of total expenditures & trade Source: WTO notifications. volumes for years when export subsidies were utilised. Subsidy rates are an average for all forms of exports in a product category. Expenditures valued at average exchange rates for the relevant 12 month period.

Average annual subsidy rate since 2000

A notable difference with the capped allowances is the lack of assistance for meat and dairy products. Export subsidies using the Article 9.4 exemption have supported trade in sugar, cereals and fruit and vegetables. Another point of difference is the subsidy level which gives an indication of the relative incentive for exports using the capped and uncapped assistance measures. Average subsidy rates derived from WTO notifications provide a measure of the degree of assistance. They are not a perfect measure as different subsidy rates may apply to different types and forms of product – e.g. high and low quality meat products, grain and flour products. Despite the aggregation issues it’s a useful point of comparison between capped and uncapped subsidised trade. The capped assistance is mostly direct subsidies for exports. Average subsidy rates are very high for meat and dairy products (table 5). Uncapped assistance is mostly used for fruit and vegetables. The EU subsidy for these products is much lower than the input assistance by India and Korea. This would suggest a stronger export incentive and trade distorting effect from the uncapped assistance. Export contingent input subsidies are a financial incentive that supports higher exports than would be the case if there was no assistance. They have similar trade distorting effects to direct export subsidies. They generate a greater volume of subsidised trade and the subsidy may allow exporters to discount their offer prices in importing markets. A key point about the uncapped export assistance is the potential for subsidised exports and subsidy expenditures to grow with industry expansion. There is no constraint on the policy mechanism and the trade distortion effect can increase if export returns are favourable. The trade distortion effects will be even stronger if there are domestic assistance programs to stimulate production growth.

14

For example, Morocco provides assistance to encourage production growth in the citrus industry. Export subsidies of US$25 to $55 per tonne are also available for trade diversification to markets other than Russia and the EU (USDA 2014i). This support is increasing the volume of subsidised trade and may be providing opportunities for exporters to lower their offer prices in some markets. Legal entitlement to use the Article 9.4 transitional exemption has lapsed. But WTO notifications indicate that use of export subsidy measures under Article 9.4 has not ceased. A further notable development has been reports of India providing an export subsidy of around US$65 per tonne for up to 1.4 million tonnes of sugar in 2014-15 (USDA 2015d). This support is an extension of a program formally announced in February 2014 and there is no WTO entitlement for this assistance. Growth in subsidised trade using the Article 9.4 exemption will undermine the spirit and intentions of a WTO agreement on export competition. There is no justifiable case to allow the use of any form of export subsidy by either developed or developing economies. The distortion effects that arise affect all other trading economies – developed and developing. Transitional exemptions provide a way to evade a ban on direct export subsidies and they should be included in the WTO policy reform effort.

Markets targeted for subsidised trade Concerns about subsidised exports can sometimes skim over the differentiated distortion effects that can arise. Some import markets receive large amounts of subsidised trade and they experience a more direct impact. Therefore the destination of subsidised trade is an important consideration. To examine this aspect of the assistance import trade flows were estimated for a selection of markets in different regions. Meat and dairy products were used for the assessment. These products have been the most affected by export subsidies in recent times. A time period from 2005 provided sufficient information that included the food price crisis and GFC episodes. In general export subsidy programs do not dictate the destinations for subsidised trade. Subsidy rates may vary for some destinations and for different forms of a product but there are often few restrictions on market eligibility. If there are restrictions the resulting list of eligible markets is usually extensive with a sizeable coverage of world trade. For example, the US Dairy Export Incentive Program (DEIP) was available for 102 markets when it was last activated in 2009. There were 54 eligible markets in Africa and the Middle East, 21 markets in Central and Southern America, 13 Asian markets and 12 East European markets. Some notable exclusions from the eligibility list were Japan, Korea and the EU. A further example is the EU export refund regulations which specify the market eligibility for each product category. In most cases market eligibility is extensive although there are exceptions. Some examples of the exceptions include:

• a group of Asian markets are ineligible for subsidised beef sales – this condition reflects a long standing informal agreement with Australia to limit trade distortions in the region;

• all Central and South American markets, Asian markets and African markets (except Angola) are excluded from subsidised chicken meat sales;

• Egypt is ineligible for beef export subsidies; and • Turkey and South Africa are ineligible for cheese export subsidies.

The destination of subsidised trade is determined by commercial considerations. Decisions are made on subsidy use based on the prospects for sales growth. Some markets are targeted more than others because of a greater responsiveness to changes in trading conditions. The targeting of sales may be facilitated by established trading relationships or markets may be selected for opportunistic sales.

15

Trading decisions will involve considerations about using the subsidy to discount offer prices relative to the prevailing market returns. Individual exporters don’t operate in a uniform manner. This means the effect on prices and trade volume will vary between markets. There are also differences between products – for example some markets may have strong potential for greater subsidised cheese sales but less so for subsidised sales of milk powder. Usage of export subsidy allowances have adjustment consequences for many economies engaged in world trade. There are affects on importing markets and other export suppliers. For smaller exporters the disruption may arise in a localised regional trade. For others the effect is more globalised – they face disruptions in several markets which have a compounding effect on trading performance. Destinations for subsidised trade are important from a regional perspective because it shows the areas where adjustment pressures are higher. This in turn shows where the consequences for other exporters are more acute. It can also reveal the regions where subsidised trade has been opportunistic and caused greater volatility in market conditions. Regional trade for meat and dairy products is summarised in Appendix C. The subsidised trade in each product is often concentrated in particular regions. Some notable observations include:

• Eastern Europe and the Middle East were major destinations for butter and cheese; • the Middle East was also a primary destination for milk powders; • Asia was a major destination for subsidised sales of cheese and SMP; • Africa was a primary destination for WMP, milk and fermented products; • Eastern Europe was a focus for sales of beef, pig meat and chicken meat; and • the Middle East was another major destination for chicken meat.

Before the food price crisis and GFC period subsidised sales of dairy products were a sizeable portion of the total trade in some regions. For example, the butter and cheese trade shares were over 40% in the Eastern Europe and Middle East regions (table 6). In Africa subsidised sales of WMP, milk and fermented products had regional trade shares exceeding 50%. The regional incursion of subsidised trade is less prominent for meat products but still significant. For example, subsidised beef sales had a trade share of around 13% in the East Europe region (table 7). In the Middle East the chicken meat trade share was around 15%. There are numerous instances of a one-off surge in regional subsidised sales. They can be traced back to specific markets within a region. Large sudden changes in trade outcomes are not evident in all the product categories (see Appendix C). But where they have occurred it would suggest opportunistic sales encouraged by adjustments in subsidy rates. Examples where this may have occurred include:

• US butter sales to most regions in 2008; • US cheese sales to the Middle East in 2008; • EU sales of SMP to Asia and the Middle East in 2009; • US SMP sales to Southern America and the Middle East in 2008; • EU sales of beef to Eastern Europe in the 2010-11 period; • EU trade in other pig meat to Asia and Eastern Europe in 2008; and • EU trade in chicken meat to the Middle East in 2011.

A sudden rise in subsidised trade could reflect a change in global trading conditions or commercial developments in particular markets. Trading conditions may have been a contributing factor in some cases. But the availability or re-activation of export subsidies is likely to have been the primary cause of sudden, substantial changes if developments in other years were relatively benign.

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6. Major regional destinations for subsidised trade – Dairy products #

2005 2006 2007 2008 2009 2010 2011GFC

Middle East & North Africa Butter trade Subsidised trade '000 t 131 87 74 27 72 73 0 - regional trade share % 60 41 35 12 30 25 0Russia & East Europe Subsidised trade '000 t 53 64 47 35 40 48 38 - regional trade share % 43 42 42 25 32 29 25

Middle East & North Africa Cheese trade Subsidised trade '000 t 142 130 123 23 149 28 3 - regional trade share % 46 40 35 7 33 7 1Russia & East Europe Subsidised trade '000 t 131 165 167 1 167 2 1 - regional trade share % 46 65 59 0 58 1 0

Asia SMP trade Subsidised trade '000 t 83 43 6 153 164 191 7 - regional trade share % 15 8 1 30 27 26 1Middle East & North Africa Subsidised trade '000 t 102 56 5 62 176 28 2 - regional trade share % 40 24 2 21 53 9 1

Middle East & North Africa WMP trade Subsidised trade '000 t 203 196 1 0 242 0 0 - regional trade share % 40 37 0 0 39 0 0Central & Southern Africa Subsidised trade '000 t 133 146 0 1 141 0 1 - regional trade share % 57 50 0 0 50 0 1

Asia Whey products trade Subsidised trade '000 t 193 221 0 0 265 0 0 - regional trade share % 39 40 0 0 42 0 0

Central & Southern Africa Milk trade Subsidised trade '000 t 52 49 57 0 66 0 0 - regional trade share % 57 61 44 0 44 0 0

Central & Southern Africa Fermented products trade Subsidised trade '000 t 14 13 17 15 21 0 0 - regional trade share % 56 59 47 33 62 0 0

# Regional imports from export suppliers that provided subsidies, year ended December 31. Source: FAO 2014. See Appendix C for a complete summary of regional trade supported by export subsidies.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

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7. Major regional destinations for subsidised trade – Meat products #

2005 2006 2007 2008 2009 2010 2011GFC

Russia & East Europe Beef trade Subsidised trade '000 t 101 96 53 59 22 137 199 - regional trade share % 13 13 7 7 3 19 26

Central & Southern Africa Ham trade Subsidised trade '000 t 3 4 5 4 5 4 5 - regional trade share % 59 71 79 89 86 87 85

Asia Other pig meat trade Subsidised trade '000 t 0 0 0 756 0 1 1 - regional trade share % 0 0 0 32 0 0 0Russia & East Europe Subsidised trade '000 t 2 4 0 491 1 2 2 - regional trade share % 0 1 0 45 0 0 0

Middle East & North Africa Chicken meat trade Subsidised trade '000 t 177 129 138 166 176 195 240 - regional trade share % 16 13 11 11 9 10 11Russia & East Europe Subsidised trade '000 t 229 241 237 229 214 229 133 - regional trade share % 14 15 14 13 15 20 15

# Regional imports from export suppliers that provided subsidies, year ended December 31. Source: FAO 2014. See Appendix C for a complete summary of regional trade supported by export subsidies.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

Sudden shifts in subsidised sales highlights an important aspect on the distortion effects – volatility. Fluctuations in subsidised trade volumes are destabilising for market conditions. They can exacerbate the natural variability of price signals caused by changes in supply and demand. Market disruptions from subsidised exports to the less advanced developing economies is an important issue. Most of the world’s least developed economies (LDEs) are in Central and Southern Africa. The low incomes in this region would suggest a limited responsiveness to subsidised trade in products such as beef and cheese. But this is unlikely to be the case for milk products. The Central and Southern Africa regions were major recipients of the subsidised sales in WMP, milk and fermented milk products. These large volumes of subsidised sales would have been destabilising for product returns and domestic industry development in some of the LDE markets in these regions. These trade outcomes are an illustration of how supply adjustment pressures in the economies using export subsidies get transferred to developing economies (Johnson 1973). There’s a large body of empirical evidence that shows there are significant cross substitution effects between similar food products. Lower import prices have direct substitution effects on the domestic output of an equivalent product in the importing market. They also affect returns for closely related substitute products:

• meat products are close substitutes – for example, subsidised sales of chicken meat will affect returns for beef and other forms of meat protein;

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• milk products are close substitutes – for example, subsidised sales of WMP and UHT milk will affect returns for fresh milk.

Commercial targeting of the less advanced developing economies is an adverse consequence of export subsidy programs. Opportunistic sales and price discounting lowers market returns and causes greater volatility for the domestic suppliers of direct or close substitute products. They are detrimental for producer incomes and poverty alleviation. They can also discourage investment which is detrimental for longer term industry development (Todaro 1977). It’s sometimes suggested that subsidised sales have food security benefits for importing markets in the less advanced developing economies. Increased product availability and lower market prices are said to be beneficial for those living in poverty. This proposition is not plausible. It’s a rather superficial perspective that ignores the basic principles of economic growth and development. A large portion of the people living in poverty generally reside in rural areas and many rely on small scale farming plots to earn an income. Sustainable gains in food security are achieved by encouraging growth in the rural sector. Low prices and price instability stifles the incentive for investment. They will also discourage producers from increasing farm output and generating more income. Subsidised exports are highly detrimental to sustainable gains in food security and poverty alleviation.

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3. Effect of export subsidies   Explanations of the distorting effects of subsidised trade often take a high level perspective. In short the impacts are generally described as:

• lower prices in the importing markets through a combination of discounting and increased product availability;

• lower market returns for competing export suppliers and producers in importing markets; • trade displacement if other exporters choose to reduce or withdraw their involvement in the

market; and • a lower average world price for traded products due to increased export supplies.

This description reflects a homogenous product perspective. But it also reflects the differentiated product perspective which is more typical of global trade in agricultural products. This is because the product substitution relationships that exist cause a transfer of the pricing impacts. Appendix D provides a simple conceptual explanation. The extent of the trade distorting effects will depend on the strength of the substitution relationships. For many traded agricultural commodities there are strong substitution effects between imports from different sources. Typically imports and domestic output are also strong substitutes and there can be significant cross-product substitution effects. Substitution relationships are an important aspect of the impact of export subsidies. In addition to the trade displacement there’s production displacement effects for domestic industries. Over time output in the importing market declines if lower prices are sustained. This can arise from the direct or cross- product substitution effects.

Rate of assistance from export subsidies The key factor in the distortion effect of export subsidy programs is the generosity of the assistance. This determines the strength of the incentive for subsidised trade and its affected by:

• the size of the subsidy; • product accumulation costs for the exporter; and • the prevailing traded product price on the world market.

If a subsidy is generous relative to the gap between accumulation costs and the world price there’s a greater incentive for exports. There are more opportunities for discounting offer prices in particular markets and achieving higher sales. Import market shares may rise depending on the response of other export suppliers and the size of any market expansion effect. Market shares are not a good way to assess the distortions from export subsidy programs. The rate of assistance is a better measure because it shows how much support is obtained by an exporter. The EU and the US have been the biggest users of export subsidies. At times they have provided substantial transactional assistance and it supported large volumes of trade. The US assistance focused on cereal and dairy products while the EU assistance had an extensive product coverage. By way of example the EU subsidised trade in meat and dairy products was examined for the period since 2005. The EU was chosen because the required information was more easily accessible. Meat and dairy products were selected because they have been actively supported by export subsidies in recent times – there has been minimal use of cereal export subsidies for some time.

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Under the EU program exporters essentially receive a specified subsidy on top of the price received for the traded product. The size of the subsidy is known in advance and exporters can adjust their offer prices accordingly to the trading conditions in each importing market. This means offer prices can vary between exporters located in different parts of the EU and in the importing markets. Announcements on EU exports subsidies for selected product categories were collated for the period since 2005 (OJEU 2013). An average annual subsidy was calculated. Estimated rates of assistance were derived using commonly accepted world price indicators. This provides a reasonable indicator of the rate of assistance and is preferable to using an average subsidy derived from WTO notifications. The estimates illustrate how the amount and rate of assistance can vary substantially. Large shifts in the rate of assistance would occur in support for other products and in the export subsidy programs of other suppliers. External trading conditions are a major factor in the variability of assistance. The analysis shows sizeable export subsidies for most products in the period before the food price crisis and GFC (table 8). They were also high rates of assistance for some products – see Appendix E for more detail on meat, dairy and cereal product estimates. Some notable examples include:

• butter assistance was around 66% in the 2005 to 2006 period; • assistance for WMP was close to 30% and SMP assistance was around 7%; • assistance for cheddar cheese was 25%; • meat product assistance was 17% for beef, 40% for ham and 30% for chicken meat; and • sugar assistance averaged around 118%.

Export subsidies for dairy products were significantly lower in the early part of the food prices crisis. Rates of assistance was much lower for cheese and WMP but remained high for butter. Sizeable dairy product subsidies were re-introduced in the GFC period with significant rates of assistance. EU export subsidies for meat products were adjusted in the food price crisis and GFC periods but they remained at relatively high levels. Rates of assistance were largely unchanged. In the post-GFC period the rate of assistance for beef gradually declined as subsidies were reduced. Assistance for ham and chicken meat remained at high levels until the subsidies were eventually suspended. It’s important to recognise that subsidy reductions don’t automatically mean a lower rate of assistance. Equally a higher subsidy doesn’t necessarily mean higher rates of assistance. Much will depend on pricing conditions on world markets. Subsidises may be adjusted if changes in the size of the price gap are affecting the incentive for exports. Weak traded product prices have a dampening effect on sales by un-supported export suppliers. Some product may be diverted onto their domestic markets. There may be a contraction in supply if weak prices are sustained for a period of time. This is not the case for exporters with trade support. The subsidy is simply adjusted to maintain or even strengthen the incentive for exports. Adjustments to subsidy rates is a key factor in the distortion effect of export subsidies. The assessment shows the EU export support program provided large subsidies and high rates of assistance at certain times. High rates of assistance may suggest an intention to enhance the export incentive to encourage more sales into global markets. Comparing world price movements with changes in the rate of assistance is a useful way to highlight the distorting effect of policy settings. There are some instances where comparisons of the rate of assistance with world prices suggest an intention to significantly enhance the incentive for exports (see Appendix E). For example, despite a strong surge in world butter prices in 2007 export subsidies were maintained for a period of time. The rate of assistance was still around 50% during this period. World prices were relatively firm for the next few years but a resumption of export subsidies in 2009 provided assistance of 21%.

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8. Assistance from EU export subsidies #

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GFC

Export subsidy (US$/t) ** Butter 1 378 1 229 993 0 675 0 0 0 0 0 Cheddar cheese 750 659 159 0 262 0 0 0 0 0 SMP 232 80 0 0 259 0 0 0 0 0 WMP 724 634 220 0 351 0 0 0 0 0 Whey powder 232 80 0 0 259 0 0 0 0 0

Manufacturing beef 509 338 310 332 315 259 157 98 0 0 High valued beef cuts 1 904 1 269 1 161 1 245 1 180 970 590 366 0 0 Smoked ham cuts 722 681 743 797 755 720 754 646 0 0 Whole chicken 426 512 616 714 549 478 452 390 145 0

Wheat flour 8 6 0 0 0 0 0 0 0 0 Corn meal & groats 70 53 17 0 0 0 0 0 0 0 Raw sugar 424 300 366 350 0 0 0 0 0 0 Refined sugar 460 324 398 377 0 0 0 0 0 0

Rate of assistance (%) Butter 68 64 49 .. 21 .. .. .. .. .. Cheddar cheese 25 25 5 .. 9 .. .. .. .. .. SMP 10 4 .. .. 11 .. .. .. .. .. WMP 31 27 7 .. 14 .. .. .. .. .. Whey powder 32 10 .. .. 42 .. .. .. .. ..

Manufacturing beef 20 13 12 11 12 8 4 2 .. .. High valued beef cuts 19 13 11 11 12 9 5 3 .. .. Smoked ham cuts 40 40 38 39 42 39 39 29 .. .. Whole chicken 26 34 36 38 29 25 23 19 6 ..

Wheat flour 9 7 .. .. .. .. .. .. .. .. Corn meal & groats 20 15 4 .. .. .. .. .. .. .. Raw sugar 195 92 165 121 .. .. .. .. .. .. Refined sugar 158 77 129 105 .. .. .. .. .. ..

# Estimate of assistance for EU exporters, year ended December 31. Sources: OJEU 2007a b & e, 2008; Estimates based on export subsidy codes for products commonly traded on OJEU 2013a, 2012a & b, 2011. world markets. EU exporter returns are represented by world price indicators. See Appendix E for code selections & descriptions of world price indicators.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).

Food crisis *

In meat products there was a significant firming in world beef prices in the 2007-2008 period. Despite the firmer prices export subsidies were maintained and the rate of assistance was largely unchanged from the support provided in 2006. Chicken meat is another example in the same period. The world indicator price for whole chickens strengthened and subsidy levels were higher. Assistance rates were a little higher despite the firmer traded product prices.

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Whey powder provides another dairy product example. The world indicator price increased marginally in 2009 and the resumption of export subsidies provided a rate of assistance of over 40%. In the previous year there had been no export assistance. The pattern is not evident across all products and all time periods. Factors such as domestic trading conditions play a role in setting subsidy rates. But the examples suggest an intention to enhance the incentive for export sales rather than just maintain or restore a competitive position in world trade. They illustrate how policy settings in the export subsidy programs can be used to vary the transfer of internal adjustment pressures onto world markets.

Pricing effects of export subsidies Concerns about subsidised exports can sometimes skim over the differentiated distortion effects that arise. Some import markets will experience more acute pricing impacts that flow on to returns for domestic output if they are targeted for large subsidised sales. Changes in selling prices for subsidised product are a way to gauge differences in the pricing distortion effects between importing markets. Domestic price data for the import markets accepting subsidised trade were not available. To examine this issue average export unit values for EU trade were used as a proxy. Export unit values were calculated for each of the sample products in all the import markets eligible for export refunds. The annual unit values were an average for the EU-27 over the period since 2005. Export unit values are a good reflection of the pricing decisions of EU exporters. Comparisons with a suitable world price indictor give a reasonable indication of how the subsidies were used in pricing decisions. The comparisons show the effect on market returns for competing export suppliers. It’s also an indicator of the likely pricing effects on domestic output in the importing markets. It’s well known that exporters earn different returns for comparable products in different markets. This is generally due to differences in income levels, trading conditions, the intensity of competition and importer requirements. There is no one ‘single’ price so there’s no reason to expect an alignment of the export unit values with the indicator price in level terms. What matters is comparing the rate of change in EU export unit values and a world price indictor. Prices of comparable products should broadly move in line with similar rates of change. Significant divergences in periods when trade was supported would suggest a distortion effect on market returns from export subsidies. Other factors may occasionally be involved in some cases but a pattern of divergence across markets would suggest an export subsidy effect. Annual percentage changes in the prices are summarised in Appendix F. The summary has regional averages that align with estimates of the regional trade in subsidised product (see Appendix C). Some market specific examples were included in the Appendix for illustrative purposes. There are several instances where changes in EU export unit values diverge from changes in the world price. Pricing for WMP provides a good example (table 9). The world price of WMP rose by almost 100% in 2007 but EU export prices increased by less than 50% in most regional trade. In 2009 the world price fell by 28% and yet the export prices declined by almost 40%. EU prices recovered to more align with the world price when the subsidies were suspended. Other dairy product examples include:

• the world price of SMP was down 23% in 2009 but EU export prices fell by about 40%; • in 2009 the world price of whey powder was up 4% but EU export prices fell by 20-30%; • the world butter price was up 110% in 2007 but EU export prices were only 20-40% higher; • in 2009 the world price of butter fell 11% but EU export prices were down 30%; and • the world cheese price was up 52% in 2007 and EU export prices were only 20-25% higher.

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9. Changes in EU export prices & world indicator prices – Dairy products #

2005 2006 2007 2008 2009 2010 2011GFC

% change

WMPWorld indicator price 7 2 98 -15 -28 27 19EU export subsidy P P P O P O OEU regional export prices Asia 7 3 52 22 -39 43 21 Middle East & North Africa 5 0 50 13 -38 35 16 Central & Southern Africa 5 2 48 20 -40 32 24

SMPWorld indicator price 12 9 75 -28 -23 18 15EU export subsidy P P O O P O OEU regional export prices Asia 10 9 62 -3 -40 30 17 Middle East & North Africa 13 12 72 -17 -36 36 14 Central & Southern Africa 10 15 62 -10 -39 57 -4

Whey powderWorld indicator price 30 33 55 -53 4 34 33EU export subsidy P P O O P O OEU regional export prices Asia 20 16 46 -6 -28 27 18 Russia & East Europe 16 20 61 -32 -18 36 30

ButterWorld indicator price 6 -5 110 -4 -11 35 19EU export subsidy P P P O P O OEU regional export prices Asia 10 3 35 43 -28 35 25 Middle East & North Africa 8 0 22 61 -32 56 28 Central & Southern Africa 10 9 28 38 -29 35 24 Russia & East Europe 15 -5 40 40 -29 42 22

Natural cheeseWorld indicator price 12 -12 52 13 -36 35 8EU export subsidy P P P O P O OEU regional export prices Asia 6 2 17 29 -16 5 4 Middle East & North Africa 15 7 25 28 -23 13 9 Russia & East Europe 4 5 27 22 -21 12 13

# Comparison of annual change in world indicator prices with change in Sources: USDA 2015a; average FOB export unit values for EU 27 trade, year ended December 31. Regional price average FAO 2014. excludes markets not eligible for EU export refunds - see table 30 for market composition of regional trade. See Appendix F for a complete regional summary of EU export prices.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

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10. Changes in EU export prices & world indicator prices – Meat products #

2005 2006 2007 2008 2009 2010 2011GFC

% change

BeefWorld indicator price 3 -2 1 19 -15 28 21EU export subsidy P P P P P P PEU regional export prices Central & Southern Africa 26 4 21 -23 8 9 -7 Russia & East Europe 30 14 14 27 5 3 14

Chicken meatWorld indicator price -2 -6 13 8 1 0 2EU export subsidy P P P P P P PEU regional export prices Middle East & North Africa 24 -9 28 30 -19 12 21 Russia & East Europe -10 -17 60 24 -10 15 -17

# Comparison of annual change in world indicator prices with change in Sources: FAO 2014 & 2015; average FOB export unit values for EU 27 trade, year ended December 31. Regional price average WB 2014. exclude markets not eligible for EU export refunds - see table 30 for market composition of regional trade. See Appendix F for a complete regional summary of EU export prices.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

Examples of price divergence are also evident in meat products (table 10). The world beef price strengthened in 2010 and 2011 by more than 20% in both years. The rise in EU export prices to the East Europe and African regions was considerably smaller. The world price of chicken meat was flat in 2009 but export prices to the Middle East and East Europe regions declined by 10-20%. Some of the divergence in price movements are either insignificant or benign. They don’t suggest an intention to boost the incentive for exports. But these examples suggest significant price discounting due to the availability of generous export subsidies. Its consistent with the claims of competing export suppliers that prices in particular markets are often substantially disrupted by subsidised trade. There are occasions when the trading conditions in an import market can influence export pricing. But the pricing behaviour revealed in these examples was evident in numerous markets and most regions. The pricing analysis provides an illustration of the price distorting effects of export subsidies:

• EU commercial traders in meat and dairy products have used export subsidies to significantly undercut prevailing world prices at certain times.

