Doha Cotton feb05

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Information about Doha Cotton feb05

Published on January 25, 2008

Author: Penelope


WTO ISSUES:  WTO ISSUES Doha Round Negotiations and the Cotton Case DTB Associates, LLP Doha Round: The Framework Agreement of August 1, 2004:  Doha Round: The Framework Agreement of August 1, 2004 A significant step forward: Consolidates progress made thus far and points the negotiations in the direction of a substantial outcome in all areas; Puts within reach one of the most important U.S. trade policy objectives of the past 30 years – the elimination of export subsidies; Mandates substantial improvements in market access; Sets up negotiation on domestic support that should lead to a significant leveling of the international playing field and a reduction in trade distortions; Allowed negotiators to avoid a breakdown that could have been fatal to the Doha Round and extremely damaging to the world trading system. BUT – just a step along the way Framework Agreement:  Framework Agreement Market access “Substantial improvements” for all products Banded approach to tariff reductions (harmonizing) Sensitive products “appropriate number, to be negotiated” TRQ expansion Special and differential treatment Framework Agreement (cont):  Framework Agreement (cont) Export subsidies Elimination of direct export subsidies Current EU limits: 13.4 m MT of wheat, 10mMT of coarse grains, etc. Other issues: Export credits Food aid State trading Framework Agreement (cont):  Framework Agreement (cont) Domestic support Calls for “substantial and effective” reductions in trade-distorting support “Strong element” of harmonization New blue box criteria (CCP) No reductions in “green box”; review of criteria Political reality: no Doha Round agreement without cuts in domestic subsidies Timeline:  Timeline 10/04 – 6/05: monthly meetings, focusing on “technical” issues, modalities 7/05: “First approximation” of modalities text 9/05 – 11/05: preparations for Hong Kong Ministerial 12/12/05 – 12/18/05: Hong Kong Ministerial; agreement on modalities? 12/06: Conclusion of negotiation? WTO Brazil – U.S. Cotton Case:  WTO Brazil – U.S. Cotton Case DTB Associates, LLP Status of the WTO Panel :  Status of the WTO Panel Brazil requested the panel in 2003. Panel report circulated in September. U.S. appealed findings. Report by Appellate Body due March 3. “Serious Prejudice” :  “Serious Prejudice” serious prejudice “may arise” if the effect of a subsidy is: To displace or impede imports by the subsidizing country; or To displace or impede the exports of another country to a third country market; or Price undercutting, price depression, price suppression or lost sales; or An increase in the world market share of the subsidizing country. (Subsidies Agreement, Articles 5&6) Article 3 – Prohibited Subsidies:  Article 3 – Prohibited Subsidies Subsidies contingent on export performance Subsidies contingent on use of domestic goods Panel Findings:  Panel Findings 1)The following programs for cotton cause significant price suppression and therefore serious prejudice to the interests of Brazil: a) marketing loan program payments, b) market loss assistance program payments, c) user marketing (Step 2) payments, d) counter-cyclical payments. Panel Findings:  Panel Findings 2)Brazil FAILED to establish that following programs caused serious prejudice: a) Production flexibility contract payments (1996 Bill) b) Direct payments (2002 Bill) c) Crop insurance payments HOWEVER, Panel also found that PFC payments and direct payments were not green box programs. Panel Findings:  Panel Findings 3)Export credit guarantee (GSM) programs are export subsidies. The U.S. is therefore in violation of its export subsidy commitments with respect to cotton and certain other commodities. 4)Step 2 payments are export subsidies and import substitution subsidies. What Does the Panel Ruling Mean for U.S. Cotton? :  What Does the Panel Ruling Mean for U.S. Cotton? Panel recommendation: U.S. remove serious prejudice – e.g., by reducing payments cotton producers or by modifying or eliminating cotton programs. Panel recommendation: U.S. eliminate illegal export subsidies – i.e., Step 2 program and export subsidy element of GSM programs – by July 1, 2005. What Does The Panel Ruling Mean for other U.S. Programs?:  What Does The Panel Ruling Mean for other U.S. Programs? 1) Domestic Subsidies and Serious Prejudice: Most other U.S. programs probably less vulnerable than cotton to serious prejudice complaint Cotton-Corn Comparison:  Cotton-Corn Comparison Subsidies as percent of value of production Cotton: 80% in 2000/01; 30% in 2002/03 Corn: 27% in 2000/01; 4% in 2002/03 Trends in production, price, exports and planted acreage also problematic for corn U.S. Cotton Production and Exports:  U.S. Cotton Production and Exports U.S. Corn Production and Exports:  U.S. Corn Production and Exports Source: USDA/FAS What Does The Panel Ruling Mean for other U.S. Programs?:  What Does The Panel Ruling Mean for other U.S. Programs? 1) Domestic Subsidies and Serious Prejudice (cont.) Certain other programs could be more vulnerable What Does The Panel Ruling Mean for other U.S. Programs?:  What Does The Panel Ruling Mean for other U.S. Programs? 2) Finding on export credits: implications for GSM program for corn, soybeans and rice. 3) Finding on production flexibility payments/direct payments: implications for future operation of program (U.S. would have exceeded its domestic subsidy limit by $8 billion in 1999.) Factors affecting U.S. farm policy decisions:  Factors affecting U.S. farm policy decisions Budget/fiscal deficit Doha Round negotiations Implementation of cotton case Policy reforms in other countries (e.g., EU, Canada, Japan) Results – U.S. may be forced to pay greater attention to international obligations when developing future farm policy

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