The Benefits of a New WTO Agreement for Agri-food Trade

Shiferaw AdiluAlberta Agriculture and Food

BackgroundAlberta accounts for 10 percent of Canada’s population and 16 percent of its GDP (2006).The agri-food industry is a significant contributor of the province’s GDP and employment.

Food and beverage manufacturing shipments account for 15% of the province’s total manufactured goods.

Alberta accounts for over a fifth of Canada’s agri-food sector.

The largest cattle population (39%)The majority of slaughtering (60%)Over 36% of grain production (wheat, barley and canola seed)

The Importance of TradeThe majority of Alberta’s agri-food sectors are highly trade dependent. Alberta accounts for over a fifth of Canada’s agri-food exports.

Primary agriculture exports $3.1 billion (2006) or 45% of market cash receiptsValue added processed $2.8 billion (2006) or 31% of total market cash receipts

While the US is the largest trading partner, 55% of Alberta’s agri-food exports go to over 140 countries around the world.

The Importance of Trade, Cont’d

Canada is a trading nation –Trade and investment are the main drivers of the economy.Export value equivalent of 34% of GDP (2005).Fifth largest exporter and importer of merchandize trade after the EU, US, China and JapanThe fourth largest exporter and fifth largest importer of agri-food productsHas one of the lowest tariffs overall.

The Benefits of Trade Liberalization

CUSTA (1989):Canada’s agri-food exports to the US grew by 347% or 9% per year.Canada’s exports to the ROW grew by 88% or 3.8% per year.

NAFTA (1994):Canada’s agri-food exports to Mexico grew by 364% or 13% per year.Canada’s exports to the ROW grew by 84% or 4.8% per year.

Results for Alberta are as impressive.

The Benefits, Cont’dCurrently, Alberta’s major agri-food exports face some of the highest tariffs around the world.

Frozen meat: 91%, Fresh meat: 85%, Prepared meat:80%Grain products: 76%Certain grains and their products such as barley and malt face tariffs rates in the hundreds in some important markets.

Substantial reduction in tariffs and trade distorting agricultural support and elimination of export subsidies is estimated to bring billions of dollars benefit for Canada’s agri-food economy.

The DDA

The Uruguay Round was more important in bringing agriculture to the multilateral rules based system than the actual discipline it put on agricultural subsidies and tariffs.The Doha Round is historically destined to deliver on actual agricultural trade liberalization.This round, if concluded successfully, will also deliver on significant trade liberalization on services and manufactured products.

What is in the Chair’s Modalities text?

The proposed tariff and domestic support reduction could provide a sound basis for negotiating an ambitious outcome.Global average bound agricultural tariff was around 80% when the Uruguay Round agreement was signed. It was brought down to 62% at the end of the implementation period.Under Falconer’s modalities it could be lowered to roughly 34%. Significant even though a long way from catching up with industrial tariffs.

The Chair’s Modalities text, Cont’d

The elimination of export subsidies for good.Substantial reduction in trade distorting support.

EU OTDS lowered to 16.5 – 27.5 billion euroUS OTDS lowered to 13 - 16 billion dollars

Despite significant reforms of the CAP in the past, the proposed modalities would require the EU to make further reforms. The proposed limit for US overall trade distorting support would put significant constraints on its amber and overall trade distorting support.

The Chair’s Modalities text, Cont’dAmbition depends not only on the tariff and domestic support reduction formulas, but also on restricting exemptions and exceptions.

Sensitive products, SPs, SSG and SSM in market access.Product-specific disciplines in domestic support

Study by the WB shows that an exemption of even a small fraction of tariff lines or products from tariff reduction commitment would shrink potential gains significantly.

ChallengesThe benefits of trade are not under question mark. So cannot be the benefits of trade liberalization.Varying projections about the benefits of trade liberalization but the conclusion is the same.Trade creates opportunities for many and pose adjustment challenges for some.Benefits are diffused among a larger population while adjustment challenges are concentrated.

Challenges, Cont’dAgricultural support and protectionism is a political problem requiring a political solution.The need for political commitment

Recent APEC Statement on the WTO.

Canada’s Prime Minister recent remark on the Doha round negotiations:

Aim high so that the winners are obvious in every country

The role of senior officials and negotiators What is on the table is substantial; differences appear bridgeable.

Challenges, Cont’d

Single undertaking?Time factor?

Alternative to Success?

Bilateral/regional FTAs?Dispute settlement?

Thank You