The capacity for significant price discounting in specific markets depends on the size of the subsidy relative to the gap between EU domestic prices and traded product prices. The prices of products traded on world markets fluctuate significantly. There are periods of frequent subsidy adjustments by the EU and other times when subsidy rates are left unchanged for extended periods. This means the distortion effect on market returns from significant price discounting will vary. If a subsidy rate is generous relative to global trading conditions there’s a greater capacity for discounting. The pricing analysis suggests there have been periods where this has been the case.

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11. Economies affected by EU subsidised exports #

Asia Middle East & Central & East Central &North Africa Southern Africa Europe * South America

no. of countriesDairy product trade Export suppliers 19 22 17 11 15 Importing markets 13 19 19 7 8

Meat product trade Export suppliers 10 13 8 14 5 Importing markets 3 12 4 7 4

# Number of trading economies affected by EU subsidised exports. Source: FAO 2014. Assessment based on annual trade flows over the 2005-11 period. See Appendix G for a complete summary of economies affected by EU exports in specific products.* Includes Russia.

Economies affected by subsidised exports Another aspect of subsidised trade that tends to receive limited attention is how it can infiltrate the trading activities of many economies. In general the subsidy programs don’t dictate the destinations for subsidised trade. For most products it’s often the case that a sizeable number of economies are directly affected as either exporters or importers. Trade disruptions are not limited a few major export suppliers or large importing markets. Smaller trading economies also experience adjustment pressures. Developing economies looking to build an export capability are vulnerable to disruptions from subsidised trade. Incursions may be disrupting for localised inter-regional trade or a major trade flow with a non-regional market. The consequences may be more harmful than those faced by a developed economy with a wider range of trading options. EU subsidised trade in meat and dairy products gives an illustration of how the direct impacts can be extensive. Data compiled to show the destination of subsidised trade identified the import markets affected by EU sales. The trade data also identified the competing export suppliers. Average annual trade flows for the 2005-11 period were used to sort the affected economies into two groups – large traders and other significant traders (see Appendix G). All markets receiving the subsidised sales will be affected to some extent. But it’s useful to identify the economies that experience significant direct consequences. A large number of economies were affected by EU subsidised sales over the sample period (table 11):

• 41 economies were affected by subsidised sales of dairy products in the Middle East and 25 economies were affected by subsidised sales of meat products;

• subsidised sales of dairy products affected 36 economies in Central and Southern Africa; and • 32 Asian economies were affected by subsidised sales of dairy products.

The assessment highlights the multilateral nature of the issue. It’s not unique that a large number of economies are affected by the EU subsided trade. There would be similar consequences from the use of dairy product export subsidies by the US and Canada. It’s a strong reason for pursuing a collective agreement on reform in the WTO Doha Round negotiations.

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4. Use of export financing support Export finance support is the other area of concern in the provision of export assistance. The use of credit concessions based on government guarantees is an alternative way for exporters to artificially enhance their competitiveness. There are also concerns about the potential for export finance support to circumvent the loss of export subsidy allowances. There are no specific WTO disciplines on the use of financing support. Several export suppliers make use of this policy option and some have been substantial users of export credit guarantees. Usage of the measures are potentially unlimited – unilateral budgetary caps are only the only constraint.

Availability of export finance support Standard business practises for firms engaged in international trade is for a selling contract to set an agreed price with settlement on delivery to the foreign buyer. To gain a competitive advantage some exporters may enter into arrangements where the payment is deferred for a limited period. This will generally involve credit terms covering repayment periods and interest rates. Export credit may be provided to the selling firm through arrangements with a financial institution in the exporting country. In other cases it’s extended through a bank acting for the exporter to a financial institution in the importing market acting for the buyer. There are the normal commercial risks of re-payment delays or defaults for the institution extending the credit. Its managed by insurance cover or re-payment guarantees provided by other financial institutions. Premiums are charged for the insurance or guarantees. The cost varies with the credit risk of the business entities in the importing market and the terms of the loan facility. Export finance facilities provided by commercial institutions in exporting countries are a common feature of world trade. They offer loan facilities and insurance services. Many economies also have government backed agencies that provide these services. Some facilities offered by some agencies are a source of concern because they provide support that has trade distorting effects. Assistance from the financing facilities of these agencies come in different forms. The government may absorb losses on financing transactions with cash injections or provide support for charging risk insurance premiums at below commercial rates. Credit finance may be provided at favourable interest rates and extended re-payment terms. Re-payment guarantees may be used to shift the commercial risk to government and establish lower interest rates for credit finance. The government may also support extended credit tenors (terms) to enhance the financial benefit of the guarantees. Concerns about export finance support primarily focus on credit re-payment guarantees for product purchases. Interest rates on credit backed by government guarantees will be lower than rates charged by commercial institutions for a similar credit facility. This can be advantageous for buyers when compared with the terms available from banks in their home market or in the exporting market. Export finance support has consequences like those of export subsidies. The support reduces trade transaction costs which is an export contingent input subsidy. Credit guarantees are used to establish an implicit subsidy that reduce the trade financing cost for buyers. This creates an incentive to favour exporters offering access to the guarantees. The main trade distortion effect is a displacement of competing exports which may have a spill-over effect on product returns for other export suppliers. Information on export finance support is limited. An indication of the extent of trade distortion effects can be ascertained from the total value of agricultural trade using finance support.

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12. Use of export finance support in agricultural trade by major exporters #

2005 2006 2007 2008 2009 2010 2011 2012 2013GFC

Australia Total exports US$m 20 091 21 175 21 036 24 048 21 640 26 625 32 656 34 219 33 498

Finance support US$m na na na na 14 87 267 200 46

% .. .. .. .. 0.1 0.3 0.8 0.6 0.1

Brazil Total exports US$m 30 803 34 682 42 816 55 363 52 953 62 100 79 630 79 465 84 476

Finance support US$m 55 3 26 191 112 270 347 261 15

% 0.2 0.0 0.1 0.3 0.2 0.4 0.4 0.3 0.0

Canada Total exports US$m 21 789 24 745 29 540 36 965 31 109 34 703 41 042 43 580 44 343

Finance support US$m 542 603 662 1 187 1 037 1 324 2 051 2 263 2 545% 2.5 2.4 2.2 3.2 3.3 3.8 5.0 5.2 5.7

New Zealand Total exports US$m 10 830 10 991 13 482 14 168 13 090 16 609 15 215 15 208 16 674

Finance support US$m na na na na 81 151 119 138 63

% .. .. .. .. 0.6 0.9 0.8 0.9 0.4

USA * Total exports US$m 65 348 71 379 92 679 118 281 101 043 118 805 139 891 147 062 151 021

Finance support US$m 2 185 1 320 1 457 3 090 5 398 3 087 4 134 4 114 3 059

% 3.3 1.8 1.6 2.6 5.3 2.6 3.0 2.8 2.0

# Comparison of total value of export finance support with total exports of Sources: USDA 2014f; FAO 2014; agricultural products - fob valuations. Data on EU export finance support was unavailable. WTO 2014e & 2103b. Total exports for 2012 & 2013 is a spliced estimate based on WTO trade data.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** From 2009 port value of products registered for GSM-102 export credit guarantees, year ending 30 Sept.

Food crisis *

Data on the use of export finance support by the major agricultural exporters would seem to suggest the trade benefiting from the assistance is relatively small in most cases (table 12). Trade supported by the various financing facilities is a very small portion of the total trade by Australia, Brazil and New Zealand. Canada and the US are more significant users with finance support applying to between 2% and 6% of total trade. Data on the use of export finance support by the EU was not available. The US is the largest user of export finance support with the value of supported trade averaging US$3.1 billion over the 2005 to 2013 period. Canada’s trade using finance support averaged around US$1.4 billion. In the food price crisis and GFC periods the use of export finance support increased substantially. Usage has largely remained at the relatively higher levels ever since:

• US trade with finance support increased by 112% in 2008 and 75% in 2009; • Canada’s trade using finance support rose by almost 80% in 2008; • Brazil’s use of finance support increased but the supported trade was relatively small.

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Growth in trade using export finance support since the food price crisis may in part reflect the strength of commodity prices that has largely persisted since that time. But higher prices do not fully explain the growth. There has been a sustained, significant rise in the proportion of trade with export finance support. This would suggest an increasing use of financing support. Assistance for the transactions included in the aggregate measures of export finance support will vary. There are different types of finance facilities and different conditions attached to the facilities. Some economies also have alternative ways of providing finance support. For example, there may be export marketing organisations with separate finance facilities from those provided by a central government backed agency. Australia’s export finance agency (Efic) offers six different programs. Brazil has a program offering export finance while New Zealand has an agency (NZECO) offering credit insurance and guarantees but no direct financing support. Canada has a single agency (the EDC) providing credit risk insurance and a grain marketing board offering direct financing support. The US Commodity Credit Corporation (CCC) issues credit guarantees through the GSM-102 program which is administered by the Foreign Agricultural Service (FAS) of the United States Department of Agriculture (USDA). Fees are charged for using the different facilities and agencies offering the services are reported to be self-financing. To varying degrees each of the facilities will be providing some level of assistance if interest rates on credit finance or insurance premiums are lower than commercial rates. Explicit or implicit government backing of the agencies would suggest this is likely to be the case. A key variable is the term or tenor for financing facilities or deferred payment policies. The longer the tenor the greater the level of assistance. There’s a bigger financial advantage for buyers and a stronger incentive to favour exporters that offer access to the financing facilities. Competition between trading economies in providing extended financing terms or payment deferrals can amplify the trade distortion effects on other export suppliers. Export financing by the major export suppliers generally have maximum tenors of 6 months but there are exceptions (table 13). In some cases the terms in the contractual arrangements are shorter than the allowable maximum. Comparisons of the financing tenors shows:

• a maximum tenor of 2 years under the GSM-102 program is more generous than terms offered by other exporters – current policy has a maximum tenor of 18 months (USDA 2014g);

• the direct financing facility for grain marketing by the Canadian Wheat Board can potentially offer a maximum tenor of up to 1 year;

• the maximum tenor under Australia’s Export Finance Guarantee program can be greater than 6 months.

Another key variable is the availability of export finance support. Agencies or specific programs may cap the total value of trade that can be covered by direct credit finance or credit guarantees. There may be eligibility restrictions on products or markets. If the availability of finance support is unlimited or the cap is generous, the level of usage provides an indication of its value to buyers. There is no information to suggest access to export finance support is restricted in economies such as Australia, Brazil and New Zealand. Supported trade is a very small proportion of total trade in these economies. It may be that most trade occurs with settlement on delivery. But the limited usage would suggest the finance facilities have limited value relative to standard commercial arrangements. The US export credit guarantee program is an exception. There is an annual cap of US$5.5 billion on the GSM-102 program (CRS 2014). Program conditions include an extensive list of eligible products with very few exclusions. The actual amount of credit guarantees made available each year varies and is announced as annual policy setting by the FAS at the start of each fiscal year.

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13. Export finance tenors used by the major exporters #

Program Type of finance Maximum Average support tenor for re-payment

re-payment periods

Australia Export Capital Guarantee Risk cover 180 days 90 days

Bond Risk cover 180 days 45 days

Risk Participation Agreements Risk cover 180 days 48 days

Export Finance Guarantee Risk cover > 180 days >180 days

Documentary Credit Guarantee Risk cover 180 days 60 days

Foreign Exchange Guarantee Credit support 180 days 90 days

Brazil Proex Financiamento Direct financing 180 days 172 days

Canada Short Term Insurance * Risk cover 180 days na

Agri-Food Credit Facility ** Direct financing 90 to 360 days na

New Zealand Short Term Loan Guarantee Risk cover 42 days na

USA GSM-102 Risk cover 730 days 690 days

# Maximum & average re-payment terms for export finance support programs. Source: WTO 2014e. For illustrative purposes program conditions specified in months were converted to 30 day periods.* General export financing facility provided by Export Development Canada (EDC).** Grain export financing facility provided by the Canadian Wheat Board.

= tenor > 6 months Periodic announcements establish the total value of credit guarantees available for regional markets (USDA 2014g). They can be used for any of the eligible markets in the region. In most cases regional allocations can be used for any of the eligible products. Guarantees are available to qualified exporters on a first-come-first-serve basis but they must deal with financial institutions that meet CCC eligibility criteria. Recent examples of program usage were:

• US$3.5 billion was allocated in FY 2102 – usage was US$4.1 billion; • US$3.4 billion was allocated in FY 2103 – usage was US$3.1 billion; and • US$2.6 billion was allocated in FY 2104 – usage was US$2.1 billion.

The CCC is a government agency with authority to borrow up to US$30 billion from the US Treasury at an average interest rate of all government obligations (USDA 1999). The finance capacity supports the guarantee of credit re-payment by foreign banks to US banks that have extended credit for product purchases. This means US banks are able to offer competitive credit terms to foreign banks based on the London Inter Bank Offered Rate (LIBOR) interest rate (USDA 2014g):

• the GSM-102 program provides assistance through credit terms that are lower than commercial rates based on the CCC re-payment guarantee.

The guarantees generally cover 98% of the principal and some interest. CCC management reports indicate the guarantees are heavily utilised and in general there are no claims or loan defaults (USDA 2014b). High levels of program usage indicate a strong demand for the financing support. This would suggest the guarantees have a significant value in comparison to commercial credit arrangements.

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14. Product composition of export finance support by major exporters #

2005 2006 2007 2008 2009 2010 2011 2012 2013GFCUS$m

Australia Livestock products ** na na na na 0 27 19 4 na Cereal products na na na na 0 14 18 16 na Oilseed products *** na na na na 0 0 0 0 na Other products na na na na 14 46 229 181 46

Brazil Livestock products ** 18 0.1 8 33 27 28 26 9 0 Cereal products 0 0 0.1 0.1 0.1 21 66 59 0 Oilseed products *** 26 0 14 77 38 35 54 45 8 Other products 11 3 4 81 47 185 200 148 6

Canada Livestock products ** 129 142 124 182 244 473 876 1 042 910 Cereal products 275 350 372 542 393 398 531 410 393 Oilseed products *** 49 36 94 354 293 337 456 626 1 010 Other products 90 75 72 109 106 116 188 185 233

USA **** Livestock products ** na na na na 705 470 256 325 181 Cereal products na na na na 2 610 1 506 2 550 1 954 1 435 Oilseed products *** na na na na 1 917 934 928 1 599 1 141 Other products na na na na 166 177 399 235 302

# Product disaggregation of total value of export finance support. Sources: USDA 2014f; FAO 2014; Product data for New Zealand export finance support was unavailable. WTO 2014e & 2103b.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Livestock products includes meat, offal, dairy products, livestock & livestock products.*** Oilseed products includes oilseeds, oilseed cake and meal & vegetable oil.**** Port value of products registered for GSM-102 export credit guarantees, year ending 30 Sept.

Food crisis *

The value of trade using export finance support gives an indication of product composition and market destinations. Both elements are important for assessing the trade distortion effects. The supported trade is primarily focused on cereal and oilseed products (table 14). For the 2009-2013 period about half the US trade was in cereals and a third was in oilseed products. Canada’s trade was more evenly spread – oilseed products were 29% of the trade and cereals were 25%. This indicates the distortion effects will be strongest in the global markets for cereal and oilseed products.

Markets targeted for exports with finance support A trading advantage from lower transaction costs creates an incentive for buyers to favour commercial exporters that offer access to the finance support. This has a trade displacement effect on other export suppliers. Therefore the destination of supported trade is an important consideration. Data on the markets targeted for finance supported sales by the major exporters is limited. In general there are only a few indications of the destinations for supported trade. The lack of data does not allow the development of a detailed market based perspective of the trade distortion effects.

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15. Change in US export credit guarantees for cereal & oilseed products #

2009 2010 2011 2012 2013 2014GFC

Wheat US$m 708 535 1 036 757 805 329

% change .. -24 94 -27 6 -59

Corn US$m 1 770 724 1 234 861 239 560

% change .. -59 70 -30 -72 134

Soybeans US$m 1 377 591 534 1 084 539 412

% change .. -57 -10 103 -50 -24

Soybean meal US$m 476 295 338 475 554 295

% change .. -38 15 40 17 -47

# Port value of products registered for GSM-102 export credit guarantees, year ending 30 Sept. Source: USDA 2014f. The US and Canada have been the largest users of export finance support with a strong focus on cereal and oilseed products. By way of example US usage of export credit guarantees for these products were reviewed for the period since 2009. The US was chosen because the GSM-102 program provides a readily available source of information – equivalent data for Canada was unavailable. Use of GSM-102 credit guarantees is primarily directed by program conditions. The program targets specific markets with annual allocation caps. Commercial decisions on use of the guarantees also play a role. Exporters may not fully utilise an allocation if market conditions are weak. It’s also possible for re-allocations or adjustments in a program year if the demand for guarantees warrants a change. When access to export credits is generally available the assistance will have globally dispersed trade implications similar to those of export subsidies. If a program has market allocation caps the support is likely to have more discrete impacts. Large market allocations used for a few select products will have a more concentrated trade displacement effect. A further consequence is that fluctuations in the annual allocations can have a destabilising effect on trade with the eligible markets:

• trade displacement effects for other export suppliers will be more acute and destabilising in markets targeted with large allocation caps for export credit guarantees.

Product usage in the GSM-102 program has fluctuated considerably (table 15). For example, the use of guarantees for wheat exports almost doubled in 2011 and those for corn increased by 70%. Another example is the doubling of soybean guarantees in 2012. World prices strengthened in these years but the change in the value of guarantees was hugely disproportionate to changes in product values. This suggests credit allocations may have been set to enhance export outcomes in the targeted markets. There have also been substantial fluctuations in market allocations which flows through to product trade with some destinations – see Appendix H. Some notable examples include:

• increased use of export credit guarantees for wheat sales to Korea in 2012, South American markets in 2011 and the Middle East/Africa region in 2011;

• increased use of credit guarantees for corn exports to Central American markets in 2011; • increased use of credit guarantees for soybean exports to East Europe markets, other Asian

markets and the Middle East/Africa region in 2012; and • increased use of credit guarantees for sales of soybean meal to South America markets in

2011, other Asian markets in 2010 and the Middle East/Africa region in 2010.

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16. Major markets for US exports with credit guarantees – Cereal products #

2009 2010 2011 2012 2013 2014GFC

Mexico Wheat trade Exports with credit guarantees '000 t 261 158 269 292 545 246

% share 12 7 9 8 17 9Central America * Exports with credit guarantees '000 t 564 135 254 171 166 61

% share 23 6 11 8 7 3South America Exports with credit guarantees '000 t 640 531 1 105 231 725 121

% share 40 23 36 13 25 5Korea Exports with credit guarantees '000 t 886 846 825 1 234 699 640

% share 79 58 65 51 63 49Other Asia ** Exports with credit guarantees '000 t 363 175 268 512 47 0

% share 11 5 6 11 1 0Middle East & Africa Exports with credit guarantees '000 t 0 558 340 90 184 40

% share 0 9 3 2 3 1

Mexico Corn trade Exports with credit guarantees '000 t 447 102 357 366 299 403

% share 6 1 5 4 6 4Central America * Exports with credit guarantees '000 t 2 505 628 1 154 949 178 584

% share 56 15 27 28 11 15South America Exports with credit guarantees '000 t 1 738 397 314 651 280 943

% share 89 24 19 39 22 15Korea Exports with credit guarantees '000 t 3 855 2 174 2 083 833 0 369

% share 67 32 34 26 0 7Middle East & Africa Exports with credit guarantees '000 t 486 458 224 142 30 283

% share 11 9 5 18 8 6

# Estimates of trade with export credit guarantees based on port value of GSM-102 Sources: USDA 2014d & f. registrations & average fas export unit value (US$/t) for trade to specified destinations, year ending 30 Sept. See Appendix H for a complete summary of US regional trade with export credit guarantees.* Includes Caribbean markets.** Includes South East Asia, Central Asia & China region markets. The volume of trade with credit guarantees is a key variable for assessing the trade distortion effect. Estimates were derived from the value of registered export credit guarantees using the average (fas) unit value of US exports to each market. Export unit values will be a good reflection of returns for sales supported by guarantees. The analysis shows the supported trade has been a sizeable portion of US trade in cereal and oilseed products in several markets (tables 16 and 17).

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17. Major markets for US exports with credit guarantees – Oilseed products #

2009 2010 2011 2012 2013 2014GFC

Mexico Soybean trade Exports with credit guarantees '000 t 220 86 57 182 149 97

% share 7 3 2 5 6 3Korea Exports with credit guarantees '000 t 344 180 266 102 0 0

% share 98 23 37 21 0 0Other Asia * Exports with credit guarantees '000 t 1 940 507 564 837 230 0

% share 9 2 2 3 1 0Middle East & Africa Exports with credit guarantees '000 t 322 185 32 327 144 231

% share 21 11 2 18 13 18

Russia & East Europe ** Exports with credit guarantees '000 t 491 476 72 428 340 346

% share 66 45 25 68 71 42

Central America *** Soybean meal trade Exports with credit guarantees '000 t 590 229 416 433 387 210

% share 44 16 31 31 25 13South America Exports with credit guarantees '000 t 170 27 280 328 260 175

% share 79 12 27 27 17 12Russia & East Europe ** Exports with credit guarantees '000 t 230 58 58 165 321 138

% share 78 29 36 63 81 54

# Estimates of trade with export credit guarantees based on port value of GSM-102 Sources: USDA 2014d & f. registrations & average fas export unit value (US$/t) for trade to specified destinations, year ending 30 Sept. See Appendix H for a complete summary of US regional trade with export credit guarantees.* Includes South East Asia, Central Asia & China region markets.** Includes Turkey, Caucasus & Balkan markets.*** Includes Caribbean markets. Korea, Mexico, South America and Central America have been major markets for US wheat exports supported by credit guarantees. In 2009 almost 80% of US wheat exports to Korea were supported by guarantees. A sizeable portion of US wheat sales to South American markets were also supported by guarantees but the share of total shipments has declined in recent times. Corn exports to Korea, Central America and South America in 2009 were heavily supported by credit guarantees. Almost 90% of the exports to South America markets and two thirds of the shipments to Korea were supported by guarantees. In subsequent years exports with credit guarantees continued to account for a sizeable portion of US corn sales to Central and South America. US soybean exports to East Europe were substantially support by credit guarantees – the average trade share was over 50%. Other Asia, Korea and the Africa/Middle East were also significant markets. In 2009 almost all of the US soybean exports to Korea were supported by guarantees.

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Export of soybean meal supported by credit guarantees have been substantial in some markets. Central America, East Europe and South America were regional markets with the largest sales supported by guarantees. Supported sales accounted for a sizeable share of total trade in 2009 in all three regions. The stated aim of the GSM-102 program is to provide guarantees for short-term credit finance in order to maintain or increase exports. Competitive credit terms for buyers is considered to be necessary in some markets because credit finance may not be available (CRS 2014). There is a focus on developing economies where limitations on credit availability are likely to be an issue. This would suggest some form of market failure in the financial sectors of the targeted economies. But it’s important to recognise there is a sizeable US export trade in cereal and oilseed products to the same markets without credit guarantees. There’s also trade by other competing suppliers in many of the markets. The fact that other trade is occurring does not support the market failure argument. US exports without credit guarantees will still require payment on delivery. This is likely to involve finance arrangements with either a bank in the importing market or a US institution. Short term credit is available in almost all of the world’s economies. The cost of finance (i.e. interest rates) varies but there is no indication of prohibitive rates being charged in the targeted markets. Many of the markets eligible for the US export credit guarantees are relatively advanced developing economies. They have adequate capital markets and there is a significant import trade in cereal and oilseed products without credit assistance. This suggests the aim and effect of the GSM-102 program is to establish a transaction subsidy for buyers that will encourage greater US export sales. Trade distortions from the establishment of a transaction subsidy would equally apply to the export credit guarantee programs of other economies. They would equally apply to the direct provision of export financing credit by government backed agencies. There are trade distorting effects from providing government supported export credit. The effect will depend on how much financial advantage is gained by an importer and the corresponding incentive to favour exporters with access to the finance. This is determined by the tenor (term) of the credit facility and the gain from lower interest costs through accessing government credit ratings. Trade distortion effects are not confined to a few major competing suppliers. Smaller export suppliers are equally affected. Incursions of trade assisted by export finance support can disrupt localised inter-regional trade by less advanced economies. Changes in the availability of credit guarantees or other forms of finance support can be destabilising for the trade outcomes of these economies. The consequences may be more acute than those faced by a developed economy with more options for alternative export sales. It’s sometimes suggested that export finance support has food security benefits for importing markets in less advanced developing economies with significant poverty issues. The assistance is seen to be beneficial because it improves the purchasing capability of importers which leads to increased product availability. This proposition would imply there are import supply deficiencies when finance support is not provided or its availability is significantly restricted. Trade outcomes for the US example of export credit guarantees for cereal and oilseed products do not seem to support this proposition. In many of the regional markets eligible for the assistance there was a continuing significant US export trade in periods when the guarantees were either not available or greatly restricted. Shipments of other suppliers would need to be examined to confirm the absence of import supply deficiencies. But the US trade outcomes suggest the finance support is not necessary for ensuring adequate import supplies.

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5. Effect of export finance support Most of the export finance support offered by exporting economies is provided in the form of credit guarantees. The availability of credit finance using government guarantees encourages exporters to offer the facility as an option for product payment. The guarantee also encourages banks in exporting and importing markets to facilitate the financing option. A credit facility with this backing is low risk which means lower interest rates. Where there’s strong demand to use the guarantees it would suggest a significant financial advantage for importers. Therefore it’s availability is likely to encourage buyers to use the option and favour sellers offering the credit. Like export subsidies it’s an assistance measure that could erode the gains from preferential market access conditions in FTAs. This is a strong argument for pursuing reform in the WTO Doha Round negotiations. Rate of assistance from export credit guarantees The key factor in the distortion effect of credit guarantees is the amount of assistance. This determines the strength of the incentive to use the guaranteed finance and its largely determined by:

• the cost differential from using the guaranteed credit facility; and • the tenor of the guaranteed credit facility.

Large cost differentials and extended credit terms will translate into a stronger incentive to use the guaranteed finance. The rate of assistance is a good way to gauge the extent of the financial benefit and incentive to favour exporters with access to the guarantees. Assistance will vary between markets because the differential in the cost of the finance depends on the level of interest rates. Rates of assistance provided by export credit guarantees can be estimated by comparing alternative credit financing options. If credit finance with government guarantees were not available the most likely outcome would be a transaction financed by credit arranged with a bank in the import market. If no supported finance is available the importer is also more likely to consider other supplier options. By way of example US export credit guarantees for cereal and oilseed products were examined for the period from 2009. Estimates of the rate of assistance were calculated for selected markets that were eligible for credit guarantees. Cereal and oilseed products were selected because the global trade in these products has been the most affected by export finance support in recent times. Interest rates for short term credit is a key variable. The US prime rate can be used as a benchmark to evaluate the GSM-102 credit finance supported. The program description indicates rates will be based on the LIBOR market but this may not be a suitable benchmark. LIBOR is an inter-bank lending rate and may under-estimate the interest rate for commercial customers with a CCC guarantee in place. There are significant differences in interest rates for short term credit between the importing markets (see Appendix I). Some notable observations include:

• in Central and South America rates vary between 12% and 20% in most markets – exceptions are Mexico, Panama, Chile and Trinidad with interest rates of 5% to 9%;

• interest rates are generally lower in Asian markets with a range of 5% to 7% – exceptions are Vietnam and Indonesia with rates of between 10% and 13%;

• interest rates are relatively high in some Middle East markets – Israel is an exception; and • African markets have high interest rates and Russian rates vary between 9% and 15%.

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18. Assistance from US export credit guarantees – cereal & oilseed products #

2009 2010 2011 2012 2013GFC

% % % % %

Asia markets China 2 3 3 3 3 Indonesia 16 15 10 10 10 Korea 3 3 3 2 1 Philippines 7 6 3 2 2 Vietnam 5 7 10 7 5

Central America markets Costa Rica 24 20 15 17 14 Dominican Republic 20 12 13 13 11 Guatemala 15 15 12 12 12 Mexico 6 3 2 1 1 Honduras 12 12 11 11 13

South America markets Colombia 15 9 9 11 9 Peru 25 23 18 18 17 Venezuela .. .. .. 15 15

Other markets Egypt 13 11 9 10 10 Israel 1 3 3 3 3 Nigeria 11 11 9 10 10 Russia 15 10 7 8 8

# Selected examples of the rate of assistance for importers of US wheat, corn, soybeans Sources: USDA 2014d f & g; & soybean meal. Estimates based on the difference between US based financing costs with WB 2015. GSM-102 guarantees & domestic costs in the importing market without the guarantees. See Appendix I for details of estimates for individual products. The short term interest rates were used to estimate credit financing costs in the importing market using the country specific conditions that were effective in the GSM-102 program each year. For example, most guarantees had tenors of close to 36 months in 2009 but were subsequently reduced to around 24 months in recent years. Some markets had shorter tenors due to a high risk rating. A comparison point of US based credit costs was derived using GSM-102 program conditions. The credit cost was adjusted for program fees which are set by country credit risk ratings. Estimates of the rate of assistance were based on average US export unit values (fas) for markets eligible for credit guarantees. These export unit values are a reasonable indicator of the value of transactions supported by credit guarantees. Rate of assistance provided by US credit guarantees for exports of cereal and oilseed products were significant in several markets (see Appendix I). The estimates vary over time because of changes in interest rates and GSM-102 program conditions on maximum tenors and credit risk ratings. There are relatively high rates of assistance in most Central American markets and in some South American markets (table 18). Assistance is relatively low in Asian markets with Indonesia an exception. These regions were the primary destinations for US exports of cereal and oilseed products.

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Some notable observations on the rates of assistance include:

• assistance was highest in Costa Rica, Dominican Republic, Colombia, Guatemala, Honduras, Peru and Venezuela – the average rate of assistance was between 11% and 20%;

• the average rate of assistance was 12% for Indonesia and 11% for Egypt; and • in Korea and China that rate of assistance has average around 3%.

The difference between domestic and US based financing costs is a reasonable measure of the rate of assistance for the US credit guarantees. A lack of credit guarantees would mean buyers would have to revert to domestic sources of finance. This is how transactions with other exporters and un-supported US suppliers would be managed. The estimates may be under-stated for two reasons:

• standard interest rates in importing markets are generally adjusted with a risk premium for the credit rating of individual customers – the cost differential could be wider; and

• the US prime rate may over-state the rate charged when a CCC guarantee is in place. The length of the tenor is a key variable in measuring the rate of assistance. Most importers will aim to pay-off the finance obligation for a transaction as soon as possible to minimise interest payments. The capacity for re-payment is usually dictated by the rate of domestic sales or processing usage. This is often a matter of a few months but it can be longer for bulk purchases of storable products. Long tenors can mean a longer period of finance servicing costs and more interest payments. But short term finance with a significant interest rate differential is a financially attractive proposition for an importer even with an extended tenor period (e.g. 36 months). It’s commercially rational to use the GSM-102 finance option for a US transaction despite the cost of extra interest payments. This is because it allows more earnings to be used for business development purposes or other financing obligations with higher servicing costs based on the higher domestic interest rates. Therefore a comparison of domestic finance costs with US based finance costs is an appropriate way to assess the rate of assistance (OECD 2000). Extended tenors offered with finance guarantees can be highly beneficial for buyers. Short tenors will mean a shorter period of financial benefit. But the key factor affecting the value of the tenor period is the interest rate differential. Even a short tenor period can have a limited financial benefit if there’s a large differential in periods of high interest rates. It is worth noting the variability in assistance rates. Support was highest in the GFC period which was a time when usage of the GSM-102 guarantees was highest for cereal and oilseed products – US$4.3 billion in 2009. In later years there was an easing in interest rates and the rate of assistance declined in most cases. There was a corresponding decline in use of the guarantees to a most recent level of US$1.6 billion in 2014. The changes in usage would suggest the attraction of the finance guarantee to an importer will alter as credit conditions change. The incentive to use the export credit guarantees is weaker if the dollar value of the interest cost differential declines. This is not the only factor affecting the demand for finance with government guarantees. But it is an important consideration for buyers and is consistent with the reduced demand for GSM-102 export credits in more recent times. The global economy has experienced a sustained period of low interest rates for some time. In some respects the post-GFC period has been an unusual time for economic conditions. The interest rate environment will change at some point. Should it lead to higher interest rates or a larger differential between exporting and importing economies the dollar value of the assistance from measures such as the GSM-102 program will rise and the attraction of the finance option will strengthen:

• the trade distortion effect of finance guarantees could intensify if the global economy recovers from its post-GFC malaise and there’s a strengthening interest rate environment.

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An issue of relevance for the Doha reform proposals is reductions in the maximum tenor for finance guarantees. The maximum tenors available under the GSM-102 program for FY 2011 were reduced to 2.5 years. In the 2012 and 2013 programs they were reduced to a maximum of 2 years and there was a further reduction in 2014 to 1.5 years. The statutory cap on tenors for the GSM-102 guarantees was cut to 2 years in the 2014 Farm Bill (CRS 2014). The shorter tenors have reduced the financial benefit of the GSM-102 credit guarantees for importers. In conjunction with low interest rates the attraction of using the concessional finance has declined. Lower volume of US exports with guarantees in 2013 and 2014 would suggest that shorter maximum tenors will reduce the trade distortion effect of the finance support. However, reduced tenors may not be the panacea for ending the trade distortion effects of government supported export credits. Lower tenors for GSM-102 finance in FY 2011 did not translate into reduced US exports of wheat, corn and soybean meal with credit guarantees. World prices for these products strengthened considerably in 2011. This suggests the level of traded product prices is another factor that will affect the attraction of using concessional finance. Strong commodity prices increases the dollar value of export transactions and the corresponding cost of credit finance. Comparing the dollar value of assistance from GSM-102 guarantees for different products illustrates the point. The value of export transactions for soybean meal are higher than export transactions for cereal products (see Appendix I). This means the value of the interest cost differential is higher and the financial benefit of using the finance is higher. For example:

• the average assistance from export credit guarantees for Costa Rica over the 2009-2013 period was US$71 and US$89 per tonne for wheat and soybean meal respectively;

• the average assistance for Colombia was US$36 and US$56 per tonne for wheat and soybean meal respectively; and

• the average assistance for Indonesia was US$40 and US$67 per tonne for wheat and soybean meal respectively.

The differences in the interest cost saving for the different transaction values illustrates how strong commodity prices is likely to increase the attraction of the finance guarantees to importers. Maximum tenors of 1.5 years are not sufficient to remove the trade distortion effect of export finance guarantees, especially in periods of high interest rates and high prices for traded products. There is still a material financial incentive to use the finance and trade displacement effects will continue to arise. There is a risk that a firmer global interest rate environment and strong commodity prices will lead to stronger demand for finance guarantees through measures such as the GSM-102 program. Restricting tenors to 6 months will be highly beneficial for global trading conditions because it will substantially diminish the attraction of the financing option to importers. But this will not fully remove the trade distortion effects as a limited financial advantage will still exist in some markets. The financial gain will be stronger in trading conditions of high interest rates and strong commodity prices. The rate of assistance from finance guarantees is significant and it has trade distorting effects in many markets. Policy reforms that impose disciplines on the use of export finance support are necessary and they need to be part of a WTO Doha Round agreement on export competition. Elimination of the trade distortion effects would require an end to all forms of export finance support. However, the proposed 6 month restriction on tenors for export credit support should significantly curtail the distortion effects and it should be adopted. Individual economies should also consider unilateral reforms to either end the use of export finance support or restrict its usage through:

• an overall cap on the availability of export credit support; and • tight limitations on market eligibility.

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19. Changes in US exports with credit guarantees #

2009 2010 2011 2012 2013 2014GFC

Wheat Export credit guarantees US$m 708 535 1 036 757 805 329

% change .. -24 94 -27 6 -59 Exports with credit guarantees '000 t 2 713 2 443 3 138 2 541 2 446 1 109

% change .. -10 28 -19 -4 -55

Corn Export credit guarantees US$m 1 770 724 1 234 861 239 560

% change .. -59 70 -30 -72 134 Exports with credit guarantees '000 t 9 054 3 939 4 270 2 935 789 2 585

% change .. -56 8 -31 -73 228

Soybeans Export credit guarantees US$m 1 377 591 534 1 084 539 412

% change .. -57 -10 103 -50 -24 Exports with credit guarantees '000 t 3 379 1 457 1 059 2 046 899 742

% change .. -57 -27 93 -56 -17

Soybean meal Export credit guarantees US$m 476 295 338 475 554 295

% change .. -38 15 40 17 -47 Exports with credit guarantees '000 t 1 208 781 825 1 085 1 017 550

% change .. -35 6 31 -6 -46

# Estimates of trade with export credit guarantees based on port value of GSM-102 Sources: USDA 2014d & f. registrations & average fas export unit value (US$/t) for trade to specified destinations, year ending 30 Sept.

= maximum tenor reduced to 24 months = maximum tenor reduced to 18 months

Economies affected by export credit guarantees A substantial volume of US exports in cereal and oilseed products were assisted by credit guarantees (table 19). Trade volumes have fluctuated and the changes have coincided with changes in the GSM-102 annual allocation caps. This would suggest trade displacement effects have been a de-stabilising factor in global trading conditions. US exports of wheat supported by guarantees averaged around 2.7 million tonnes over the 2009-13 period and then declined noticeably in 2014. Exports of corn with credit guarantees have fluctuated. In 2009 over 9 million tonnes of corn were exported with finance support. Trade volumes declined from this point but still averaged around 3.7 million tonnes in the following three years. There were also considerable fluctuations in the US soybean and soybean meal export trade. The guarantees supported 3.4 million tonnes of soybean exports in 2009 and 1.2 million tonnes of meal exports. Trade volumes declined in subsequent years but remained at relatively high levels. There were no subsidised exports of cereal and oilseed products affecting global trade in the sample period. US credit guarantees were the leading source of trade distortions in world trade.

40

The high levels of US exports with credit guarantees in 2008-09 would have been largely due to the economic disruptions from the food price crisis. Finance support would have been more attractive to importers during the period of higher commodity prices. Use of the guarantees declined in 2009-10 when commodity prices weakened in the wake of the GFC. As lengthy tenors were available during this period the changes in GSM-102 trade volumes provides confirmation that traded product prices are a key factor in the demand for finance guarantees. It is worth noting US exports with finance guarantees for wheat, soybeans and soybean meal declined in 2014. Though still favourable the world indicator prices for these products have been a little weaker in recent times. The reduced use of GSM-102 guarantees in line with pricing developments is further evidence that the attraction of the guarantees to importers is partially driven by the level of traded product prices. As with export subsidies, the sales supported by export finance guarantees can infiltrate the trading activities of many economies. Trade distortion effects are not limited to a few major export suppliers. Incursions of products supported credit guarantees into importing markets can also have a trade displacement effect on localised inter-regional sales by smaller trading economies. Like export subsidy programs the support measures for export finance don’t dictate the destinations for supported trade. There are market eligibility conditions in the GSM-102 program but the list of eligible destinations is extensive. In the FY 2014 program there were 121 eligible destinations. This included 11 Asian markets, 39 markets in Central and Southern America and 62 markets in the Middle East and Africa. Corresponding information on the finance support programs of other economies were not available. The US trade with finance guarantees in cereal and oilseed products gives an illustration of how the direct trade displacement effects can be extensive. Data on the use of GSM-102 guarantees for exports to specific destinations were not available. However, the export data complied to show the regional volumes of US trade with credit guarantees provides a reasonable basis for identifying the import markets that were affected. The data on US export sales indicates that for many of the GSM-102 eligible destinations there was no significant trade in cereal and oilseed products. The remaining eligible destinations with significant US export activity are importing markets likely to be affected by the trade with finance guarantees. FAO data on shipments by competing export suppliers to these remaining eligible destinations were complied to provide a matching perspective that shows the trade displacement effect. Average annual trade flows for the 2009-13 period were used to sort the affected importing economies into two groups – large traders and other significant traders (see Appendix J). All markets receiving sales with finance guarantees will be affected to some extent. But it’s useful to identify the economies where there will be significant direct consequences of trade displacement on competing suppliers. A sizeable number of economies were affected by the US exports with credit guarantees over the sample period (table 20):

• 26 exporting economies were significantly affected by US sales of cereal products with credit guarantees in the Asian region;

• in the South American region 12 export suppliers were affected by cereal product sales with guarantees and 5 were affected in the Central American region;

• 31 export suppliers were affected by cereal product sales with guarantees in the Middle East and Africa;

• sales of oilseed products with guarantees in Asia affected 15 exporting economies; and • in the South American region 7 export suppliers were affected by sales of oilseed products

and 3 were affected in the Central American region.

41

20. Economies affected by US exports with credit guarantees #

Asia Central South Middle East EastAmerica * America & Africa Europe **

no. of countriesCereal product trade Export suppliers 26 5 12 31 14 Importing markets 15 25 10 11 1

Oilseed product trade Export suppliers 15 3 7 11 9 Importing markets 14 12 6 10 4

# Number of trading economies affected by US export with finance guarantees. Sources: USDA 2014d; Assessment of importers based on annual US trade flows to markets eligible for GSM-102 FAO 2014. guarantees over the 2009-13 period. Assessment of competing exporters to GSM-102 eligible destinations based on annual trade flows over the 2009-11 period. See Appendix J for a complete summary of economies affected by US exports in specific products. * Includes Mexico & Caribbean countries.** Includes Russia & Turkey. The assessment highlights the multilateral nature of the direct implications of the US export trade with finance guarantees. It’s not unique that a large number of trading economies are affected by US sales with credit guarantees. There would be similar consequences from the use of direct export credit and export finance guarantees by other trading economies. This underlines the need for an agreement on the reform of export assistance measures in the WTO Doha Round negotiations that includes effective disciplines on the use export finance support.

42

6. Conclusions Export subsidies are a highly trade distorting form of support. Indirectly they contribute to increased output and higher export supplies from the economies that provide the assistance. This comes at the expense of distorting world trade. Subsidised trade increases global price volatility, lowers market returns and displaces trade by other export suppliers. Export finance support is another concern in the provision of export assistance. Finance backed by government guarantees is another way to enhance export competitiveness. Credit guarantees can be used to establish an export contingent input subsidy that reduce trade transaction costs for importers. The finance support create an incentive for importers to favour export suppliers offering the assistance which causes a displacement of competing exports. In recent times export subsidy use has been well below the WTO allowances. The diminished use is a welcome development. But the fact remains the policy option remains in place. Many economies have dormant or eliminated programs that could be resurrected if trading conditions change. There are also a number of subsidy programs that remain active today, some without a clear WTO entitlement. Strong commodity prices have reduced the need to use export subsidies. But the volatility of traded product prices is well known. There are likely to be periods of unfavourable trading conditions in the future and political pressures to use export subsidies to alleviate domestic adjustment concerns will resurface. The risk associated with the continued availability of export subsidy allowances is clearly illustrated by events in 2009. In 2007 and 2008 the world economy experienced a period of very high food price inflation. This was followed by the recessionary effects of the GFC in 2009 which coincided with a weakening of traded prices. One response was a re-activation of EU export subsidies for dairy products which triggered a corresponding re-activation of US dairy export subsidies. The AoA allowed for unrestricted use of some forms of export subsidies by developing economies for a limited period. Article 9.4 was a transitional concession. It expired at the end of the implementation period for the AoA. All forms of export subsidies have trade distortion effects and this includes export contingent input subsidies. Trade supported by the Article 9.4 exemption has added to the distortion effects of the capped export subsidies. Legal entitlement to use the Article 9.4 exemption has lapsed. But WTO notifications indicate that use of export subsidy measures under Article 9.4 has not ceased. A further notable development has been reports of India providing an export subsidy of around $US$65 per tonne for up to 1.4 million tonnes of sugar in 2014-15. There is no WTO entitlement for this assistance. Growth in subsidised trade using the Article 9.4 exemption will undermine the spirit and intentions of a WTO agreement on export competition. There is no justifiable case for allowing the use of any form export subsidy by either developed or developing economies. The distortion effects that arise affect all other trading economies – developed and developing. Transitional exemptions provide a way to evade a ban on direct export subsidies and they should be part of the WTO policy reform effort. Concerns about subsidised exports can sometimes skim over the differentiated distortion effects that can arise. Some import markets receive large subsidised sales and experience a more direct impact. Regional trade for meat and dairy products show subsidised sales are often concentrated in particular regions. For example, before the food price crisis and GFC period the subsidised sales of butter and cheese trade shares were over 40% of total trade in Eastern Europe and the Middle East. In Africa subsidised sales of WMP, milk and fermented products had regional trade shares exceeding 50%.

43

There are numerous instances of a one-off surge in regional subsidised sales which can be traced back to specific markets within a region. The trade developments suggest opportunistic sales encouraged by adjustments in subsidy rates. Examples where this may have occurred include US butter sales to most regions in 2008, EU SMP sales to Asia and the Middle East in 2009, US SMP sales to South America and the Middle East in 2008 and EU beef sales to Eastern Europe in the 2010-11 period. The targeting of the less advanced developing economies is an adverse consequence of export subsidy programs. Opportunistic sales and price discounting will lower market returns for domestic suppliers of competing products and cause greater volatility. These distortion effects can be detrimental for producer incomes and poverty alleviation. They also discourage investment which is detrimental for longer term industry development. EU illustrative examples show how the rate of assistance can vary. For example, in the 2005 to 2006 period there were sizeable subsidy levels and rates of assistance for several products:

• butter assistance was 66%, WMP was close to 30%, SMP was 7% and cheese was 25%; • meat product assistance was 17% for beef, 40% for ham and 30% for chicken meat; and • sugar assistance averaged around 118%.

Price discounting is another aspect of the trade distorting effect of export subsidies. Comparisons of EU export prices with a world price indictor show several instances of significantly different price movements. For example, world prices of WMP rose by almost 100% in 2007 but EU export prices increased by less than 50%. The divergence in price movements indicate some importing markets experienced more acute pricing impacts. The capacity for significant price discounting depends on the size of the subsidy relative to the gap between domestic prices and traded product prices. As subsidy rates and the price gap changes over time the distortion effect on market returns from significant price discounting will vary. The pricing analysis of EU export returns provides an illustration of the price distorting effects. EU commercial traders in meat and dairy products have used export subsidies to significantly undercut prevailing world prices at certain times. The impact of subsidised sales undermines the trading activities of many economies. Disruptions are not limited to a few major export suppliers or importers. Smaller trading economies also experience adjustment pressures. This highlights the multilateral nature of the issue and is a strong reason for pursuing a collective agreement on reform in the WTO Doha Round negotiations. Data on the use of export finance support by the major agricultural exporters would seem to suggest the supported trade is relatively small in most cases. Exports supported by the financing measures are a very small portion of the total agricultural trade by Australia, Brazil and New Zealand. Canada and the US have been more significant users of export finance support. The use of export finance support increased substantially during the food price crisis and GFC period. For example, US trade with finance support increased by 112% in 2008 and 75% in 2009. Canada’s trade with finance support rose by almost 80% in 2008. Usage has largely remained at the relatively higher levels ever since. The growth may in part reflect the strength of commodity prices. But higher prices do not fully explain the growth. There has been a sustained, significant rise in the proportion of trade with export finance support. This indicates an increasing use of financing support. Most of the export finance support is provided in the form of re-payment guarantees on trade finance. Trade distortion effects are strongest in the global markets for cereal and oilseed products. The US is a large user of credit guarantees and at times they have been extensively used to support sales to specific markets. For example, in 2009 concessional finance on sales to Korea supported almost 80% of wheat exports, two thirds of the corn exports and 98% of the soybeans exports.

44

US export finance guarantees have provided significant assistance. Rates of assistance were relatively high for the period from 2009 in most Central American markets and some South American markets. For example the average rate of assistance in Costa Rica, Dominican Republic, Colombia, Guatemala, Honduras, Peru and Venezuela was between 11% and 20%. The assistance was lower for most of the Asian markets. In Korea it averaged around 3% and in Indonesia it averaged 12%. The length of the tenor is a key factor in the value of a credit guarantee and its attraction to importers. The US currently has maximum tenors of 1.5 years compared with the 6 month tenors offered by most other exporters. Extended tenors can be highly beneficial for buyers. But the key factor affecting the value of the tenor period is the interest rate differential. Even a short tenor period can have a limited financial benefit if there’s a large differential in periods of high interest rates. The incentive to use the finance guarantees is weaker if the dollar value of the interest cost differential declines. The global economy has experienced a sustained period of low interest rates in the post-GFC period. The interest rate environment will change at some point. Should it lead to higher interest rates or a larger differential between the US and importing economies the dollar value of the support from GSM-102 guarantees will rise and the attraction of the supported finance will strengthen. In recent years shorter tenors in conjunction with low interest rates have reduced the financial benefit and usage of the GSM-102 guarantees. But short tenors may not be a complete solution. Lower tenors in FY 2011 did not translate into reduced US exports of wheat, corn and soybean meal with finance support. World commodity prices strengthened considerably in 2011. This suggests the level of traded product prices is another factor that will affect the attraction of using concessional finance. Strong commodity prices increase the dollar value of export transactions and the corresponding cost of credit finance. This means the value of the benefit from the interest cost differential is higher and the attraction of the supported finance to importers is stronger. Tenors of 1.5 years are not sufficient to remove the trade distortion effects of finance guarantees in measures such as the GSM-102 program, especially in periods of high interest rates and high prices for traded products. There is still a material financial incentive to use the finance and trade displacement effects will continue to arise. There is a risk that firmer global interest rates and strong commodity prices will lead to stronger demand for export finance guarantees. Restricting tenors to 6 months will be highly beneficial for global trading conditions as it will substantially diminish the attraction of the finance. But it will not fully remove the trade distortion effect as a limited financial advantage will still exist in some markets. The financial gain will be stronger in conditions of high interest rates and strong commodity prices. The rate of assistance from finance guarantees is significant and it has trade distorting effects in many markets. Policy reforms that impose disciplines on the use of export finance support are necessary and they need to be part of a WTO Doha Round agreement on export competition. Elimination of the trade distortion effects would require an end to all forms of export finance support. However, the proposed 6 month restriction on tenors for export credit support should significantly curtail the distortion effects and it should be adopted. Since 2009 there have been substantial US exports of wheat, corn and oilseed products with finance guarantees in most years. This suggests trade displacement effects have been a de-stabilising factor in global trading conditions. There were no subsidised exports of these products affecting global trade in this period. US credit guarantees were the leading source of trade distortions in world trade. The effect of sales with export finance guarantees infiltrates the trading activities of many economies. Trade displacement effects are not limited to a few major export suppliers. Incursions of exports with finance support can disrupt localised inter-regional sales by smaller trading economies. This highlights the multilateral nature of the issue and the need for a Doha Round agreement on export competition that includes disciplines on the use of export finance support.

45

Appendix A: Use of export subsidies in world trade

21. Subsidised exports subject to WTO commitments #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

'000 tMeat productsEU - beef 766 475 484 359 385 292 189 116 81 82 84 279 166 - pig 694 129 72 61 139 69 77 70 441 136 60 68 59 - poultry 318 261 230 247 216 205 180 228 187 194 249 231 240Norway - beef 1 0.4 0.1 0.1 0.0 0.1 1 0.2 0 0 0 0 0 - pig 1 0.8 0.4 0.2 4 2 4 0.2 0.1 1 3 2 3 - sheep 0.0 0.2 0.7 0.6 0.6 0.5 0 0 0 0 0 0 0Turkey - poultry 2 na na na na na na na na na na na naUSA - poultry 2 12 0 0 0 0 0 0 0 0 0 0 0

Dairy productsEU - butter 194 197 194 292 354 382 295 254 0 98 71 0 0 - cheese 305 305 280 317 321 300 319 293 0 134 128 0 0 - SMP 417 128 87 220 259 212 117 0 0 127 129 0 0 - other 1 104 873 764 833 880 827 741 462 16 466 409 0 0US - butter 5 0 0 10 0 0 0 0 0 1.9 16 0 0 - cheese 4 3 3 3 3 0 0 0 0 0.2 2 0 0 - SMP 101 68 68 68 68 0 0 0 0 20 17 0 0 - other 18 0 0 0 0 0 0 0 0 0 0 0 0Canada - butter 2 na na na 0 0.9 2 2 0 0 0.7 0.1 0 - cheese 20 na na na 6 7 6 6 6 5 4 4 5 - SMP 42 na na na 11 11 10 10 16 9 9 11 9 - other 21 na na na 21 16 10 9 9 7 6 7 7Norway - butter 4 1 0.8 1 0.6 2 0.3 2 3 3 2 0.4 0 - cheese 16 16 15 16 16 16 15 14 13 12 12 13 12Australia - other 3 0 0 0 0 0 0 0 0 0 0 0 0Swiss - other 62 54 58 62 45 33 32 22 18 6 0 0 na

Cereal productsEU - wheat 15 606 10 204 1 650 12 055 0 4 944 10 979 825 0 0 0 0 0 - coarse grain 18 379 7 080 3 922 6 259 1 514 4 976 2 904 1 346 0 0 0 0 0 - rice 140 132 132 128 128 22 0 0 0 0 0 0 0

Other productsEU - sugar 971 882 1 052 601 663 1 130 1 215 1 337 1 360 0 0 0 0 - fruit & veg 981 815 783 778 778 501 604 545 225 0 0 0 0Israel - fruit & veg 0 125 174 133 116 na na 0 1 6 14 8 1Sth Africa - sugar 15 0 0 0 0 0 0 0 0 0 0 na naSwiss - fruit & veg 15 14 13 12 11 8 8 7 11 13 0 0 naTurkey - fruit & veg 92 na na na na na na na na na na na na

# Coverage confined to WTO members with active use of export subsidy allowances. Source: WTO notifications. EU-15 exports from 2000 to 2003, EU-25 from 2004 to December 2006 & EU-27 from January 2007. Marketing year ended July 31 for Canada, June 30 for US & Australia, September 30 for Israel and June 30 for EU except sugar (September 30) & rice (August 31). Calendar year ended December 31 for Norway, Switzerland & Turkey.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

46

22. Quantity usage rates of export subsidy caps #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

%Meat productsEU - beef 87 58 59 44 47 36 23 12 8 8 8 28 17 - pig 150 29 16 14 31 16 17 12 75 23 10 11 10 - poultry 101 91 81 87 75 72 63 53 43 45 58 54 56Norway - beef 75 29 7 7 3 7 80 13 0 0 0 0 0 - pig 37 20 11 6 95 49 98 6 4 40 82 53 72 - sheep 4 31 96 95 86 76 0 0 0 0 0 0 0Turkey - poultry 78 na na na na na na na na na na na naUSA - poultry 9 41 0 0 0 0 0 0 0 0 0 0 0

Dairy productsEU - butter 46 49 49 73 89 96 74 62 0 24 17 0 0 - cheese 89 95 87 99 100 93 99 88 0 40 39 0 0 - SMP 146 47 32 81 95 78 43 0 0 39 40 0 0 - other 110 91 80 87 92 86 77 46 2 46 40 0 0US - butter 21 0 0 47 0 0 0 0 0 9 74 0 0 - cheese 121 100 100 100 100 0 0 0 0 5 56 0 0 - SMP 133 100 100 100 100 0 0 0 0 29 25 0 0 - other 711 0 0 0 0 0 0 0 0 0 0 0 0Canada - butter 39 na na na 0 25 66 60 0 0 20 4 0 - cheese 100 na na na 66 73 67 64 69 60 48 49 53 - SMP 89 na na na 24 25 22 23 36 20 19 25 21 - other 67 na na na 71 53 34 30 30 22 19 23 23Norway - butter 63 21 14 17 10 26 5 36 54 57 38 7 0 - cheese 100 99 91 100 99 96 95 85 81 76 76 79 75Australia - other 4 0 0 0 0 0 0 0 0 0 0 0 0Swiss - other 99 87 94 100 72 53 51 36 29 9 0 0 na

Cereal productsEU - wheat 100 71 11 83 0 34 76 5 0 0 0 0 0 - coarse grain 161 65 36 58 14 46 27 13 0 0 0 0 0 - rice 101 99 99 96 96 16 0 0 0 0 0 0 0

Other productsEU - sugar 73 69 83 47 52 89 95 97 99 0 0 0 0 - fruit & veg 105 91 87 87 87 56 67 35 15 0 0 0 0Israel - fruit & veg 0 24 34 26 23 na na 0 0 1 3 2 1Sth Africa - sugar 2 0 0 0 0 0 0 0 0 0 0 na naSwiss - fruit & veg 83 79 72 65 59 42 45 38 62 72 0 0 naTurkey - fruit & veg 8 na na na na na na na na na na na na

# Coverage confined to WTO members with active use of export subsidy allowances. Source: WTO notifications. EU-15 exports from 2000 to 2003, EU-25 from 2004 to December 2006 & EU-27 from January 2007. Marketing year ended July 31 for Canada, June 30 for US & Australia, September 30 for Israel and June 30 for EU except sugar (September 30) & rice (August 31). Calendar year ended December 31 for Norway, Switzerland & Turkey.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

47

23. Average export subsidy for trade with WTO commitments #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

US$/tMeat productsEU - beef 950 720 720 834 850 1 047 780 608 575 491 508 326 249 - pig 351 234 250 251 377 344 308 339 419 402 393 384 378 - poultry 237 194 234 384 485 561 398 553 763 623 552 441 434Norway - beef 3 388 3 228 5 121 5 880 7 317 6 669 4 532 5 266 .. .. .. .. .. - pig 2 049 1 953 2 862 4 119 2 784 2 756 2 498 3 151 2 979 3 191 3 857 3 985 3 816 - sheep 3 428 2 402 2 278 2 421 3 942 3 864 .. .. .. .. .. .. ..Turkey - poultry 199 na na na na na na na na na na na naUSA - poultry 659 592 .. .. .. .. .. .. .. .. .. .. ..

Dairy productsEU - butter 1 723 1 529 1 502 1 958 2 087 1 732 1 204 1 231 .. 759 827 .. .. - cheese 774 697 604 886 888 667 543 486 .. 253 259 .. .. - SMP 811 183 378 776 660 396 152 .. .. 280 349 .. .. - other 822 419 472 750 855 629 457 368 182 283 331 .. ..US - butter 1 381 .. .. 1 551 .. .. .. .. .. 6 093 136 .. .. - cheese 1 440 581 308 403 308 .. .. .. .. 2 291 146 .. .. - SMP 447 99 787 217 26 .. .. .. .. 360 na .. .. - other 1 134 .. .. .. .. .. .. .. .. .. .. .. ..Canada - butter na na na na .. 4 120 4 101 4 396 .. .. 3 235 4 201 .. - cheese na na na na 1 582 1 896 2 320 2 396 2 539 2 537 3 074 3 133 2 950 - SMP na na na na 2 114 2 237 2 719 2 695 1 886 2 985 3 412 2 804 3 330 - other na na na na 786 1 131 1 870 2 183 2 461 2 892 3 635 3 196 3 263Norway - butter 1 602 1 447 1 731 1 835 1 590 1 762 1 805 1 438 1 309 1 909 927 218 .. - cheese 1 667 1 380 1 547 2 151 2 169 2 197 2 061 2 115 1 948 1 745 1 885 1 953 1 822Australia - other 886 .. .. .. .. .. .. .. .. .. .. .. ..Swiss - other 1 770 1 146 849 764 796 886 792 483 337 499 .. .. na

Cereal productsEU - wheat 33 9 5 12 .. 13 12 80 .. .. .. .. .. - coarse grain 40 24 26 28 65 46 41 45 .. .. .. .. .. - rice 184 216 209 209 206 81 .. .. .. .. .. .. ..

Other productsEU - sugar 468 376 422 528 598 525 449 468 488 .. .. .. .. - fruit & veg 44 34 28 25 30 43 49 45 44 .. .. .. ..Israel - fruit & veg .. 13 16 14 2 na na .. 278 237 116 240 539Sth Africa - sugar 215 .. .. .. .. .. .. .. .. .. .. na naSwiss - fruit & veg 744 773 904 1 159 1 331 1 014 998 644 1 411 1 252 .. .. naTurkey - fruit & veg 42 na na na na na na na na na na na na

# Coverage confined to WTO members with active use of export subsidy allowances. Source: WTO notifications. Subsidy rate derived as the ratio of total expenditures & trade volumes and is an average for all exports in a product category. Expenditures valued at average exchange rates for the relevant 12 month reporting period. EU-15 exports from 2000 to 2003, EU-25 from 2004 to December 2006 & EU-27 from January 2007. Marketing year ended July 31 for Canada, June 30 for US & Australia, September 30 for Israel and June 30 for EU except sugar (September 30) & rice (August 31). Calendar year ended December 31 for Norway, Switzerland & Turkey.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

48

24. Unrestricted subsidised exports by WTO Members #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

'000 t

Cereal productsMexico - wheat 335 478 440 112 193 544 439 311 201 664 409 224 24

- coarse grain 0 0 152 0 0 0 95 228 0 2 0 0 0

Other productsIndia - sugar 0 0 0 637 948 159 239 777 4 558 3 412 na na na

- fruit & veg 88 2 3 15 12 2 11 32 37 42 na na na

Korea - fruit & veg 52 74 72 60 71 75 65 65 84 na na na na

Morocco - fruit & veg 0.3 0.2 0 184 160 191 258 302 357 255 179 280 na

Tunisia - fruit & veg 34 36 45 na na na na na na na na na na

# WTO Members using assistance measures not subject to commitments under Source: WTO notifications. Article 9.1(d) and/or (e) for developing countries (i.e. internal transport subsidies & cost reduction measures). Marketing year ended March 31 for Mexico, India & Korea. Calendar year ended December 31 for Morocco & Tunisia.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

25. Expenditures on unrestricted subsidised exports by WTO Members #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

US$m

Cereal productsMexico - wheat 18 6 5 1 3 14 18 14 8 13 16 11 1

- coarse grain 0 0 5 0 0 0 4 8 0 0 0 0 0

Other productsIndia - sugar 0 0 0 7 10 9 5 20 53 88 na na na

- fruit & veg 1 1 1 1 2 1 3 6 7 6 na na na

Korea - fruit & veg 10 13 15 13 16 20 21 21 20 na na na na

Morocco - fruit & veg 0.1 0.1 0 4 4 4 6 7 9 6 4 8 na

Tunisia - fruit & veg 5 3 3 na na na na na na na na na na

# WTO Members using assistance measures not subject to commitments under Source: WTO notifications. Article 9.1(d) and/or (e) for developing countries (i.e. internal transport subsidies & cost reduction measures). Marketing year ended March 31 for Mexico, India & Korea. Calendar year ended December 31 for Morocco & Tunisia.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

49

26. Average export subsidy for unrestricted trade #

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012GFC

US$/t

Cereal productsMexico - wheat 53 12 11 7 16 26 41 44 41 20 38 49 30

- coarse grain .. .. 30 .. .. .. 39 33 .. 39 .. .. ..

Other productsIndia - sugar .. .. .. 11 11 53 19 26 12 26 na na na

- fruit & veg 7 292 262 55 174 129 258 180 199 152 na na na

Korea - fruit & veg 193 170 208 225 223 271 323 317 237 na na na na

Morocco - fruit & veg 333 381 386 21 22 21 23 24 26 25 24 28 na

Tunisia - fruit & veg 148 90 56 na na na na na na na na na na

# WTO Members using assistance measures not subject to commitments under Source: WTO notifications. Article 9.1(d) and/or (e) for developing countries (i.e. internal transport subsidies & cost reduction measures). Subsidy rate derived as the ratio of total expenditures & trade volumes and is an average for all exports in a product category. Expenditures valued at average exchange rates for the relevant 12 month reporting period. Marketing year ended March 31 for Mexico, India & Korea. Calendar year ended December 31 for Morocco & Tunisia.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.

Food crisis *

50

Appendix B: EU market prices

27. EU market prices during the GFC #

2007-08 2008-09 2009-10Food crisis GFC

€/t % change €/t % change €/t % change

Meat products * Beef - HQ 3 049 3 3 148 3 2 984 -5

Beef - manufacturing 2 753 2 2 781 1 2 689 -3

Pig meat 1 420 2 1 512 7 1 404 -7

Poultry meat 1 820 11 1 769 -3 1 644 -7

Dairy products ** Butter 3 322 27 2 368 -29 2 825 19

WMP 3 312 27 2 158 -35 2 429 13

SMP 2 946 17 1 859 -37 2 010 8

Cheese - cheddar 3 516 27 2 920 -17 2 474 -15

Cheese - edam 3 571 19 2 771 -22 2 639 -5

Cheese - gouda 3 558 26 2 793 -22 2 612 -6

Cheese - emmental 4 799 12 4 970 4 4 271 -14

Cereal products *** Common wheat 234 58 150 -36 125 -17

Durum wheat 374 115 244 -35 178 -27

Feed wheat 216 57 130 -40 113 -13

Corn 218 42 145 -34 135 -7

Malting barley 246 45 155 -37 121 -22

Feed barley 210 52 131 -38 108 -18

# Average internal market prices for marketing year ended June 30. Source: ECom 2014. The global food price crisis emerged during the second half of calendar year 2007 & continued into the first half of calendar year 2008. The GFC emerged in September 2008.* Average of representative Member country prices for: - carcase weight price of steers, class C, grade R3; - carcase weight price of cows, class D, grade R3; - carcase weight price of slaughter pigs, class E; - carcase weight price of chicken.** Production weighted average prices for Member countries. SMP price is for intervention quality product.*** Average of representative Member country prices.

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Appendix C: Destination of subsidised trade

28. Regional trade supported by export subsidies – Dairy products #

2005 2006 2007 2008 2009 2010 2011GFC

Butter tradeAsia EU 27 '000 t 48 28 39 22 17 20 24 USA '000 t 0.7 0.8 1.5 12 1.2 3 9 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 79 95 105 91 111 113 120

Middle East & North Africa EU 27 '000 t 131 84 74 68 59 54 36 USA '000 t 1.9 3 7 26 12 19 33 Canada '000 t 0.6 3 0.0 0.0 0.0 0.4 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 1.2 1.2 1.7 Norway '000 t 0.1 0.0 0.0 1.2 1.1 0.2 0.0 Other sources ** '000 t 85 124 130 125 167 165 134

Central & Southern Africa EU 27 '000 t 15 12 11 11 10 11 10 USA '000 t 0.0 0.0 0.1 1.6 1.1 0.1 0.2 Canada '000 t 0.0 0.0 0.0 0.1 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.1 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 5 6 7 9 9 10 12

Russia & East Europe EU 27 '000 t 52 64 47 34 39 47 38 USA '000 t 0.6 1.1 3 21 0.4 4 0.7 Canada '000 t 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 1.6 2.1 2.5 Norway '000 t 1.0 0.3 0.3 0.4 0.9 0.8 0.2 Other sources ** '000 t 70 86 64 67 82 68 73

Central & South America EU 27 '000 t 34 16 9 4 3 3 1.9 USA '000 t 1.0 4 6 11 9 7 5 Canada '000 t 0.2 0.4 0.1 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 31 43 55 40 68 49 36

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

52

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Cheese tradeAsia EU 27 '000 t 66 68 66 55 59 67 72 USA '000 t 15 18 22 30 25 47 79 Canada '000 t 0.5 0.3 0.1 0.2 0.2 0.9 1.3 Switzerland '000 t 0.9 1.1 1.3 1.9 3 2 2 Norway '000 t 4 2 0.5 0.0 0.0 0.0 0.0 Other sources ** '000 t 250 254 288 245 257 268 277

Middle East & North Africa EU 27 '000 t 140 128 121 118 138 131 134 USA '000 t 3 5 7 20 9 25 31 Canada '000 t 1.6 1.8 1.5 1.7 3 3 3 Switzerland '000 t 0.2 0.1 0.4 0.4 0.2 0.3 0.5 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 161 192 222 174 300 234 270

Central & Southern Africa EU 27 - subsidised '000 t 8 9 10 8 10 8 8 EU 27 - other '000 t 0.0 0.0 0.0 1.7 3 3 4 USA '000 t 0.1 0.0 0.3 0.3 0.5 1.0 0.4 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.1 0.2 0.1 0.1 0.1 0.1 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 12 9 13 10 13 10 13

Russia & East Europe EU 27 - subsidised '000 t 130 165 167 170 165 226 222 EU 27 - other '000 t 5 4 5 3 6 5 5 USA '000 t 0.0 0.0 0.1 0.7 0.5 1.3 0.6 Canada '000 t 0.5 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.1 0.2 0.5 0.4 0.3 0.4 0.6 Norway '000 t 0.0 0.1 0.2 0.3 0.4 0.5 0.6 Other sources ** '000 t 145 84 109 126 115 111 119

Central & South America EU 27 '000 t 15 17 23 19 19 21 19 USA '000 t 25 30 34 38 42 60 73 Canada '000 t 1.3 0.3 0.1 0.1 0.1 0.1 0.1 Switzerland '000 t 0.3 1.2 0.5 0.4 0.3 0.3 0.3 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 103 104 110 95 108 109 127

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… Includes natural & processed cheese. See table 30 for market composition of regional trade & EU 27 trade definitions.

= trade supported by export subsidies

Food crisis *

53

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

SMP tradeAsia EU 27 '000 t 72 39 72 30 63 119 180 USA '000 t 112 117 103 147 92 182 221 Canada '000 t 8 5 6 6 7 10 7 Switzerland '000 t 3 0.1 0.4 0.3 2 2 3 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 352 411 391 334 455 415 435

Middle East & North Africa EU 27 '000 t 98 48 87 103 130 159 219 USA '000 t 21 33 29 56 26 26 16 Canada '000 t 0.2 1.5 3 3 3 1.4 2 Switzerland '000 t 3 7 3 3 16 8 6 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 134 144 168 134 158 113 118

Central & Southern Africa EU 27 '000 t 30 15 25 27 23 37 44 USA '000 t 0.5 4 2 5 0.2 0.5 1.8 Canada '000 t 0.0 0.1 2 0.5 0.5 0.6 1.2 Switzerland '000 t 1.0 1.5 1.0 1.2 2 1.8 1.9 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 28 32 43 49 47 37 35

Russia & East Europe EU 27 '000 t 2 2 5 9 9 65 25 USA '000 t 18 6 4 5 2 6 2 Canada '000 t 0.1 0.1 0.1 0.0 0.4 0.4 0.1 Switzerland '000 t 2 2 0.2 0.0 4 7 1.3 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 25 18 22 26 28 22 30

Central & South America EU 27 '000 t 17 4 20 7 7 7 17 USA '000 t 153 101 91 167 144 163 198 Canada '000 t 5 3 5 4 3 2 6 Switzerland '000 t 0.5 0.1 0.4 0.3 0.0 0.3 0.8 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 42 65 44 51 64 48 63

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

54

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

WMP tradeAsia EU 27 '000 t 85 55 68 55 65 75 76 USA '000 t 6 10 13 21 6 18 6 Canada '000 t 0.8 0.7 0.9 0.6 2.1 6.3 4.6 Switzerland '000 t 0.6 0.3 0.6 0.8 1.1 0.7 0.8 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 426 471 447 400 489 667 708

Middle East & North Africa EU 27 '000 t 202 195 184 255 239 226 217 USA '000 t 9 6 4 2 0.7 6 1.4 Canada '000 t 0.3 0.6 0.4 0.2 0.3 0.3 0.5 Switzerland '000 t 0.6 0.3 0.3 0.2 2.0 0.6 0.6 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 294 332 309 346 371 311 372

Central & Southern Africa EU 27 '000 t 132 145 108 119 141 147 141 USA '000 t 0.1 0.1 0.6 0.8 0.1 0.8 0.3 Canada '000 t 0.0 0.1 0.0 0.0 0.0 0.4 1.4 Switzerland '000 t 0.7 1.2 0.3 0.7 0.4 0.6 0.4 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 99 146 141 115 140 133 124

Russia & East Europe EU 27 '000 t 5 6 3 4 8 9 4 USA '000 t 0.0 1.4 1.0 0.0 0.0 0.2 0.0 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.3 0.3 0.2 0.1 0.3 0.2 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 17 13 14 18 12 15 11

Central & South America EU 27 '000 t 57 42 41 79 45 27 27 USA '000 t 6 3 2 7 3 0.6 1.1 Canada '000 t 0.6 0.5 0.2 0.3 0.1 0.1 0.1 Switzerland '000 t 0.1 0.1 0.3 0.3 0.9 0.0 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 206 232 257 346 346 206 260

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

55

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Whey products tradeAsia EU 27 '000 t 193 221 207 202 265 250 343 USA '000 t 183 200 153 193 252 286 292 Canada '000 t 11 11 8 8 13 13 14 Switzerland '000 t 0.1 0.1 0.2 0.0 0.3 0.1 0.6 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 107 118 111 98 99 91 118

Middle East & North Africa EU 27 '000 t 17 19 18 22 27 29 24 USA '000 t 3 3 6 5 2 4 2 Canada '000 t 0.3 1.8 1.6 2 1.7 4 3 Switzerland '000 t 0.0 0.0 0.0 0.0 0.1 0.2 0.9 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 9 7 11 9 7 10 15

Central & Southern Africa EU 27 '000 t 13 14 10 13 10 13 15 USA '000 t 0.2 0.4 0.7 0.7 0.0 0.3 0.2 Canada '000 t 0.1 0.4 0.2 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 1.4 1.9 3 2 1.9 1.8 3

Russia & East Europe EU 27 '000 t 59 45 51 61 56 50 30 USA '000 t 3 2 6 2 1.0 1.2 0.0 Canada '000 t 0.0 0.2 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.1 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.1 0.0 Other sources ** '000 t 9 3 2 5 2 8 8

Central & South America EU 27 '000 t 24 22 24 23 16 11 10 USA '000 t 73 78 84 81 74 81 74 Canada '000 t 1.9 3 1.3 3 3 3 2 Switzerland '000 t 0.6 0.4 0.4 0.4 0.2 0.2 0.2 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 28 31 42 37 33 36 38

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… Includes whey powder & concentrate. See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

56

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Milk tradeAsia EU 27 '000 t 1.2 1.2 1.1 4 6 9 22 USA '000 t 0.9 0.8 1.2 1.4 1.0 3 5 Canada '000 t 0.3 0.1 0.2 0.1 0.0 0.0 0.0 Switzerland '000 t 0.0 0.1 0.1 0.3 0.1 0.1 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 162 162 173 173 173 200 202

Middle East & North Africa EU 27 '000 t 22 14 24 13 7 28 24 USA '000 t 0.0 0.1 0.4 0.3 0.5 0.2 0.0 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 55 83 109 50 75 96 99

Central & Southern Africa EU 27 '000 t 52 49 57 60 66 75 87 USA '000 t 0.0 0.0 0.2 0.6 0.0 0.3 0.2 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 39 31 71 87 82 85 86

Russia & East Europe EU 27 '000 t 5 7 10 12 14 17 20 USA '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 25 36 37 57 70 47 62

Central & South America EU 27 '000 t 0.9 1.1 1.2 1.7 2 3 3 USA '000 t 27 25 44 39 26 26 28 Canada '000 t 0.3 0.2 0.2 0.0 0.0 0.0 0.0 Switzerland '000 t 0.7 0.0 0.8 0.0 0.0 0.1 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 95 62 77 69 73 81 88

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… Includes skim & whole milk. See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

57

28. Regional trade supported by export subsidies – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Fermented products tradeAsia EU 27 '000 t 18 17 14 13 13 19 22 USA '000 t 0.7 3 2 4 1.5 3 4 Canada '000 t 0.4 0.0 0.1 0.1 0.1 0.3 0.1 Switzerland '000 t 0.6 0.7 0.9 0.8 1.0 1.1 1.8 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 49 63 60 48 65 60 57

Middle East & North Africa EU 27 '000 t 4 4 4 5 6 6 10 USA '000 t 0.2 0.1 0.1 3 0.2 1.0 3 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.1 0.2 0.2 0.2 0.2 0.3 0.3 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 48 62 80 30 60 57 68

Central & Southern Africa EU 27 '000 t 14 13 17 15 21 25 28 USA '000 t 0.0 0.0 0.2 0.1 0.0 0.0 0.1 Canada '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 11 9 18 15 13 14 22

Russia & East Europe EU 27 '000 t 21 18 29 24 17 21 27 USA '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Canada '000 t 0.1 0.1 0.0 0.0 0.0 0.0 0.0 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 1.4 0.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 55 72 90 84 69 57 69

Central & South America EU 27 '000 t 6 5 4 4 3 4 4 USA '000 t 6 6 7 8 8 8 14 Canada '000 t 0.1 0.0 0.0 0.0 0.0 0.3 0.1 Switzerland '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 21 21 31 36 35 34 31

# Regional imports from export suppliers that provided subsidies, year ended December 31. Source: FAO 2014. Includes butter milk powder, acidified milk & yoghurt. See table 30 for market composition of regional trade.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Regional imports from other export suppliers that did not provide subsidies.

= trade supported by export subsidies

Food crisis *

58

29. Regional trade supported by export subsidies – Meat products #

2005 2006 2007 2008 2009 2010 2011GFC

Beef tradeAsia EU 27 - subsidised '000 t 2 3 2 4 8 5 13 EU 27 - other '000 t 0.3 0.0 0.1 0.1 0.0 0.1 0.4 Norway '000 t 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 1 059 1 102 1 185 1 206 1 367 1 436 1 518

Middle East & North Africa EU 27 - subsidised '000 t 20 19 11 14 13 25 19 EU 27 - other '000 t 0.6 0.1 0.0 0.1 0.0 1.2 1.6 Norway '000 t 0.0 0.3 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 510 652 708 516 665 760 745

Central & Southern Africa EU 27 - subsidised '000 t 35 26 18 17 14 16 24 EU 27 - other '000 t 0.0 0.0 0.0 0.0 0.0 0.1 0.0 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 73 94 103 88 67 49 60

Russia & East Europe EU 27 - subsidised '000 t 101 95 53 59 22 137 199 Norway '000 t 0.0 1.2 0.2 0.0 0.0 0.0 0.0 Other sources ** '000 t 672 659 742 826 678 575 570

Central & South America EU 27 - subsidised '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EU 27 - other '000 t 1.0 0.4 0.2 3.6 2 2 1.1 Norway '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources ** '000 t 496 491 642 744 658 537 588

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… Includes boneless beef, cattle meat & beef preparations - excludes beef sausages. See table 30 for market composition of regional trade & EU 27 trade definitions.

= trade supported by export subsidies

Food crisis *

59

29. Regional trade supported by export subsidies – Meat products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Pig meat tradeAsia EU 27 - ham '000 t 2 2 2 2 2 2 3 Norway - ham '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - ham ** '000 t 6 6 6 5 7 7 8

EU 27 - meat '000 t 495 443 516 755 561 685 916 Norway - meat '000 t 0.0 0.0 0.0 0.2 0.2 0.6 0.9 Other sources - meat ** '000 t 1 192 1 213 1 297 1 605 1 442 1 385 1 715

Middle East & North Africa EU 27 - ham '000 t 0.7 0.5 0.6 0.5 0.6 0.5 0.8 Norway - ham '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - ham ** '000 t 0.3 0.3 0.5 0.5 0.3 0.3 0.1

EU 27 - meat '000 t 3 3 4 4 4 5 5 Norway - meat '000 t 0.0 0.0 0.0 0.1 0.0 0.0 0.0 Other sources - meat ** '000 t 8 8 10 11 10 8 8

Central & Southern Africa EU 27 - ham '000 t 3 4 5 4 5 4 5 Norway - ham '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - ham ** '000 t 2 2 1 0 1 1 1

EU 27 - meat '000 t 36 52 56 51 56 76 86 Norway - meat '000 t 0.0 0.0 0.0 0.0 0.1 0.0 0.1 Other sources - meat ** '000 t 36 29 42 45 58 48 52

Russia & East Europe EU 27 - ham '000 t 2 2 2 3 2 4 5 Norway - ham '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - ham ** '000 t 0 0 1 1 0 0 0

EU 27 - meat '000 t 164 306 272 491 344 434 512 Norway - meat '000 t 1.6 4 0.3 0.2 1.2 2 1.5 Other sources - meat ** '000 t 528 477 529 609 533 427 397

Central & South America EU 27 - ham '000 t 1.2 1.2 1.4 2 2 3 3 Norway - ham '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - ham ** '000 t 30 17 18 21 23 24 23

EU 27 - meat '000 t 0.9 1.1 0.9 2 2 3 5 Norway - meat '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other sources - meat ** '000 t 366 416 440 504 623 669 621

# Regional imports from export suppliers that provided subsidies, year ended December 31. Continued …… Ham includes bacon. Meat includes pig meat, pork & pig meat preparations - excludes pig meat sausages. See table 30 for market composition of regional trade.

= trade supported by export subsidies

Food crisis *

60

29. Regional trade supported by export subsidies – Meat products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Chicken meat tradeAsia EU 27 - subsidised '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EU 27 - other '000 t 86 75 83 87 99 168 254 Other sources ** '000 t 1 941 2 249 2 683 3 095 3 122 3 414 3 883

Middle East & North Africa EU 27 - subsidised '000 t 177 129 138 166 176 195 240 EU 27 - other '000 t 5 5 5 6 6 9 15 Other sources ** '000 t 897 892 1 162 1 372 1 779 1 764 1 873

Central & Southern Africa EU 27 - subsidised '000 t 5 14 9 11 7 14 14 EU 27 - other '000 t 137 133 132 148 165 213 333 Other sources ** '000 t 386 449 525 541 624 784 870

Russia & East Europe EU 27 - subsidised '000 t 229 241 237 229 214 229 133 EU 27 - other '000 t 15 12 15 18 19 19 29 Other sources ** '000 t 1 380 1 350 1 403 1 509 1 152 879 708

Central & South America EU 27 - subsidised '000 t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EU 27 - other '000 t 6 5 0.5 0.7 5 0.7 0.6 Other sources ** '000 t 709 727 925 1 221 1 209 1 275 1 321

# Regional imports from export suppliers that provided subsidies, year ended December 31. Source: FAO 2014. Includes canned product. See table 30 for market composition of regional trade & EU 27 trade definitions.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Regional imports from other export suppliers that did not provide subsidies.

= carcase trade supported by export subsidies = carcase & selected bone-in trade supported by export subsidies

Food crisis *

61

30. Market composition of regional trade #

Region Import markets

Asia * North Asia China, Hong Kong, Japan, South Korea, Taiwan South East Asia Brunei, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam Central Asia Bangladesh, India, Pakistan, Sri Lanka

Middle East & North Africa ** Middle East Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria,

UAE, Yemen North Africa Algeria, Egypt, Libya, Morocco, Tunisia

Central & Southern Africa *** Africa LDEs **** Angola, Benin, Burkina Faso, Burundi, Cape Verde, Chad, Central African Republic,

Comoros, Congo Democratic Republic, Djibouti, Equatorial Guinea, Eritrea, Ethiopia,Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania,Mozambique, Niger, Rwanda, São Tomé, Senegal, Sierra Leone, Somalia, Sudan,Tanzania, Togo, Uganda, Zambia,

Other Africa Botswana, Cameroon, Congo Republic, Côte d'Ivoire, Gabon, Ghana, Kenya, Mauritius,Nigeria, South Africa, Swaziland, Zimbabwe

Russia & East Europe ^ Eastern Europe Albania, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova,

Russia, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

Central & South America ^^ Central America Costa Rica, Cuba, Dominica, Dominican Republic, El Salvador, Guatemala, Haiti,

Honduras, Jamaica, Mexico, Nicaragua, Trinidad South America Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Surinam,

Uruguay, Venezuela

# Regions defined to correspond with selected import markets that were eligible for EU export refunds in 2009. Where FAO import data was unavailable estimates were derived from an aggregation of exports by all suppliers. In regional import tables EU 27 - other is an aggregation of markets not eligible for EU export refunds. In all regional chicken meat trade EU 27 - subsidised includes boneless products which were not eligible for export refunds. The FAO data had insufficient disaggregation & the estimate may be overstated for some markets. Canned chicken meat not eligible for EU export refunds & included in EU - 27 other.* For regional beef trade EU 27 - other includes Bangladesh, Japan, Malaysia, Singapore, South Korea & Taiwan. For regional chicken meat trade EU 27 - other includes all Asia markets.** For regional beef trade EU 27 - other includes Egypt. For regional chicken meat trade EU 27 - other includes Algeria, Egypt, Israel, Libya, Morocco, Syria, Tunisia.*** For regional cheese trade EU 27 - other includes South Africa (export refund eligibility ended April 2008). For regional beef trade EU 27 - other includes Botswana, Kenya, Madagascar, Swaziland & Zimbabwe. For regional chicken meat trade EU 27 - other includes all Central & Southern Africa markets except Angola.**** Africa LDEs - Least Developed Economies as defined by the United Nations.^ For regional cheese trade EU 27 - other includes Turkey. For regional chicken meat trade EU 27 - other includes Albania & Turkey.^^ For regional beef trade EU 27 - other includes all Central & South America markets. For regional chicken meat trade EU 27 - other includes all Central & South America markets.

62

Appendix D: Conceptual view of export subsidies EU export refunds can be used as a generalised example of the effect of export subsidies on global product markets. For export sales the net return received by an EU trader is composed of the product price in the destination market plus an export refund (subsidy). For simplicity the product price can be represented by a ‘world indicator price’. In reality there is no single world price. The price received for sales to different markets will vary. However, a cif or fob export price received by a major exporting economy for a common product specification is often used as an indicator of the traded product value. These prices are generally referred to as the world indicator price. The following conceptual diagrams illustrate the effects of the export subsidy on EU exporters, the world price, competing exporter suppliers and importing markets. Panel A shows the EU product market effect. If the net return on exports (Per) is more than the return from sales of the same product on the EU domestic market there will be an expansion in exports. The net return is sum of the traded product price (Pw*) and the export subsidy. The export growth comes from a combination of reduced domestic consumption (Qc*) and increased production (Qs*):

• exports increase from (Qs – Qc) to (Qs* – Qc*) Panel B shows the effect of increased EU exports on the world market for a homogeneous (identical) product representation. The expansion in product availability is represented by a shift in the global supply schedule (Sw*). With global demand unchanged the world price declines from Pw to Pw*. Global supply increases to Qws*. This is the net outcome of higher EU exports and the production adjustments by competing export suppliers and producers in importing markets. Panel C shows the adjustment by competing export suppliers. The decline in the world price to Pw* reduces export returns and product prices in other exporting countries. Production declines to Qes* and domestic consumption increases to Qec*:

• exports decline from (Qes – Qec) to (Qes* – Qec*). Panel D shows the adjustment in importing markets for a homogenous product representation. The availability of lower priced imports (Pw*) generates an increased demand for the product. There’s a market expansion effect with total consumption rising to Qic*. As the domestic output and imports are the same products the lower price causes a domestic product adjustment to Qis*:

• imports increase from (Qic – Qis) to (Qic* – Qis*) Panel E shows the adjustment in importing markets for a substitute product representation. This outcome can occur if the imported product is a substitute for a different product. For example, imports of frozen beef competing with domestic supplies of fresh pig and poultry meat. A similar outcome occurs if the imports are a similar but differentiated product relative to the domestic output. Examples include WMP imports competing with domestic fresh milk supplies or imports of frozen grass fed beef competing with domestic supplies of fresh beef. The availability of lower priced imports is represented by a shift in the domestic demand schedule (Dim*). The effect (i.e. size of demand shift) will depend on the degree of price discounting by the exporter and the strength of the substitution relationship. A contraction in demand for the domestic product will cause market returns to fall (Pim*) and production to decline (Qim*). The growth in imports at lower prices causes the domestic industry to contact.

63

A. EU product  market  – exporter  effect  of  subsidy

Export  subsidy

B. World  market  indicator  priceB. World  market  for  traded  product  – price  effect

Exports  =  homogenousproduct

C.  Competing exporter  product  market  – subsidised  trade  effect

Exports  =  homogenousproduct

64

D.    Importing market  – effect  of  subsidised   trade

Imports  =  homogeneousproduct

E.    Importing market  – effect  of  subsidised   trade

Imports  =  substituteproduct

65

Appendix E: Assistance from export subsidies

31. EU assistance from export subsidies – Cereal & sugar products #

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GFC

Common wheat flour World price US$/t 298 336 389 555 481 446 539 535 561 520

% change 4 13 16 43 - 13 - 7 21 - 1 5 - 7 Subsidy period mths 11 6 0 0 0 0 0 0 0 0 Export subsidy ** US$/t 8 6 0 0 0 0 0 0 0 0 Rate of assistance *** % 9 7 .. .. .. .. .. .. .. ..

Corn meal & groats World price US$/t 348 363 416 486 437 467 647 640 645 476

% change - 7 5 14 17 - 10 7 38 - 1 1 - 26 Subsidy period mths 12 11 7 0 0 0 0 0 0 0 Export subsidy ** US$/t 70 53 17 0 0 0 0 0 0 0 Rate of assistance *** % 20 15 4 .. .. .. .. .. .. ..

Raw cane or beet sugar World price US$/t 218 326 222 282 400 469 573 475 390 375

% change 38 50 - 32 27 42 17 22 - 17 - 18 - 4 Subsidy period mths 12 12 12 9 0 0 0 0 0 0 Export subsidy ** US$/t 424 300 366 350 0 0 0 0 0 0 Rate of assistance *** % 195 92 165 121 .. .. .. .. .. ..

Refined white sugar World price US$/t 291 419 309 352 488 612 698 584 489 442

% change 21 44 - 26 14 39 26 14 - 16 - 16 - 10 Subsidy period mths 12 12 12 9 .. .. .. .. .. .. Export subsidy ** US$/t 460 324 398 377 0 0 0 0 0 0 Rate of assistance *** % 158 77 129 105 .. .. .. .. .. ..

# Estimate of assistance for EU exporters, year ended December 31. Sources: USDA 2014c & h, 2015c; WB 2014; Estimates based on export subsidy codes for commonly traded products. OJEU 2007a b & e, 2008. Code selections were common wheat flour ash ≤ 0.6% (1101 00 15 9100), corn groats & meal with fat > 0.9% but ≤ 1.3% & crude fibre ≤ 0.8% (1103 13 10 9300), raw beet or cane sugar with no flavouring (1701 12 90 9100) & refined white sugar with no flavouring & quantity >10 tonnes (1701 99 10 9950). EU exporter returns represented by world price indicators: - FAS US export unit value of all wheat flour for common wheat flour; - US processor price of yellow corn meal, New York for corn meal & groats; - FOB (ISA) daily raw sugar price, Caribbean ports for raw cane or beet sugar; - FOB (ISA Index) white sugar price, contract No. 407 (aka no.5), Europe ports for refined white sugar.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).*** Derived as ratio of export return (inclusive of subsidy) & world price indicator for period of with-in year availability.

Food crisis *

66

32. EU assistance from export subsidies – Dairy products #

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GFC

Butter World price US$/t 2 015 1 913 4 016 3 857 3 420 4 619 5 513 3 913 5 177 4 438

% change 6 - 5 110 - 4 - 11 35 19 - 29 32 - 14 Subsidy period mths 12 12 6 0 11 0 0 0 0 0 Export subsidy ** US$/t 1 378 1 229 993 0 675 0 0 0 0 0 Rate of assistance *** % 68 64 49 .. 21 .. .. .. .. ..

Butter oil World price US$/t 2 564 2 328 4 441 4 627 3 647 5 115 6 074 4 553 6 013 5 466

% change 21 - 9 91 4 - 21 40 19 - 25 32 - 9 Subsidy period mths 12 12 6 0 11 0 0 0 0 0 Export subsidy ** US$/t 1 428 1 496 1 239 0 817 0 0 0 0 0 Rate of assistance *** % 56 64 40 .. 23 .. .. .. .. ..

Cheddar cheese World price US$/t 3 042 2 684 4 080 4 611 2 974 4 010 4 315 3 823 4 404 4 445

% change 12 - 12 52 13 - 36 35 8 - 11 15 1 Subsidy period mths 12 12 6 0 11 0 0 0 0 0 Export subsidy ** US$/t 750 659 159 0 262 0 0 0 0 0 Rate of assistance *** % 25 25 5 .. 9 .. .. .. .. ..

SMP World price US$/t 2 311 2 530 4 433 3 207 2 484 2 934 3 386 3 053 4 073 3 533

% change 12 9 75 - 28 - 23 18 15 - 10 33 - 13 Subsidy period mths 12 6 0 0 9 0 0 0 0 0 Export subsidy ** US$/t 232 80 0 0 259 0 0 0 0 0 Rate of assistance *** % 10 4 .. .. 11 .. .. .. .. ..

WMP World price US$/t 2 315 2 353 4 649 3 948 2 836 3 596 4 276 3 553 4 696 4 083

% change 7 2 98 - 15 - 28 27 19 - 17 32 - 13 Subsidy period mths 12 12 1 0 11 0 0 0 0 0 Export subsidy ** US$/t 724 634 220 0 351 0 0 0 0 0 Rate of assistance *** % 31 27 7 .. 14 .. .. .. .. ..

Whey powder World price US$/t 719 957 1 488 698 723 972 1 297 1 272 1 373 1 305

% change 30 33 55 - 53 4 34 33 - 2 8 - 5 Subsidy period mths 12 6 0 0 9 0 0 0 0 0 Export subsidy ** US$/t 232 80 0 0 259 0 0 0 0 0 Rate of assistance *** % 32 10 .. .. 42 .. .. .. .. ..

# Estimate of assistance for EU exporters, year ended December 31. Sources: OJEU 2011; USDA 2015a. Estimates based on export subsidy codes for commonly traded products. Code selections were butter (0405 10 19 9700), butter oil (0405 90 10 9000), cheddar (0406 90 21 9900), SMP (0402 10 19 9000), WMP (0402 21 18 9900) & whey powder (0404 90 23 9120). EU exporter returns represented by world price indicators: - FOB West Europe port export prices for butter, butter oil, SMP, WMP & whey powder; - FOB Oceania port export price for cheddar cheese.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).*** Derived as ratio of export return (inclusive of subsidy) & world price indicator for period of with-in year availability.

Food crisis *

67

33. EU assistance from export subsidies – Meat products #

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GFC

Frozen boneless manufacturing beef World price US$/t 2 565 2 522 2 544 3 025 2 562 3 272 3 944 4 176 4 009 5 016

% change 3 - 2 1 19 - 15 28 21 6 - 4 25 Subsidy period mths 12 12 12 12 12 12 12 9 0 0 Export subsidy ** US$/t 509 338 310 332 315 259 157 98 0 0 Rate of assistance *** % 20 13 12 11 12 8 4 2 .. ..

Chilled low valued boneless beef cuts World price US$/t 4 649 4 477 4 708 5 061 4 295 4 851 5 667 5 860 5 725 6 089

% change 2 - 4 5 8 - 15 13 17 3 - 2 6 Subsidy period mths 12 12 12 12 12 12 12 9 0 0 Export subsidy ** US$/t 1 051 761 696 747 708 582 354 219 0 0 Rate of assistance *** % 23 17 15 15 16 12 6 4 .. ..

Chilled high valued boneless beef cuts World price US$/t 9 832 9 962 10 693 11 518 9 818 11 023 11 976 12 803 12 457 12 386

% change - 1 1 7 8 - 15 12 9 7 - 3 - 1 Subsidy period mths 12 12 12 12 12 12 12 9 0 0 Export subsidy ** US$/t 1 904 1 269 1 161 1 245 1 180 970 590 366 0 0 Rate of assistance *** % 19 13 11 11 12 9 5 3 .. ..

Chilled bone-in pig meat loin World price US$/t 2 473 2 264 2 278 2 339 2 015 2 537 2 818 2 608 2 554 na

% change - 4 - 8 1 3 - 14 26 11 - 7 - 2 .. Subsidy period mths 0 0 2 8 0 0 0 0 0 0 Export subsidy ** US$/t 0 0 234 432 0 0 0 0 0 0 Rate of assistance *** % .. .. 12 18 .. .. .. .. .. ..

Chilled bone-in ham & ham cuts World price US$/t 1 461 1 415 1 289 1 382 1 130 1 701 1 827 1 632 1 753 na

% change 4 - 3 - 9 7 - 18 51 7 - 11 7 .. Subsidy period mths 0 0 2 8 0 0 0 0 0 0 Export subsidy ** US$/t 0 0 234 432 0 0 0 0 0 0 Rate of assistance *** % .. .. 20 30 .. .. .. .. .. ..

Smoked bone-in ham & ham cuts World price US$/t 1 801 1 702 1 973 2 054 1 779 1 830 1 954 2 065 2 063 2 298

% change 9 - 5 16 4 - 13 3 7 6 0 11 Subsidy period mths 12 12 12 12 12 12 12 4 0 0 Export subsidy ** US$/t 722 681 743 797 755 720 754 646 0 0 Rate of assistance *** % 40 40 38 39 42 39 39 29 .. ..

# Estimate of assistance for EU exporters, year ended December 31. Continued……

Food crisis *

68

33. EU assistance from export subsidies – meat products (cont.) #

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GFC

Frozen whole chicken World price US$/t 1 629 1 526 1 724 1 865 1 888 1 892 1 926 2 079 2 289 2 428

% change - 2 - 6 13 8 1 0 2 8 10 6 Subsidy period mths 12 12 12 12 12 12 12 12 7 0 Export subsidy ** US$/t 426 512 616 714 549 478 452 390 145 0

Rate of assistance *** % 26 34 36 38 29 25 23 19 6 ..

Frozen bone-in chicken leg World price US$/t 1 150 875 1 284 1 415 1 260 1 147 1 375 1 492 1 483 1 353

% change 18 - 24 47 10 - 11 - 9 20 9 - 1 - 9 Subsidy period mths 2 9 0 0 0 0 0 0 0 0 Export subsidy ** US$/t 71 305 0 0 0 0 0 0 0 0 Rate of assistance *** % 7 35 .. .. .. .. .. .. .. ..

# Estimate of assistance for EU exporters, year ended December 31. Sources: OJEU 2013a, 2012a & b; FAO 2015; Estimates based on export subsidy codes for commonly traded products. USDA 2014a; WB 2014; ALIC 2014. Code selections were manufacturing beef ≥ 78% CL (0201 30 00 9100), low value IW fore-quarter beef cuts ≥ 55% CL (0201 30 00 9120), high value IW hind-quarter beef cuts ≥ 55% CL (0201 30 00 9100), pig meat loin (0203 29 13 9100), chilled ham cuts bone cartilage < 25 % (0203 22 11 9100), smoked ham cuts bone cartilage < 25 % (0210 11 31 9910), whole chicken 70% (0207 12 10 9900) & chicken leg (0207 14 60 9900). EU exporter returns represented by world price indicators: - FAS Australian export price of 90% CL frozen boneless cow beef to the US for manufacturing beef; - FAS (equivalent) Japan import unit value of chilled boneless chuck, clod & round for low valued beef cuts; - FAS (equivalent) Japan import unit value of chilled boneless loin for high valued beef cuts; - FOB US processing plant (Iowa) price of bone-in loin, 14-19 lb 1/4", Trim 21 for pig meat loin; - FOB US processing plant (Iowa) price of bone-in ham, trimmed 20-23 lb, Trim Spec 1 for ham cuts; - FAS US export unit value of cured hams & shoulders for smoked ham cuts; - US processor price of broilers/fryers 2.5 to 3 lbs "A" grade, ice-packed Georgia Dock for whole chicken; - US processor price of chicken legs, RTC ice-packed Midwest region for bone-in chicken leg.* Period of strong rise in commodity prices generally referred to as the 'food price crisis'.** Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).*** Derived as ratio of export return (inclusive of subsidy) & world price indicator for period of with-in year availability.

Food crisis *

69

Appendix F: EU export prices

34. EU export prices for regional markets – Dairy products #

2005 2006 2007 2008 2009 2010 2011GFC

ButterWorld indicator price US$/t 2 015 1 913 4 016 3 857 3 420 4 619 5 513

% change 6 -5 110 -4 -11 35 19Export subsidy * US$/t 1 378 1 229 993 0 675 0 0Rate of assistance % 68 64 49 .. 21 .. ..

Asia Small subsidised tradeAll markets ** US$/t 2 630 2 706 3 653 5 236 3 795 5 128 6 416

% change 10 3 35 43 -28 35 25

Middle East & North Africa Large subsidised tradeAll markets ** US$/t 2 356 2 353 2 860 4 595 3 115 4 858 6 236

% change 8 0 22 61 -32 56 28Algeria US$/t 2 389 2 185 3 336 4 654 2 862 4 559 6 048

% change 10 -9 53 39 -39 59 33Egypt US$/t 2 146 2 051 2 375 4 712 2 636 4 528 6 011

% change 13 -4 16 98 -44 72 33Iran US$/t 2 089 2 194 2 360 4 009 2 622 4 295 5 417

% change 4 5 8 70 -35 64 26Morocco US$/t 2 023 1 990 2 642 4 265 2 713 4 518 5 566

% change -1 -2 33 61 -36 67 23Saudi Arabia US$/t 2 632 2 469 3 081 4 919 3 104 5 392 7 003

% change 9 -6 25 60 -37 74 30

Central & Southern Africa Small subsidised tradeAll markets ** US$/t 2 843 3 092 3 958 5 450 3 863 5 201 6 452

% change 10 9 28 38 -29 35 24Africa LDEs *** US$/t 3 113 3 308 4 253 5 837 4 341 5 258 6 437

% change 13 6 29 37 -26 21 22

Russia & East Europe Large subsidised tradeAll markets ** US$/t 2 455 2 321 3 253 4 545 3 238 4 599 5 632

% change 15 -5 40 40 -29 42 22Russia US$/t 2 638 2 394 3 321 4 738 3 351 4 601 5 793

% change 20 -9 39 43 -29 37 26

Central & South America Small subsidised tradeAll markets ** US$/t 2 626 2 608 3 645 5 300 4 335 4 950 6 140

% change 13 -1 40 45 -18 14 24

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

70

34. EU export prices for regional markets – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Natural cheeseWorld indicator price US$/t 3 042 2 684 4 080 4 611 2 974 4 010 4 315

% change 12 -12 52 13 -36 35 8Export subsidy * US$/t 750 659 159 0 262 0 0Rate of assistance % 25 25 5 .. 9 .. ..

Asia Large subsidised tradeAll markets ** US$/t 4 652 4 725 5 539 7 154 6 027 6 336 6 607

% change 6 2 17 29 -16 5 4Japan US$/t 4 532 4 602 5 351 6 853 5 844 6 276 6 721

% change 4 2 16 28 -15 7 7

Middle East & North Africa Substantial subsidised tradeAll markets ** US$/t 3 532 3 762 4 687 5 981 4 632 5 243 5 716

% change 15 7 25 28 -23 13 9Algeria US$/t 3 229 3 250 4 236 5 491 3 799 4 284 5 086

% change 9 1 30 30 -31 13 19Lebanon US$/t 3 381 3 553 4 391 5 602 4 591 4 800 5 108

% change 12 5 24 28 -18 5 6Saudi Arabia US$/t 3 295 3 626 4 650 5 983 4 800 5 440 5 868

% change 18 10 28 29 -20 13 8UAE US$/t 4 293 4 572 5 406 7 225 6 497 7 061 6 722

% change 16 7 18 34 -10 9 -5

Central & Southern Africa Small subsidised tradeAll markets ** US$/t 5 234 5 194 6 091 7 372 6 303 5 390 6 117

% change 3 -1 17 21 -14 -14 13Africa LDEs *** US$/t 5 081 5 052 5 961 7 306 6 075 5 422 6 200

% change 1 -1 18 23 -17 -11 14

Russia & East Europe Substantial subsidised tradeAll markets ** US$/t 3 242 3 418 4 357 5 320 4 195 4 684 5 303

% change 4 5 27 22 -21 12 13Russia US$/t 3 230 3 405 4 339 5 297 4 171 4 671 5 289

% change 4 5 27 22 -21 12 13

Central & South America Small subsidised tradeAll markets ** US$/t 4 364 4 796 5 289 6 634 5 478 5 878 6 991

% change 20 10 10 25 -17 7 19

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

71

34. EU export prices for regional markets – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

SMPWorld indicator price US$/t 2 311 2 530 4 433 3 207 2 484 2 934 3 386

% change 12 9 75 -28 -23 18 15Export subsidy * US$/t 232 80 0 0 259 0 0Rate of assistance % 10 4 .. .. 11 .. ..

Asia Substantial subsidised tradeAll markets ** US$/t 2 217 2 424 3 934 3 827 2 312 2 999 3 510

% change 10 9 62 -3 -40 30 17Indonesia US$/t 2 159 2 509 3 935 3 802 2 297 2 905 3 403

% change 4 16 57 -3 -40 26 17Malaysia US$/t 2 230 2 374 3 988 3 729 2 317 2 897 3 387

% change 13 6 68 -6 -38 25 17Thailand US$/t 2 262 2 553 3 989 3 760 2 318 3 139 3 569

% change 9 13 56 -6 -38 35 14

Middle East & North Africa Substantial subsidised tradeAll markets ** US$/t 2 236 2 514 4 313 3 574 2 297 3 114 3 553

% change 13 12 72 -17 -36 36 14Algeria US$/t 2 215 2 341 4 460 3 539 2 290 3 126 3 564

% change 14 6 91 -21 -35 37 14Egypt US$/t 2 190 2 357 3 680 3 018 2 165 3 006 3 420

% change 11 8 56 -18 -28 39 14Morocco US$/t 2 199 2 514 4 021 3 424 2 245 2 916 3 417

% change 5 14 60 -15 -34 30 17Saudi Arabia US$/t 2 282 2 796 3 879 3 873 2 249 3 060 3 570

% change 10 23 39 0 -42 36 17

Central & Southern Africa Small subsidised tradeAll markets ** US$/t 2 344 2 685 4 355 3 933 2 391 3 754 3 614

% change 10 15 62 -10 -39 57 -4

Russia & East Europe Small subsidised tradeAll markets ** US$/t 2 067 2 762 4 399 3 909 2 524 3 000 3 296

% change 3 34 59 -11 -35 19 10

Central & South America Small subsidised tradeAll markets ** US$/t 2 182 2 496 3 836 4 060 2 139 2 998 3 434

% change 13 14 54 6 -47 40 15

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

72

34. EU export prices for regional markets – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

WMPWorld indicator price US$/t 2 315 2 353 4 649 3 948 2 836 3 596 4 276

% change 7 2 98 -15 -28 27 19Export subsidy * US$/t 724 634 220 0 351 0 0Rate of assistance % 31 27 7 .. 14 .. ..

Asia Large subsidised tradeAll markets ** US$/t 2 318 2 386 3 617 4 400 2 690 3 835 4 645

% change 7 3 52 22 -39 43 21Singapore US$/t 2 425 2 513 3 879 4 630 2 611 3 737 4 210

% change 3 4 54 19 -44 43 13

Middle East & North Africa Substantial subsidised tradeAll markets ** US$/t 2 737 2 748 4 125 4 657 2 883 3 895 4 535

% change 5 0 50 13 -38 35 16Algeria US$/t 2 562 2 590 3 981 4 329 2 826 3 697 4 452

% change 3 1 54 9 -35 31 20Egypt US$/t 2 649 2 395 3 434 4 231 2 470 3 605 4 067

% change 4 -10 43 23 -42 46 13Oman US$/t 2 438 2 362 3 646 4 132 2 190 3 560 3 902

% change 5 -3 54 13 -47 63 10

Central & Southern Africa Substantial subsidised tradeAll markets ** US$/t 2 801 2 853 4 211 5 067 3 037 4 006 4 975

% change 5 2 48 20 -40 32 24Africa LDEs *** US$/t 2 731 2 907 4 361 5 271 3 172 4 069 5 001

% change 5 6 50 21 -40 28 23Angola US$/t 3 108 3 319 4 258 5 553 3 585 4 276 5 138

% change 10 7 28 30 -35 19 20Nigeria US$/t 3 038 2 766 3 982 4 805 2 754 3 915 4 955

% change 5 -9 44 21 -43 42 27

Russia & East Europe Small subsidised tradeAll markets US$/t 2 603 2 829 3 864 4 518 3 075 3 581 4 265

% change 12 9 37 17 -32 16 19

Central & South America Large subsidised tradeAll markets ** US$/t 2 828 2 978 4 136 4 887 3 688 4 211 4 764

% change 12 5 39 18 -25 14 13

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

73

34. EU export prices for regional markets – Dairy products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Whey powderWorld indicator price US$/t 719 957 1 488 698 723 972 1 297

% change 30 33 55 -53 4 34 33Export subsidy * US$/t 232 80 0 0 259 0 0Rate of assistance % 32 10 .. .. 42 .. ..

Asia Substantial subsidised tradeAll markets ** US$/t 1 041 1 210 1 773 1 666 1 204 1 530 1 803

% change 20 16 46 -6 -28 27 18China US$/t 959 1 169 1 611 1 768 1 375 1 694 1 990

% change 14 22 38 10 -22 23 17Indonesia US$/t 1 077 1 175 1 740 1 477 1 073 1 343 1 639

% change 16 9 48 -15 -27 25 22Japan US$/t 1 938 1 984 2 591 3 515 3 097 3 036 2 855

% change 21 2 31 36 -12 -2 -6Malaysia US$/t 796 976 1 672 1 182 777 1 154 1 417

% change 13 23 71 -29 -34 48 23

Middle East & North Africa Small subsidised tradeAll markets ** US$/t 909 1 068 1 763 1 347 883 1 229 1 495

% change 15 18 65 -24 -34 39 22

Central & Southern Africa Small subsidised tradeAll markets ** US$/t 1 186 1 304 2 187 1 933 1 440 1 403 1 909

% change 12 10 68 -12 -26 -3 36

Russia & East Europe Large subsidised tradeAll markets ** US$/t 750 899 1 452 991 811 1 104 1 440

% change 16 20 61 -32 -18 36 30Russia US$/t 740 878 1 421 973 809 1 103 1 431

% change 17 19 62 -32 -17 36 30

Central & South America Small subsidised tradeAll markets ** US$/t 870 1 055 1 696 1 530 1 354 1 784 2 566

% change 21 21 61 -10 -11 32 44

# Average FOB export unit values for EU 27 trade, year ended December 31. Sources: USDA 2015a, FAO 2014. Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions.* Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).** Average for markets eligible for EU export refunds - see table 30 for market composition of regional trade.*** LDEs - Least Developed Economies as defined by the United Nations.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Substantial subsidised trade = > 75 ktLarge subsidised trade = 50 to 75 ktSmall subsidised trade = < 50 kt

Food crisis *

Scale of EU regional trade

74

35. EU export prices for regional markets – Meat products #

2005 2006 2007 2008 2009 2010 2011GFC

BeefWorld indicator price US$/t 2 565 2 522 2 544 3 025 2 562 3 272 3 944

% change 3 -2 1 19 -15 28 21Export subsidy * US$/t 509 338 310 332 315 259 157Rate of assistance % 20 13 12 11 12 8 4

Asia Small subsidised tradeAll markets ** US$/t 4 223 5 375 7 727 3 855 2 134 1 963 2 667

% change 71 27 44 -50 -45 -8 36

Middle East & North Africa Small subsidised tradeAll markets ** US$/t 2 703 2 878 4 348 5 705 5 171 4 914 5 742

% change 8 6 51 31 -9 -5 17Algeria US$/t 2 362 1 967 3 132 4 303 4 630 4 270 4 984

% change -18 -17 59 37 8 -8 17Israel US$/t 4 614 4 658 4 827 5 297 4 896 5 524 6 234

% change -15 1 4 10 -8 13 13Morocco US$/t 3 873 3 884 4 127 4 739 4 889 4 327 5 114

% change 43 0 6 15 3 -11 18

Central & Southern Africa Small subsidised tradeAll markets ** US$/t 1 825 1 890 2 279 1 761 1 901 2 071 1 921

% change 26 4 21 -23 8 9 -7Africa LDEs *** US$/t 2 016 3 093 3 599 5 344 4 966 4 201 3 497

% change 34 53 16 48 -7 -15 -17Côte d'Ivoire US$/t 1 055 1 634 1 734 1 190 924 1 191 1 193

% change -62 55 6 -31 -22 29 0

Russia & East Europe Substantial subsidised tradeAll markets ** US$/t 2 084 2 369 2 694 3 419 3 584 3 695 4 226

% change 30 14 14 27 5 3 14Kazakhstan US$/t 2 276 2 188 2 179 3 295 2 992 2 919 3 796

% change 55 -4 0 51 -9 -2 30Turkey US$/t 3 155 2 676 3 042 4 406 4 911 4 440 4 232

% change 21 -15 14 45 11 -10 -5Russia US$/t 2 098 2 387 2 766 3 433 3 660 3 238 4 240

% change 30 14 16 24 7 -12 31

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions. Central & South America markets excluded - not eligible for EU export refunds.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

75

35. EU export prices for regional markets – Meat products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Chicken meatWorld indicator price US$/t 1 629 1 526 1 724 1 865 1 888 1 892 1 926

% change -2 -6 13 8 1 0 2Export subsidy * US$/t 426 512 616 714 549 478 452Rate of assistance % 26 34 36 38 29 25 23

Middle East & North Africa Substantial subsidised tradeAll markets ** US$/t 1 123 1 019 1 309 1 700 1 381 1 548 1 876

% change 24 -9 28 30 -19 12 21Bahrain US$/t 1 088 1 009 1 350 1 859 1 526 1 574 1 868

% change 5 -7 34 38 -18 3 19Oman US$/t 1 126 1 084 1 340 1 846 1 503 1 514 1 826

% change 30 -4 24 38 -19 1 21Qatar US$/t 1 175 942 1 278 1 789 1 512 1 518 1 716

% change 5 -20 36 40 -15 0 13Saudi Arabia US$/t 1 119 1 018 1 331 1 674 1 347 1 612 1 975

% change 22 -9 31 26 -20 20 23UAE US$/t 1 195 975 1 261 1 753 1 492 1 553 1 872

% change 18 -18 29 39 -15 4 21Yemen US$/t 1 067 1 056 1 277 1 710 1 345 1 412 1 679

% change 31 -1 21 34 -21 5 19

Central & Southern Africa Small subsidised tradeAngola US$/t 868 835 1 174 1 446 1 449 1 369 1 585

% change 3 -4 41 23 0 -6 16

Russia & East Europe Substantial subsidised tradeAll markets ** US$/t 615 512 822 1 022 917 1 055 873

% change -10 -17 60 24 -10 15 -17Belarus US$/t 855 581 670 875 733 627 844

% change -3 -32 15 31 -16 -14 35Georgia US$/t 716 646 668 880 1 022 803 1 260

% change -19 -10 3 32 16 -21 57Kazakhstan US$/t 581 489 572 861 557 639 817

% change -27 -16 17 50 -35 15 28Russia US$/t 646 629 908 1 149 1 006 1 210 970

% change -6 -3 44 26 -12 20 -20

# Average FOB export unit values for EU 27 trade, year ended December 31. Continued …… Trading regions colour coded for scale of EU subsidised trade - see table footnotes for colour code definitions. Asia markets and Central & South America markets excluded - not eligible for EU export refunds.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

Food crisis *

76

35. EU export prices for regional markets – Meat products (cont.) #

2005 2006 2007 2008 2009 2010 2011GFC

Pig meat - HamWorld indicator price US$/t 1 801 1 702 1 973 2 054 1 779 1 830 1 954

% change 9 -5 16 4 -13 3 7Export subsidy * US$/t 722 681 743 797 755 720 754Rate of assistance % 40 40 38 39 42 39 39

Asia Small subsidised tradeAll markets ** US$/t 10 880 9 602 14 183 8 685 11 634 11 016 11 857

% change -9 -12 48 -39 34 -5 8Japan US$/t 16 662 14 415 17 896 9 474 16 330 14 439 14 668

% change 2 -13 24 -47 72 -12 2

Middle East & North Africa Small subsidised tradeAll markets ** US$/t 4 811 6 241 6 889 8 306 6 706 7 007 7 344

% change -4 30 10 21 -19 4 5

Central & Southern Africa Large subsidised tradeAll markets ** US$/t 2 088 2 256 2 681 3 445 2 947 3 293 4 182

% change 8 8 19 28 -14 12 27Africa LDEs *** US$/t 3 738 3 404 4 352 6 002 3 696 4 330 5 207

% change 13 -9 28 38 -38 17 20Angola US$/t 5 660 4 419 5 727 7 327 4 495 6 806 6 753

% change 14 -22 30 28 -39 51 -1Ghana US$/t 693 564 691 1 078 992 1 156 1 323

% change 13 -19 22 56 -8 17 14

Russia & East Europe Large subsidised tradeAll markets ** US$/t 3 667 5 133 5 905 6 508 5 817 4 807 5 181

% change -18 40 15 10 -11 -17 8Russia US$/t 5 148 5 184 6 140 7 014 6 470 5 238 5 207

% change 15 1 18 14 -8 -19 -1

Central & South America Small subsidised tradeAll markets ** US$/t 9 261 8 631 10 749 11 512 10 281 10 124 11 596

% change 15 -7 25 7 -11 -2 15

# Average FOB export unit values for EU 27 trade, year ended December 31. Sources: USDA 2014a; WB 2014 Trading regions colour coded for scale of EU subsidised trade - see table footnotes FAO 2015 & 2014. for colour code definitions.* Average subsidy for period of with-in year availability (i.e. excludes days when subsidies not provided).** Average for markets eligible for EU export refunds - see table 30 for market composition of regional trade.*** LDEs - Least Developed Economies as defined by the United Nations.

= EU export price fall (rise) greater (smaller) than world price fall (rise).

HamSubstantial subsidised trade = > 10 kt

Large subsidised trade = 5 to 10 ktSmall subsidised trade = < 5 kt < 50 kt

Food crisis *

Beef & chickenScale of EU regional trade: > 75 kt

50 to 75 kt

77

Appendix G: Economies affected by subsidised trade

36. Economies affected by EU export subsidies – Dairy products #

Region

Butter

Asia Small subsidised trade Large exporters Australia, NZ Other significant exporters USA Large importers .. Other significant importers China, Hong Kong, Indonesia, Japan, Singapore, Taiwan

Middle East & North Africa Large subsidised trade Large exporters Australia, NZ, USA Other significant exporters Argentina, Brazil, China, India, Malaysia, Singapore, Uruguay Large importers Iran, Morocco, Saudi Arabia Other significant importers Algeria, Egypt, Kuwait, Lebanon, Syria, UAE

Central & Southern Africa Small subsidised trade Large exporters .. Other significant exporters NZ Large importers .. Other significant importers Nigeria, Sth Africa

Russia & East Europe Large subsidised trade Large exporters NZ Other significant exporters Argentina, Australia, Belarus, Russia, Ukraine, USA, Uruguay Large importers Russia Other significant importers Turkey, Uzbekistan

Central & South America Small subsidised trade Large exporters NZ Other significant exporters Argentina, Australia, USA, Uruguay Large importers .. Other significant importers Mexico

Cheese

Asia Large subsidised trade Large exporters Argentina, Australia, NZ, USA Other significant exporters Uruguay Large importers Japan Other significant importers China, Hong Kong, Korea, Singapore, Taiwan, Vietnam

Middle East & North Africa Substantial subsidised trade Large exporters Australia, Egypt, Morocco, NZ, Turkey, USA Other significant exporters Canada, Tunisia Large importers Algeria, Lebanon, Saudi Arabia, UAE Other significant importers Bahrain, Egypt, Iraq, Jordan, Kuwait, Libya, Morocco, Oman

Continued ……

Affected export suppliers & importing markets

78

36. Economies affected by EU export subsidies – Dairy products (cont.) #

Region

Central & Southern Africa * Small subsidised trade Large exporters .. Other significant exporters Australia, Sth Africa Large importers .. Other significant importers Angola

Russia & East Europe ** Substantial subsidised trade Large exporters Argentina, Russia, Ukraine Other significant exporters Kyrgyzstan, NZ, Uruguay Large importers Russia Other significant importers Azerbaijan, Kazakhstan, Ukraine

Central & South America Small subsidised trade Large exporters Argentina, Chile, NZ, Nicaragua, USA, Uruguay Other significant exporters Australia, Brazil, Colombia, Costa Rica, Honduras Large importers .. Other significant importers Brazil, Cuba, Dominican Rep, Mexico, Venezuela

SMP

Asia Substantial subsidised trade Large exporters Australia, India, NZ, USA Other significant exporters Argentina, Belarus, Canada, Malaysia, Singapore, Switzerland, Ukraine Large importers Indonesia, Malaysia, Thailand Other significant importers Bangladesh, China, Japan, Korea, Pakistan, Philippines, Singapore, Vietnam

Middle East & North Africa Substantial subsidised trade Large exporters Australia, India, NZ, Ukraine, USA Other significant exporters Argentina, Belarus, Canada, Malaysia, Singapore, Switzerland, Uruguay Large importers Algeria, Egypt Other significant importers Jordan, Lebanon, Libya, Morocco, Saudi Arabia, Syria, Tunisia, UAE, Yemen

Central & Southern Africa Small subsidised trade Large exporters NZ Other significant exporters Australia, Malaysia, Sth Africa, Ukraine, USA Large importers Nigeria Other significant importers Ghana, Mauritania, Sth Africa

Russia & East Europe Small subsidised trade Large exporters Ukraine Other significant exporters Belarus, Switzerland, USA Large importers Russia Other significant importers ..

Central & South America Small subsidised trade Large exporters Argentina, NZ, USA, Uruguay Other significant exporters Australia, Canada, Chile Large importers .. Other significant importers Cuba, Mexico

Continued ……

Affected export suppliers & importing markets

79

36. Economies affected by EU export subsidies – Dairy products (cont.) #

Region

WMP

Asia Large subsidised trade Large exporters Australia, China, Malaysia, NZ, Philippines, Singapore, USA Other significant exporters Argentina, Canada, Indonesia, Thailand Large importers Hong Kong, Singapore Other significant importers Bangladesh, China, Indonesia, Malaysia, Philippines, Thailand, Vietnam

Middle East & North Africa Substantial subsidised trade Large exporters Argentina, Australia, Indonesia, Malaysia, NZ, Other significant exporters Brazil, India, Singapore, Ukraine, USA, Uruguay Large importers Algeria, Egypt, Lebanon, Oman, Saudi Arabia, UAE Other significant importers Iran, Iraq, Israel, Jordan, Kuwait, Libya, Qatar, Syria, Tunisia, Yemen

Central & Southern Africa Substantial subsidised trade Large exporters Argentina, NZ Other significant exporters Australia, Brazil, China, Malaysia, Oman, Singapore, Sth Africa, UAE, Uruguay Large importers Angola, Nigeria, Senegal Other significant importers Burkina Faso, Cabo Verde, Cameroon, Congo Rep, Congo Democratic Rep,

Côte d'Ivoire, Gabon, Gambia, Ghana, Guinea, Mali, Mauritania, Niger, Sudan

Russia & East Europe Small subsidised trade Large exporters .. Other significant exporters Belarus, Russia, Ukraine Large importers .. Other significant importers Russia, Turkey

Central & South America Large subsidised trade Large exporters Argentina, Brazil, NZ, Uruguay Other significant exporters Australia, Chile, China, Colombia, Costa Rica, Nicaragua, USA, Large importers Dominican Rep, Venezuela Other significant importers Cuba, Guyana, Trinidad

Whey products

Asia Substantial subsidised trade Large exporters Argentina, Australia, Canada, NZ, USA Other significant exporters Chile, India, Singapore, Sth Africa, Turkey, Ukraine, Uruguay Large importers China, Indonesia, Japan, Malaysia, Pakistan, Thailand, Vietnam Other significant importers Bangladesh, Korea, Philippines, Singapore, Taiwan

Middle East & North Africa Small subsidised trade Large exporters .. Other significant exporters Australia, Canada, Turkey, Ukraine, USA Large importers .. Other significant importers Algeria, Egypt, Iran, Morocco, Saudi Arabia, Tunisia, UAE

Central & Southern Africa Small subsidised trade Large exporters .. Other significant exporters .. Large importers .. Other significant importers Ghana, Sth Africa

Continued ……

Affected export suppliers & importing markets

80

36. Economies affected by EU export subsidies – Dairy products (cont.) #

Region

Russia & East Europe Large subsidised trade Large exporters .. Other significant exporters Ukraine, USA Large importers Russia Other significant importers Ukraine

Central & South America Small subsidised trade Large exporters Argentina, USA, Uruguay Other significant exporters Australia, Canada, Chile Large importers .. Other significant importers Brazil, Colombia, Mexico, Peru, Venezuela

Milk

Asia Small subsidised trade Large exporters Australia, Indonesia, NZ, Thailand Other significant exporters Argentina, Brazil, India, Malaysia, Singapore, USA, Uruguay Large importers .. Other significant importers ..

Middle East & North Africa Small subsidised trade Large exporters .. Other significant exporters Egypt, Tunisia, Turkey Large importers Saudi Arabia Other significant importers Libya

Central & Southern Africa Large subsidised trade Large exporters Sth Africa Other significant exporters Argentina, Egypt, Kenya, Saudi Arabia, Uganda, Uruguay, Yemen Large importers Angola, Mauritania Other significant importers Cabo Verde, Gabon, Gambia, Ghana, Nigeria, Senegal

Russia & East Europe Small subsidised trade Large exporters Kyrgyzstan, Russia Other significant exporters Belarus, Uganda, Ukraine Large importers .. Other significant importers Albania, Russia

Central & South America Small subsidised trade Large exporters Costa Rica, USA, Uruguay Other significant exporters Argentina, Colombia, Ecuador, Honduras, Mexico, Nicaragua, Paraguay Large importers .. Other significant importers ..

Fermented products

Asia Small subsidised trade Large exporters Australia, NZ Other significant exporters Malaysia, Singapore, Thailand, USA Large importers .. Other significant importers Indonesia, Philippines, Singapore, Thailand

Continued ……

Affected export suppliers & importing markets

81

36. Economies affected by EU export subsidies – Dairy products (cont.) #

Region

Middle East & North Africa Small subsidised trade Large exporters .. Other significant exporters Algeria, Turkey Large importers .. Other significant importers ..

Central & Southern Africa Small subsidised trade Large exporters .. Other significant exporters Sth Africa Large importers .. Other significant importers Angola, Cabo Verde, Nigeria, Togo

Russia & East Europe Small subsidised trade Large exporters Russia Other significant exporters Kyrgyzstan, Ukraine Large importers Russia Other significant importers Albania, Azerbaijan

Central & South America Small subsidised trade Large exporters .. Other significant exporters Argentina, Brazil, Costa Rica, Mexico, NZ, USA, Uruguay Large importers .. Other significant importers Peru

# Assessment based on average annual trade for the 2005-11 period. Source: FAO 2014. Excludes export trade likely to reflect significant regional trans-shipments (e.g. Middle East, Central Africa, China). Large exporters are EU competitors with regional trade to markets eligible for EU export subsidies > 10 kt. Other significant exporters are EU competitors with regional trade to eligible markets of 2.5 kt to 10 kt. Large importers are regional markets eligible for EU export subsidies with EU shipments > 10 kt. Other significant importers are eligible regional markets with EU shipments of 2.5 kt to 10 kt. See table 30 for market composition of regional trade.* Excludes South Africa - not eligible for EU export refunds from April 2008.** Excludes Turkey - not eligible for EU export refunds.

Substantial subsidised trade = > 75 ktLarge subsidised trade = 50 to 75 ktSmall subsidised trade = < 50 kt

Scale of EU subsidised trade

Affected export suppliers & importing markets

82

37. Economies affected by EU export subsidies – Meat products #

Region

Beef

Asia * Small subsidised trade Large exporters Australia, Brazil, Canada, India, NZ, USA Other significant exporters Argentina, China, Paraguay, Uruguay Large importers .. Other significant importers Hong Kong

Middle East & North Africa ** Small subsidised trade Large exporters Argentina, Australia, Brazil, China, India, USA, Uruguay Other significant exporters NZ, Pakistan, Panama, Paraguay Large importers .. Other significant importers Algeria, Israel, Lebanon, Tunisia

Central & Southern Africa *** Small subsidised trade Large exporters Brazil, India Other significant exporters Argentina, Australia, Paraguay, Sth Africa, Uruguay Large importers .. Other significant importers Angola, Congo Democratic Rep, Ghana

Russia & East Europe Substantial subsidised trade Large exporters Argentina, Australia, Brazil, India, Paraguay, Ukraine, USA, Uruguay Other significant exporters China, Mongolia, Russia Large importers Russia Other significant importers Belarus, Kazakhstan

Central & South America No subsidised trade

Chicken meat

Asia No subsidised trade

Middle East & North Africa ** Substantial subsidised trade Large exporters Argentina, Brazil, Turkey, USA Other significant exporters China, Malaysia, Uruguay Large importers Oman, Saudi Arabia, UAE, Yemen Other significant importers Bahrain, Jordan, Kuwait, Qatar

Central & Southern Africa *** Small subsidised trade Large exporters Brazil, USA Other significant exporters Argentina Large importers Angola Other significant importers ..

Russia & East Europe **** Substantial subsidised trade Large exporters Brazil, Turkey, Ukraine, USA Other significant exporters Argentina, Canada, China, Russia, Sth Africa Large importers Belarus, Russia, Ukraine Other significant importers Georgia, Kazakhstan, Moldova, Uzbekistan

Central & South America No subsidised trade

Continued ……

Affected export suppliers & importing markets

83

37. Economies affected by EU export subsidies – Meat products (cont.) #

Region

Pig meat - ham

Asia Small subsidised trade Large exporters China, USA Other significant exporters Brazil, Canada, India Large importers .. Other significant importers Hong Kong, Japan, Singapore

Middle East & North Africa Small subsidised trade Large exporters .. Other significant exporters .. Large importers .. Other significant importers UAE

Central & Southern Africa Large subsidised trade Large exporters .. Other significant exporters Brazil Large importers Ghana Other significant importers Angola, Liberia

Russia & East Europe Large subsidised trade Large exporters .. Other significant exporters Canada Large importers Russia Other significant importers Ukraine

Central & South America Small subsidised trade Large exporters Brazil, Canada, USA Other significant exporters Chile, El Salvador Large importers .. Other significant importers Argentina, Brazil, Chile, Mexico

# Assessment based on average annual trade for the 2005-11 period. Source: FAO 2014. Excludes export trade likely to reflect significant regional trans-shipments (e.g. Middle East, Central Africa, China). Large exporters are EU competitors with regional trade to markets eligible for EU export subsidies > 10 kt. Other significant exporters are EU competitors with regional trade to eligible markets of 2.5 kt to 10 kt. Large importers are regional markets eligible for EU export subsidies with EU shipments > 10 kt. Other significant importers are eligible regional markets with EU shipments of 2.5 kt to 10 kt. See table 30 for market composition of regional trade.* Excludes Bangladesh, Japan, Malaysia, Singapore, South Korea & Taiwan - not eligible for EU export refunds.** Beef trade excludes Egypt - not eligible for EU export refunds. Chicken meat trade excludes Algeria, Egypt, Israel, Libya, Morocco, Syria, Tunisia - not eligible for EU export refunds.*** Beet trade excludes Botswana, Kenya, Madagascar, Swaziland & Zimbabwe - not eligible for EU export refunds. Chicken meat trade excludes all Central & Southern Africa markets except Angola - not eligible for EU export refunds.**** Excludes Albania, Turkey - not eligible for EU export refunds.

HamSubstantial subsidised trade = > 10 kt

Large subsidised trade = 5 to 10 ktSmall subsidised trade = < 5 kt

Beef & chicken > 75 kt

50 to 75 kt < 50 kt

Scale of EU subsidised trade

Affected export suppliers & importing markets

84

Appendix H: US exports with finance guarantees

38. US exports with credit guarantees – Cereal products #

2009 2010 2011 2012 2013 2014GFC

Mexico Total value of exports US$m 595 491 924 1 126 1 044 859 Export credit guarantees US$m 71 35 85 86 177 73 Total exports '000 t 2 197 2 231 2 925 3 805 3 206 2 884 Exports with credit guarantees '000 t 261 158 269 292 545 246

% share 12 7 9 8 17 9

Central America * Total value of exports US$m 702 542 798 680 800 694 Export credit guarantees US$m 159 31 85 55 56 19 Total exports '000 t 2 483 2 344 2 380 2 125 2 380 2 228 Exports with credit guarantees '000 t 564 135 254 171 166 61

% share 23 6 11 8 7 3

South America Total value of exports US$m 364 495 1 007 548 958 757 Export credit guarantees US$m 144 112 361 73 236 36 Total exports '000 t 1 611 2 335 3 081 1 743 2 945 2 528 Exports with credit guarantees '000 t 640 531 1 105 231 725 121

% share 40 23 36 13 25 5

Korea Total value of exports US$m 303 306 430 673 373 386 Export credit guarantees US$m 238 179 279 346 236 188 Total exports '000 t 1 127 1 448 1 274 2 399 1 107 1 314 Exports with credit guarantees '000 t 886 846 825 1 234 699 640

% share 79 58 65 51 63 49

Other Asia ** Total value of exports US$m 842 758 1 437 1 498 2 396 2 085 Export credit guarantees US$m 95 38 89 169 15 0 Total exports '000 t 3 219 3 457 4 314 4 526 7 468 6 816 Exports with credit guarantees '000 t 363 175 268 512 47 0

% share 11 5 6 11 1 0

Africa & Middle East Total value of exports US$m 1 203 1 367 4 030 1 734 1 890 1 180 Export credit guarantees US$m 0 128 110 28 60 12 Total exports '000 t 4 779 5 969 12 486 5 661 5 761 3 826 Exports with credit guarantees '000 t 0 558 340 90 184 40

% share 0 9 3 2 3 1

Continued ……

Wheat

85

38. US exports with credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013 2014GFC

Russia & East Europe *** Total value of exports US$m 16 48 250 1 114 0 Export credit guarantees US$m 0 12 27 0 25 0 Total exports '000 t 64 168 721 1 361 0 Exports with credit guarantees '000 t 0 42 78 0 80 0

% share 0 25 11 0 22 0

Total **** Total value of exports US$m 4 024 4 007 8 877 6 259 7 574 5 960 Export credit guarantees US$m 708 535 1 036 757 805 329 Total exports '000 t 15 480 17 954 27 181 20 260 23 228 19 595 Exports with credit guarantees '000 t 2 713 2 443 3 138 2 541 2 446 1 109

% share 18 14 12 13 11 6

Mexico Total value of exports US$m 92 19 106 108 91 91 Export credit guarantees US$m 1 586 1 544 2 215 2 926 1 479 2 467 Total exports '000 t 7 710 8 243 7 476 9 878 4 861 10 901 Exports with credit guarantees '000 t 447 102 357 366 299 403

% share 6 1 5 4 6 4

Central America * Total value of exports US$m 904 772 1 213 966 481 837 Export credit guarantees US$m 503 112 326 270 53 127 Total exports '000 t 4 504 4 313 4 295 3 394 1 616 3 860 Exports with credit guarantees '000 t 2 505 628 1 154 949 178 584

% share 56 15 27 28 11 15

South America Total value of exports US$m 361 277 470 473 393 1 365 Export credit guarantees US$m 322 68 88 187 85 200 Total exports '000 t 1 945 1 626 1 669 1 649 1 295 6 431 Exports with credit guarantees '000 t 1 738 397 314 651 280 943

% share 89 24 19 39 22 15

Korea Total value of exports US$m 1 136 1 279 1 776 977 101 1 205 Export credit guarantees US$m 763 409 611 255 0 84 Total exports '000 t 5 735 6 795 6 059 3 189 296 5 323 Exports with credit guarantees '000 t 3 855 2 174 2 083 833 0 369

% share 67 32 34 26 0 7

Continued ……

Corn

86

38. US exports with credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013 2014GFC

Other Asia ** Total value of exports US$m 71 329 497 1 633 848 1 147 Export credit guarantees US$m 0 36 40 0 0 0 Total exports '000 t 302 1 648 1 628 5 454 2 738 4 877 Exports with credit guarantees '000 t 0 180 130 0 0 0

% share 0 11 8 0 0 0

Middle East & Africa Total value of exports US$m 770 868 1 358 222 120 999 Export credit guarantees US$m 85 80 64 41 10 59 Total exports '000 t 4 387 5 000 4 741 774 357 4 816 Exports with credit guarantees '000 t 486 458 224 142 30 283

% share 11 9 5 18 8 6

Russia & East Europe *** Total value of exports US$m 4 0 3 0 0 0 Export credit guarantees US$m 4 0 0 0 0 0 Total exports '000 t 28 1 10 1 0 0 Exports with credit guarantees '000 t 26 0 0 0 0 0

% share 91 0 0 0 0 0

Total **** Total value of exports US$m 4 832 5 069 7 531 7 197 3 421 8 020 Export credit guarantees US$m 1 770 724 1 234 861 239 560 Total exports '000 t 24 611 27 625 25 879 24 338 11 164 36 207 Exports with credit guarantees '000 t 9 054 3 939 4 270 2 935 789 2 585

% share 37 14 16 12 7 7

# Estimates of trade with export credit guarantees based on port values of GSM-102 Sources: USDA 2014d & f. registrations & average fas export unit value (US$/t) for trade to specified destinations, year ending 30 Sept. See table 40 for market composition of regional trade.* Includes export credit guarantees for Caribbean markets.** Includes export credit guarantees for South East Asia, Central Asia & China region markets.*** Includes export credit guarantees for Turkey, Caucasus & Balkan markets.**** Total for all markets eligible for export credit guarantees.

87

39. US exports with credit guarantees – Oilseed products #

2009 2010 2011 2012 2013 2014GFC

Mexico Total value of exports US$m 1 362 1 352 1 735 1 797 1 543 1 830 Export credit guarantees US$m 93 34 30 97 88 52 Total exports '000 t 3 224 3 425 3 372 3 381 2 602 3 401 Exports with credit guarantees '000 t 220 86 57 182 149 97

% share 7 3 2 5 6 3

Central America * Total value of exports US$m 157 160 238 222 176 135 Export credit guarantees US$m 17 7 25 66 12 13 Total exports '000 t 367 398 457 425 300 255 Exports with credit guarantees '000 t 39 18 47 127 21 25

% share 11 5 10 30 7 10

South America Total value of exports US$m 85 92 90 84 127 148 Export credit guarantees US$m 38 5 10 37 9 15 Total exports '000 t 211 237 175 156 219 289 Exports with credit guarantees '000 t 94 12 20 68 16 30

% share 45 5 11 44 7 10

Korea Total value of exports US$m 156 337 361 281 315 335 Export credit guarantees US$m 153 76 133 58 0 0 Total exports '000 t 351 798 724 495 503 585 Exports with credit guarantees '000 t 344 180 266 102 0 0

% share 98 23 37 21 0 0

Other Asia ** Total value of exports US$m 8 194 10 385 13 670 13 717 14 753 17 221 Export credit guarantees US$m 752 207 282 427 138 0 Total exports '000 t 21 138 25 415 27 345 26 906 24 579 32 455 Exports with credit guarantees '000 t 1 940 507 564 837 230 0

% share 9 2 2 3 1 0

Africa & Middle East Total value of exports US$m 614 642 705 949 640 708 Export credit guarantees US$m 126 74 17 175 86 130 Total exports '000 t 1 567 1 617 1 331 1 778 1 075 1 261 Exports with credit guarantees '000 t 322 185 32 327 144 231

% share 21 11 2 18 13 18

Continued ……

Soybeans

88

39. US exports with credit guarantees – Oilseed products (cont.) #

2009 2010 2011 2012 2013 2014GFC

Russia & East Europe *** Total value of exports US$m 300 421 153 333 288 480 Export credit guarantees US$m 198 188 38 225 206 201 Total exports '000 t 745 1 065 288 633 476 826 Exports with credit guarantees '000 t 491 476 72 428 340 346

% share 66 45 25 68 71 42

Total **** Total value of exports US$m 10 869 13 390 16 953 17 382 17 841 20 857 Export credit guarantees US$m 1 377 591 534 1 084 539 412 Total exports '000 t 27 601 32 955 33 692 33 776 29 754 39 072 Exports with credit guarantees '000 t 3 379 1 457 1 059 2 046 899 742

% share 12 4 3 6 3 2

Mexico Total value of exports US$m 570 444 609 630 708 803 Export credit guarantees US$m 0 0 0 28 14 9 Total exports '000 t 1 507 1 232 1 491 1 477 1 317 1 476 Exports with credit guarantees '000 t 0 0 0 66 26 17

% share 0 0 0 4 2 1

Central America * Total value of exports US$m 539 518 549 602 831 868 Export credit guarantees US$m 235 85 169 188 210 115 Total exports '000 t 1 352 1 399 1 351 1 385 1 528 1 580 Exports with credit guarantees '000 t 590 229 416 433 387 210

% share 44 16 31 31 25 13

South America Total value of exports US$m 82 87 432 545 827 784 Export credit guarantees US$m 65 10 115 147 142 92 Total exports '000 t 214 233 1 050 1 219 1 516 1 494 Exports with credit guarantees '000 t 170 27 280 328 260 175

% share 79 12 27 27 17 12

Korea Total value of exports US$m 50 185 74 7 105 106 Export credit guarantees US$m 54 31 20 0 17 3 Total exports '000 t 132 479 177 11 162 192 Exports with credit guarantees '000 t 141 81 48 0 26 5

% share 107 17 27 0 16 2

Continued ……

Soybean meal

89

39. US exports with credit guarantees – Oilseed products (cont.) #

2009 2010 2011 2012 2013 2014GFC

Other Asia ** Total value of exports US$m 363 894 386 610 894 1 153 Export credit guarantees US$m 31 84 5 12 0 0 Total exports '000 t 916 2 315 975 1 402 1 565 2 127 Exports with credit guarantees '000 t 78 218 13 27 0 0

% share 9 9 1 2 0 0

Middle East & Africa Total value of exports US$m 237 258 346 493 485 318 Export credit guarantees US$m 0 63 4 30 0 3 Total exports '000 t 612 674 811 1 023 868 558 Exports with credit guarantees '000 t 0 166 10 63 0 6

% share 0 25 1 6 0 1

Russia & East Europe *** Total value of exports US$m 117 72 69 111 213 134 Export credit guarantees US$m 91 21 25 70 172 73 Total exports '000 t 294 197 162 264 398 254 Exports with credit guarantees '000 t 230 58 58 165 321 138

% share 78 29 36 63 81 54

Total **** Total value of exports US$m 1 958 2 458 2 466 2 999 4 064 4 167 Export credit guarantees US$m 476 295 338 475 554 295 Total exports '000 t 5 026 6 530 6 018 6 780 7 355 7 681 Exports with credit guarantees '000 t 1 208 781 825 1 085 1 017 550

% share 24 12 14 16 14 7

# Estimates of trade with export credit guarantees based on port values of GSM-102 Sources: USDA 2014d & f. registrations & average fas export unit value (US$/t) for trade to specified destinations, year ending 30 Sept. See table 40 for market composition of regional trade.* Includes export credit guarantees for Caribbean markets.** Includes export credit guarantees for South East Asia, Central Asia & China region markets.*** Includes export credit guarantees for Turkey, Caucasus & Balkan markets.**** Total for all markets eligible for export credit guarantees.

90

40. Regional markets eligible for US export credit guarantees #

Region Import markets

Asia * Korea Korea China region China, Hong Kong, Macau South East Asia Cambodia, Indonesia, Malaysia, Myanmar, Philippines, PNG, Singapore, Taiwan,

Thailand, Vietnam Central Asia ..

Middle East & Africa ** Middle East Bahrain, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia,

UAE, Yemen North Africa Algeria, Egypt, Libya, Morocco, Tunisia Africa LDEs Angola, Benin, Burkina Faso, Burundi, Cape Verde, Chad, Central African Republic,

Comoros, Congo Democratic Republic, Djibouti, Equatorial Guinea, Eritrea, Ethiopia,Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania,Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Tanzania, Togo, Uganda, Zambia

Other Africa Botswana, Cameroon, Congo Republic, Côte d'Ivoire, Gabon, Ghana, Kenya, Mauritius,Namib ia, Nigeria, Seychelles, South Africa, Swaziland, Zimbabwe

Russia & East Europe *** Eastern Europe Armenia, Azerbaijan, Georgia, Kazakhstan, Mongolia, Russia, Turkey, Ukraine,

Uzbekistan

South America **** South America Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, Venezuela

Central America Mexico Mexico Central America Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama Caribbean Anguilla, Antigua, Aruba, Bahamas, Barbados, British Virgin Islands, Cayman Islands,

Curacao, Dominica, Dominican Republic, Grenada, Guadeloupe, Guyana, Haiti, Jamaica, Montserrat, St. Kitts, St. Lucia, St. Vincent, St Maarten, Suriname, Trinidad

# Regions defined to correspond with market eligibility for the 2013-14 program.* Regional eligibility for Central Asia excluded Bangladesh, India & Sri Lanka from 2011. Regional eligibility for South East Asia included Cambodia from 2011, Taiwan from 2013 & Myanmar from 2014.** Regional eligibility for Middle East included Iraq from 2011. Regional eligibility for Africa LDEs included Angola, Burundi, Chad, Central African Republic, Comoros, Congo Democratic Republic, Eritrea, Ethiopia, Guinea, Guinea-Bissau, Liberia, Madagascar, Mauritania, Rwanda, Sierra Leone & Togo from 2011. LDEs - Least Developed Economies as defined by the United Nations. Regional eligibility for Other Africa included Congo Republic & Zimbabwe from 2011.*** Regional eligibility for Eastern Europe excluded Albania, Bulgaria, Macedonia, Moldova & Romania from 2011.**** Regional eligibility for South America excluded Brazil and included Bolivia, Ecuador & Venezuela from 2012.

91

Appendix I: Assistance from export credit guarantees

41. Assistance from US export credit guarantees – Cereal products #

2009 2010 2011 2012 2013GFC

Corn – AsiaChina * Export price US$/t 264 200 319 299 309 Subsidy from credit guarantee US$/t 7 7 12 9 9 Rate of assistance % 2 3 3 3 3

Indonesia * Export price US$/t 243 185 299 271 .. Subsidy from credit guarantee US$/t 52 34 37 31 .. Rate of assistance % 16 15 10 10 ..

Korea * Export price US$/t 198 188 293 306 341 Subsidy from credit guarantee US$/t 8 7 9 7 4 Rate of assistance % 3 3 3 2 1

Malaysia * Export price US$/t 234 292 178 475 371 Subsidy from credit guarantee US$/t 6 7 3 7 4 Rate of assistance % 2 2 2 1 1

Vietnam ** Export price US$/t 229 205 244 293 326 Subsidy from credit guarantee US$/t 12 17 29 25 17 Rate of assistance % 5 7 10 7 5

Corn – Central AmericaCosta Rica * Export price US$/t 188 182 284 278 273 Subsidy from credit guarantee US$/t 63 50 53 61 47 Rate of assistance % 24 20 15 17 14

Dominican Republic * Export price US$/t 191 178 292 274 275 Subsidy from credit guarantee US$/t 54 27 47 44 36 Rate of assistance % 20 12 13 13 11

Guatemala * Export price US$/t 206 175 283 289 289 Subsidy from credit guarantee US$/t 41 33 40 41 41 Rate of assistance % 15 15 12 12 12

Honduras ** Export price US$/t 207 186 293 309 309 Subsidy from credit guarantee US$/t 30 26 40 41 47 Rate of assistance % 12 12 11 11 13

Continued ……

92

41. Assistance from US export credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013GFC

Jamaica * Export price US$/t 187 173 261 284 303 Subsidy from credit guarantee US$/t 50 62 64 61 65 Rate of assistance % 20 25 19 17 17

Mexico * Export price US$/t 206 187 296 296 304 Subsidy from credit guarantee US$/t 14 6 5 4 2 Rate of assistance % 6 3 2 1 1

Panama * Export price US$/t 228 176 262 287 284 Subsidy from credit guarantee US$/t 20 13 11 12 11 Rate of assistance % 7 7 4 4 3

Trinidad * Export price US$/t 228 192 281 308 312 Subsidy from credit guarantee US$/t 39 22 18 18 17 Rate of assistance % 14 10 6 5 5

Corn – South AmericaColombia * Export price US$/t 192 172 294 309 315 Subsidy from credit guarantee US$/t 36 19 32 40 33 Rate of assistance % 15 9 9 11 9

Peru * Export price US$/t 168 168 253 244 207 Subsidy from credit guarantee US$/t 61 54 57 57 45 Rate of assistance % 25 23 18 18 17

Venezuela * Export price US$/t 189 181 274 284 303 Subsidy from credit guarantee US$/t 0 0 0 54 55 Rate of assistance % .. .. .. 15 15

Corn – Other marketsEgypt * Export price US$/t 171 174 288 298 .. Subsidy from credit guarantee US$/t 27 24 30 35 .. Rate of assistance % 13 11 9 10 ..

Israel * Export price US$/t 190 168 275 247 155 Subsidy from credit guarantee US$/t 2 5 10 7 4 Rate of assistance % 1 3 3 3 3

Continued ……

93

41. Assistance from US export credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013GFC

Wheat – AsiaChina * Export price US$/t 211 204 314 365 304 Subsidy from credit guarantee US$/t 5 7 12 11 9 Rate of assistance % 2 3 3 3 3

Indonesia * Export price US$/t 234 216 325 314 301 Subsidy from credit guarantee US$/t 50 40 40 36 34 Rate of assistance % 16 15 10 10 10

Korea * Export price US$/t 269 211 338 280 337 Subsidy from credit guarantee US$/t 10 8 10 7 4 Rate of assistance % 3 3 3 2 1

Malaysia * Export price US$/t 286 235 364 358 344 Subsidy from credit guarantee US$/t 8 6 6 5 4 Rate of assistance % 2 2 2 1 1

Philippines * Export price US$/t 287 222 332 325 327 Subsidy from credit guarantee US$/t 25 15 12 7 7 Rate of assistance % 7 6 3 2 2

Thailand * Export price US$/t 260 237 351 332 339 Subsidy from credit guarantee US$/t 8 7 14 14 14 Rate of assistance % 3 3 4 4 4

Vietnam ** Export price US$/t 257 238 353 343 330 Subsidy from credit guarantee US$/t 13 19 42 29 18 Rate of assistance % 5 7 10 7 5

Wheat – Central AmericaCosta Rica * Export price US$/t 297 229 338 326 325 Subsidy from credit guarantee US$/t 100 64 63 71 56 Rate of assistance % 24 20 15 17 14

Dominican Republic * Export price US$/t 279 233 339 321 341 Subsidy from credit guarantee US$/t 79 35 55 52 45 Rate of assistance % 20 12 13 13 11

Continued ……

94

41. Assistance from US export credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013GFC

Guatemala * Export price US$/t 275 220 325 306 320 Subsidy from credit guarantee US$/t 55 41 46 43 46 Rate of assistance % 15 15 12 12 12

Honduras ** Export price US$/t 268 234 350 321 349 Subsidy from credit guarantee US$/t 39 32 47 43 53 Rate of assistance % 12 12 11 11 13

Jamaica * Export price US$/t 281 218 306 319 339 Subsidy from credit guarantee US$/t 75 78 74 68 73 Rate of assistance % 20 25 19 17 17

Mexico * Export price US$/t 271 220 316 296 325 Subsidy from credit guarantee US$/t 18 7 5 4 2 Rate of assistance % 6 3 2 1 1

Panama * Export price US$/t 283 238 351 321 337 Subsidy from credit guarantee US$/t 25 18 15 14 13 Rate of assistance % 7 7 4 4 3

Trinidad * Export price US$/t 331 264 353 332 355 Subsidy from credit guarantee US$/t 57 30 22 20 20 Rate of assistance % 14 10 6 5 5

Wheat – South AmericaChile * Export price US$/t 206 208 302 289 297 Subsidy from credit guarantee US$/t 16 5 25 28 26 Rate of assistance % 7 2 7 9 8

Colombia * Export price US$/t 240 213 325 295 324 Subsidy from credit guarantee US$/t 45 24 36 39 34 Rate of assistance % 15 9 9 11 9

Peru * Export price US$/t 224 207 313 303 319 Subsidy from credit guarantee US$/t 82 66 71 71 70 Rate of assistance % 25 23 18 18 17

Continued ……

95

41. Assistance from US export credit guarantees – Cereal products (cont.) #

2009 2010 2011 2012 2013GFC

Venezuela * Export price US$/t 285 236 367 351 364 Subsidy from credit guarantee US$/t 0 0 0 67 66 Rate of assistance % .. .. .. 15 15

Wheat – Other marketsAlgeria ** Export price US$/t 313 200 311 275 334 Subsidy from credit guarantee US$/t 9 6 9 8 10 Rate of assistance % 3 3 3 3 3

Egypt * Export price US$/t 191 250 315 275 315 Subsidy from credit guarantee US$/t 30 35 33 33 39 Rate of assistance % 13 11 9 10 10

Iraq ** Export price US$/t 249 211 350 272 .. Subsidy from credit guarantee US$/t 0 0 30 22 .. Rate of assistance % .. .. 8 7 ..

Israel * Export price US$/t 239 266 322 310 319 Subsidy from credit guarantee US$/t 3 8 11 9 9 Rate of assistance % 1 3 3 3 3

Mozambique ** Export price US$/t 264 230 325 279 370 Subsidy from credit guarantee US$/t 28 26 46 33 38 Rate of assistance % 9 10 12 10 9

Nigeria ** Export price US$/t 273 225 319 321 333 Subsidy from credit guarantee US$/t 36 28 35 38 39 Rate of assistance % 11 11 9 10 10

Sth Africa * Export price US$/t 193 241 317 301 304 Subsidy from credit guarantee US$/t 32 30 25 23 22 Rate of assistance % 13 10 7 7 6

# Estimates of assistance based on the difference between US based financing costs Sources: USDA 2014d f & g; with GSM-102 guarantees & domestic costs in the importing market without the guaratees. WB 2015. Domestic cost includes product price & domestic finance cost based on standard bank interest rates for private sector short term credit finance. Cost may be under-estimated as standard rates can be adjusted for the credit risk of individual borrowers. US based cost includes product price & US finance cost based on US prime interest rate adjusted for GSM-102 fees (effective November 2013) using risk categories effective in March 2014. Rate of assistance derived as ratio of US based cost (inclusive of subsidy) & domestic cost.* Finance cost assumes annual re-payment schedule for 3 year term in 2009 & 2010 and 2 year term in later years.** Finance cost assumes 6 monthly re-payment schedule for 1 year term as per program conditions effective March 2014.

96

42. Assistance from US export credit guarantees – Oilseed products #

2009 2010 2011 2012 2013GFC

Soybean meal – AsiaIndonesia * Export price US$/t 383 405 448 498 557 Subsidy from credit guarantee US$/t 82 75 56 57 63 Rate of assistance % 16 15 10 10 10

Korea * Export price US$/t 379 386 419 576 647 Subsidy from credit guarantee US$/t 15 14 12 14 8 Rate of assistance % 3 3 3 2 1

Philippines * Export price US$/t 397 376 375 413 567 Subsidy from credit guarantee US$/t 34 26 13 9 13 Rate of assistance % 7 6 3 2 2

Thailand * Export price US$/t 426 427 1 395 890 959 Subsidy from credit guarantee US$/t 14 13 55 38 39 Rate of assistance % 3 3 4 4 4

Vietnam ** Export price US$/t 388 365 441 473 553 Subsidy from credit guarantee US$/t 20 30 53 40 30 Rate of assistance % 5 7 10 7 5

Soybean meal – Central AmericaCosta Rica * Export price US$/t 321 339 354 419 495 Subsidy from credit guarantee US$/t 108 94 66 92 85 Rate of assistance % 24 20 15 17 14

Dominican Republic * Export price US$/t 393 377 416 433 541 Subsidy from credit guarantee US$/t 111 57 68 70 71 Rate of assistance % 20 12 13 13 11

Guatemala * Export price US$/t 395 367 411 451 541 Subsidy from credit guarantee US$/t 79 69 58 64 77 Rate of assistance % 15 15 12 12 12

Honduras ** Export price US$/t 395 358 407 438 545 Subsidy from credit guarantee US$/t 57 50 55 59 82 Rate of assistance % 12 12 11 11 13

Jamaica * Export price US$/t 387 366 401 434 513 Subsidy from credit guarantee US$/t 104 131 98 93 110 Rate of assistance % 20 25 19 17 17

Continued ……

97

42. Assistance from US export credit guarantees – Oilseed products (cont.) #

2009 2010 2011 2012 2013GFC

Mexico * Export price US$/t 378 361 409 426 538 Subsidy from credit guarantee US$/t 26 11 7 6 3 Rate of assistance % 6 3 2 1 1

Panama * Export price US$/t 411 374 377 426 584 Subsidy from credit guarantee US$/t 36 29 16 18 22 Rate of assistance % 7 7 4 4 3

Trinidad * Export price US$/t 822 385 411 490 565 Subsidy from credit guarantee US$/t 141 44 26 29 32 Rate of assistance % 14 10 6 5 5

Soybean meal – South AmericaColombia * Export price US$/t 381 369 428 497 540 Subsidy from credit guarantee US$/t 72 41 47 65 57 Rate of assistance % 15 9 9 11 9

Peru * Export price US$/t 387 370 388 488 530 Subsidy from credit guarantee US$/t 141 118 88 115 116 Rate of assistance % 25 23 18 18 17

Venezuela * Export price US$/t 387 380 412 435 540 Subsidy from credit guarantee US$/t 0 0 0 83 99 Rate of assistance % .. .. .. 15 15

Soybean meal – Other marketsEgypt * Export price US$/t 427 372 421 549 564 Subsidy from credit guarantee US$/t 68 51 43 65 69 Rate of assistance % 13 11 9 10 10

Israel * Export price US$/t 392 379 409 442 553 Subsidy from credit guarantee US$/t 5 11 14 13 16 Rate of assistance % 1 3 3 3 3

Russia *** Export price US$/t 347 354 436 501 1 844 Subsidy from credit guarantee US$/t 63 40 34 44 172 Rate of assistance % 15 10 7 8 8

Continued ……

98

42. Assistance from US export credit guarantees – Oilseed products (cont.) #

2009 2010 2011 2012 2013GFC

Soybeans – AsiaChina * Export price US$/t 384 407 500 507 601 Subsidy from credit guarantee US$/t 10 15 19 15 18 Rate of assistance % 2 3 3 3 3

Indonesia * Export price US$/t 423 418 503 526 585 Subsidy from credit guarantee US$/t 90 78 63 61 66 Rate of assistance % 16 15 10 10 10

Korea * Export price US$/t 446 422 499 567 625 Subsidy from credit guarantee US$/t 17 15 15 14 8 Rate of assistance % 3 3 3 2 1

Malaysia * Export price US$/t 419 425 434 557 617 Subsidy from credit guarantee US$/t 11 11 7 8 7 Rate of assistance % 2 2 2 1 1

Philippines * Export price US$/t 442 419 540 512 612 Subsidy from credit guarantee US$/t 38 28 19 11 14 Rate of assistance % 7 6 3 2 2

Thailand * Export price US$/t 393 422 521 548 605 Subsidy from credit guarantee US$/t 13 13 21 23 24 Rate of assistance % 3 3 4 4 4

Vietnam ** Export price US$/t 444 431 526 553 603 Subsidy from credit guarantee US$/t 22 35 63 47 32 Rate of assistance % 5 7 10 7 5

Soybeans – Central AmericaCosta Rica * Export price US$/t 403 400 523 521 592 Subsidy from credit guarantee US$/t 135 111 98 114 102 Rate of assistance % 24 20 15 17 14

Guatemala * Export price US$/t 421 406 501 456 596 Subsidy from credit guarantee US$/t 84 77 70 65 85 Rate of assistance % 15 15 12 12 12

Continued ……

99

42. Assistance from US export credit guarantees – Oilseed products (cont.) #

2009 2010 2011 2012 2013GFC

Mexico * Export price US$/t 422 395 515 531 593 Subsidy from credit guarantee US$/t 29 12 9 7 4 Rate of assistance % 6 3 2 1 1

Soybeans – South AmericaColombia * Export price US$/t 398 383 505 555 575 Subsidy from credit guarantee US$/t 75 43 55 73 61 Rate of assistance % 15 9 9 11 9

Venezuela * Export price US$/t 381 383 530 479 588 Subsidy from credit guarantee US$/t 0 0 0 91 107 Rate of assistance % .. .. .. 15 15

Soybeans – Other marketsEgypt * Export price US$/t 400 399 512 538 595 Subsidy from credit guarantee US$/t 64 55 53 64 73 Rate of assistance % 13 11 9 10 10

Israel * Export price US$/t 347 392 533 580 611 Subsidy from credit guarantee US$/t 4 11 19 17 17 Rate of assistance % 1 3 3 3 3

Russia *** Export price US$/t 358 402 535 468 580 Subsidy from credit guarantee US$/t 65 46 42 41 54 Rate of assistance % 15 10 7 8 8

# Estimates of assistance based on the difference between US based financing costs Sources: USDA 2014d f & g; with GSM-102 guarantees & domestic costs in the importing market without the guaratees. WB 2015. Domestic cost includes product price & domestic finance cost based on standard bank interest rates for private sector short term credit finance. Cost may be under-estimated as standard rates can be adjusted for the credit risk of individual borrowers. US based cost includes product price & US finance cost based on US prime interest rate adjusted for GSM-102 fees (effective November 2013) using risk categories effective in March 2014. Rate of assistance derived as ratio of US based cost (inclusive of subsidy) & domestic cost.* Finance cost assumes annual re-payment schedule for 3 year term in 2009 & 2010 and 2 year term in later years.** Finance cost assumes 6 monthly re-payment schedule for 1 year term as per program conditions effective March 2014. *** Finance cost assumes 6 monthly re-payment schedule for 1.5 year term as per program conditions effective March 2014.

100

43. Interest rates for short term credit finance in selected economies #

2009 2010 2011 2012 2013GFC

% annual rate

LIBOR * 1.6 0.9 0.8 1.0 0.7US Prime rate 3.3 3.3 3.3 3.3 3.3

AsiaChina 5.3 5.8 6.6 6.0 6.0Indonesia 14.5 13.3 12.4 11.8 11.7Korea 5.6 5.5 5.8 5.4 4.6Malaysia 5.1 5.0 4.9 4.8 4.6Philippines 8.6 7.7 6.7 5.7 5.8Thailand 6.0 5.9 6.9 7.1 7.0Vietnam 10.1 13.1 17.0 13.5 10.4

Central AmericaCosta Rica 19.7 17.1 16.1 18.2 15.2Dominican Rep 18.1 12.1 15.6 15.5 13.6Guatemala 13.8 13.3 13.4 13.5 13.6Honduras 19.4 18.9 18.6 18.5 20.1Jamaica 16.4 20.5 19.5 17.6 17.7Mexico 7.1 5.3 4.9 4.7 4.2Panama 8.2 7.7 6.9 6.9 6.6Trinidad 11.9 9.3 8.0 7.7 7.5

South AmericaChile 7.3 4.8 9.0 10.1 9.3Colombia 13.0 9.4 11.2 12.6 11.0Peru 21.0 19.0 18.7 19.2 18.1Venezuela 19.9 18.3 17.2 16.4 15.9

Middle East & AfricaAlgeria 8.0 8.0 8.0 8.0 8.0Egypt 12.0 11.0 11.0 12.0 12.3Iraq 15.6 13.3 13.6 13.0 13.1Israel 4.2 5.0 6.0 5.6 5.5Mozambique 15.7 16.3 19.1 16.8 15.3Nigeria 18.4 17.6 16.0 16.8 16.7Sth Africa 11.7 9.8 9.0 8.8 8.5

Russia & East EuropeRussia 15.3 10.8 8.5 9.1 9.5

# Standard bank interest rates for private sector short to medium-term credit finance. Source: WB 2015. Annual rates are typically adjusted for the credit risk of individual borrowers.* London Interbank Offered Rate, US$ 12 month lending rate. Average interest rate for leading banks to borrow funds from other banks in London market.

101

Appendix J: Economies affected by export credit guarantees

44. Economies affected by US credit guarantees – Selected products #

Region

Wheat

Asia Substantial guaranteed credit trade Large exporters Australia, Brazil, Canada, EU 27, Russia, Ukraine Other significant exporters Argentina, China, Pakistan, Thailand Large importers China, Indonesia, Korea, Malaysia, Philippines, Taiwan, Thailand, Vietnam Other significant importers Singapore

Central America Substantial guaranteed credit trade Large exporters Canada Other significant exporters Mexico Large importers Costa Rica, Dominican Rep, El Salvador, Guatemala, Honduras, Jamaica, Mexico

Nicaragua, Panama, Trinidad Other significant importers Barbados, Grenada, Haiti, St. Vincent

South America Substantial guaranteed credit trade Large exporters Argentina, Canada, Russia Other significant exporters EU 27, Mexico, Paraguay, Uruguay Large importers Chile, Colombia, Ecuador, Peru, Venezuela Other significant importers ..

Middle East & Africa Large guaranteed credit trade Large exporters Argentina, Australia, Belarus, Belize, Brazil, Canada, EU 27, Kazakhstan, Mexico,

Russia, Switzerland, Ukraine Other significant exporters Afghanistan, Algeria, Pakistan, Turkey, Turkmenistan, Uruguay Large importers Algeria, Egypt, Iraq, Israel, Jordan, Morocco, Saudi Arabia Other significant importers Lebanon, Libya, Tunisia, UAE

Russia & East Europe Small guaranteed credit trade Large exporters EU 27, Kazakhstan, Russia, Ukraine Other significant exporters Argentina, Brazil, Canada, Paraguay, Moldova Large importers Turkey Other significant importers ..

Corn

Asia Substantial guaranteed credit trade Large exporters Australia, Brazil, Canada, EU 27, Russia, Ukraine Other significant exporters Argentina, China, Pakistan, Thailand Large importers China, Indonesia, Korea, Malaysia, Philippines, Taiwan, Thailand, Vietnam Other significant importers Singapore

Continued ……

Affected export suppliers & importing markets

102

44. Economies affected by US credit guarantees – selected products (cont.) #

Region

Central America Substantial guaranteed credit trade Large exporters Canada Other significant exporters Mexico Large importers Costa Rica, Dominican Rep, El Salvador, Guatemala, Honduras, Jamaica, Mexico

Nicaragua, Panama, Other significant importers Barbados, Grenada, Haiti, St. Vincent, Trinidad

South America Substantial guaranteed credit trade Large exporters Argentina, Canada, Russia Other significant exporters EU 27, Mexico, Paraguay, Uruguay Large importers Chile, Colombia, Ecuador, Peru, Venezuela Other significant importers ..

Middle East & Africa Large guaranteed credit trade Large exporters Argentina, Australia, Belarus, Belize, Brazil, Canada, EU 27, Kazakhstan, Mexico,

Russia, Switzerland, Ukraine Other significant exporters Afghanistan, Algeria, Pakistan, Turkey, Turkmenistan, Uruguay Large importers Algeria, Egypt, Iraq, Israel, Jordan, Morocco, Saudi Arabia Other significant importers Lebanon, Libya, Tunisia, UAE

Russia & East Europe Small guaranteed credit trade Large exporters EU 27, Kazakhstan, Russia, Ukraine Other significant exporters Argentina, Brazil, Canada, Paraguay, Moldova Large importers Turkey Other significant importers ..

Soybeans

Asia Substantial guaranteed credit trade Large exporters Argentina, Brazil, Canada, China, Uruguay Other significant exporters Cambodia, Malaysia, Paraguay, Sth Africa Large importers China, Indonesia, Korea, Malaysia, Taiwan, Thailand, Vietnam Other significant importers Philippines

Central America Large guaranteed credit trade Large exporters .. Other significant exporters Brazil, Paraguay Large importers Costa Rica, Mexico Other significant importers ..

South America Small guaranteed credit trade Large exporters Argentina Other significant exporters Bolivia, Paraguay Large importers Colombia Other significant importers Venezuela

Middle East & Africa Large guaranteed credit trade Large exporters Argentina, Brazil, Paraguay, Switzerland Other significant exporters Canada, Ukraine, Uruguay Large importers Egypt, Israel, Saudi Arabia, Tunisia Other significant importers Morocco

Continued ……

Affected export suppliers & importing markets

103

44. Economies affected by US credit guarantees – Selected products (cont.) #

Region

Russia & East Europe Substantial guaranteed credit trade Large exporters Argentina, Brazil, Paraguay, Ukraine Other significant exporters Canada, Uruguay Large importers Turkey Other significant importers Russia

Soybean meal

Asia Small guaranteed credit trade Large exporters Argentina, Brazil, India Other significant exporters China, Korea, Paraguay Large importers Indonesia, Korea, Philippines, Vietnam Other significant importers Malaysia, Thailand

Central America Substantial guaranteed credit trade Large exporters .. Other significant exporters Argentina Large importers El Salvador, Guatemala, Honduras, Jamaica, Mexico, Panama Other significant importers Costa Rica, Dominican Rep, Nicaragua, Trinidad

South America Large guaranteed credit trade Large exporters Argentina, Bolivia, Brazil, Paraguay Other significant exporters .. Large importers Colombia, Ecuador, Venezuela Other significant importers Peru

Middle East & Africa Small guaranteed credit trade Large exporters Argentina, Brazil Other significant exporters India, Switzerland Large importers Egypt, Lebanon, Morocco Other significant importers Israel, Saudi Arabia

Russia & East Europe Large guaranteed credit trade Large exporters Argentina, EU 27 Other significant exporters Brazil Large importers Turkey Other significant importers Russia

# Assessment of economies affected by US exports of cereal & oilseed products Sources: USDA 2014d; FAO 2014. with credit finance guarantees. Exporter assessment based on average annual trade for the 2009-11 period. Excludes export trade likely to reflect significant regional trans-shipments (e.g. Middle East, Central Africa, China). Large exporters are US competitors with regional trade to markets eligible for US export credit guarantees > 100 kt. Other significant exporters are US competitors with regional trade to eligible markets of 25 kt to 100 kt. Importer assessment based on average annual US trade for the 2009-13 period. Large importers are regional markets eligible for US export credit guarantees with US shipments > 100 kt. Other significant importers are eligible regional markets with US shipments of 25 kt to 100 kt. See table 40 for market composition of regional trade.

Substantial guaranteed credit trade = > 300 ktLarge guaranteed credit trade = 150 to 300 ktSmall guaranteed credit trade = < 150 kt

Scale of US exports with finance guarantees

Affected export suppliers & importing markets

104

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Export assistance and agricultural trade reformby David Harris

RIRDC Publication No 15/057

RIRDC Project No PRJ-009684

NATIONAL RURAL ISSUES