Export Competition Issues
in the WTO
Linda Young
Montana State University
Bozeman, MT, USA
June 16, 2005
Linda Young
Underlying Premises on Trade Reform
Disciplines first in areas of most need– Large and clear cases
Institutional diversity when possible
– Best fit needs of countries; developing countries lacking other institutions
Emphasis on the poor and food security
Motivation: overall success
– Trade (reform) contentious in all quarters
Linda Young
July Framework and Export Subsidies
Direct export subsidies will be phased out under a “credible” time frame
Treat all products the same– Phase out export subsidies for all products over a
specified time period in equal increments (or) Initial down payment:
– 42 percent (continue pace of URAA)
– 20 percent (mirror down payment in domestic support)
– A good faith gesture
– Then phase out over 5-10 years
Linda Young
Export Subsidies cont:
Limited number of commodities could be given longer transition period– Particularly if 5 year phase out for most
Maintain the current system of commitments on both the volume of subsidized exports and the value of expenditures on export subsidies
Accelerated reduction for commodities with higher levels of subsidies – politically difficult
Linda Young
Export Subsidies: Special and Differential Treatment
Special and differential treatment for developing countries – Longer transition period than that given to
developed countries for reduction of their remaining export subsidy commitments
– Concern over unfairness – less compelling if being phased out
Currently, exceptions for developing countries for marketing, handling, upgrading and international transport
Continued concern over food import bills
Linda Young
Share of Total Export Subsidies Notified to the WTO, 1995-2001
USA
Norway
SwitzerlandSA: 1.4%
Other
Switzerland: 5.3%
: 1.4%
: 1.4%
: 1.9%
EU-25: 90.0%
Source: ICONE (based on WTO notifications)
Linda Young
EU Export Subsidy Notifications by Commodity, 2001
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rice
Wine
Fruit and vegetables, fresh
Cheese
Sugar
Poultry meat
Eggs
Other milk products
Bovine meat
Fruit and vegetables, processed
Butter and butter oil
Achohol
Coarse grains
Skim milk powder
Pigmeat
Wheat and wheat flour
% value % volume
Linda Young
U.S. Export Subsidy Notifications, 2001 & 2002
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cheese - 2002
Cheese - 2001
Skim milk powder - 2002
Skim milk powder - 2001
% volume % value
Linda Young
Major Accomplishment
Phasing out – great deal of support
Achievement should not be risked due
to details– 5-10 years – still a good agreement
Linda Young
Export Credits
July Framework: Elimination of programs with more than 180 days repayment– Transition period
(3-5 years suggested)– Reduce dollar value of
transactions coveredEU-15
3%
Canada1%
USA96%
Export Credits,1 Year or More, 1998
Linda Young
Programs Less Than 180 Days
Premium covering operating costs and losses Reporting to WTO Harbinson text disciplines including (but is not limited to):
– Maximum repayment term of 180 days; – Minimum cash payments by importers of specified
percentage of the amount of the contract value by the starting point of the credit;
– Provisions specifying the payment of interest;– Minimum interests rates, with members to use Commercial
Interest Reference Rates as published by the OCED, plus appropriate risk-based spread;
Linda Young
Export Credits: Special and Differential Treatment
Create a special program for developing countries Past credit programs did not serve LDCs and NFIDCs Credit constraints most likely to inhibit imports by
developing country members Could assist the WTO in meeting food security goals Program
• operated by a multilateral institution or national governments
• without budgetary restrictions for designated recipients, perhaps NFIDCs and least developed countries
Linda Young
State Trading Enterprises (STEs)
July Framework: “Trade distorting practices with respect to exporting STEs including eliminating export subsidies provided to or by them, government financing, and the underwriting of losses.”
New Terms and Conditions for STEs– Require STEs to provide duty-free access for the goods they manage – Eliminate the possibility of high-price domestic market used to subsidize exports
Expedited dispute settlement procedure to determine if violations have occurred– Possible, but concerns over harassment and due process
Linda Young
Lack of Agreement on Trade Impacts of STEs
Viewpoints on consequences and acceptability differ Sumner and Bolton on the CWB – provocative Sometimes categorized on basis of contestability Disagreement on market power (grain markets) Price discrimination and pooling
– CWB Case by WTO
– Cannot generalize results to other cases
Linda Young
Mandate Co-existence
Few STEs coexist with the private sector– Evidence suggests results in demise
Removes the achievement of scale (and sometimes scope) economies in marketing initiatives, quality control and reputation, branding and related areas; funneling any rents to producers.
Possible that private firms, often in imperfect markets, will benefit
Negotiate in context of competition policy – Recommended by Josling, Scopolla, others
Linda Young
STEs: Special and Differential Treatment
Increasing recognition that markets don’t always perform functions abandoned by the state
Removal of STEs has/can result in lack of R&D
If co-existence mandated, consider exemption or longer transition period
Linda Young
Food Aid: Proposals for Disciplines
Assuming no restrictions on emergency food aid
Language stating market development objectives not appropriate
Surplus disposal: we define as food aid from stocks due to the implementation of agricultural policy, i.e., US 416 b– these stocks can be used appropriately
– suggest discipline food aid from such stocks to be given to the WFP – prevent worse abuse and political motivations
Linda Young
Other Viewpoints
More restrictions?– Oxfam – in cash form and more restrictions on
in-kind and monetized food aid
– Barrett and Maxwell: non-emergency tied aid Blue Box; poorly target tied aid Red Box
Restrictions to make food aid more efficient will reduce amount
This trade-off should be made by recipients
Linda Young
New Institutional Home
Recognize the WTO is not the appropriate institution
to discipline food aid
• Emphasis on commercial displacement (as in July Framework) excessive
• Create a new institution to replace current dysfunctional structure
• Evaluate trade-offs between quantity and efficiency of food aid
• Advise WTO on future disciplines
Linda Young
Parallel Elimination of All Forms of Export Subsidies
July Framework asks for “parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect” – Necessary for political reasons
Not a model-based solution: not possible in a credible fashion
Eliminate government expenditures on export subsides, export credits, STEs
S&D treatment for developing country concerns including food aid and export credit program for specified recipient
Linda Young
Share of Total Export Subsidies Notified to the WTO, 1995-2001
Source: ICONE (based on WTO notifications)
Processed products 12%
Sugar 11%
Other meats 5%
Other 5%
Dairy 35%
Beef 18%Grains 14%
Linda Young
Australia2%
Canada5%
EU-158%
USA85%
Share of Total Subsidy Element in Export Credits among Participants to the OECD Export Credit
Arrangement, 1998
Source: OECD
Total: US$300 million
Linda Young
EU-153%
Canada1%
USA96%
Share of Total Export Credits with Length of1 Year or More among Participants to the OECD
Export Credit Arrangement, 1998
Total: US$3.9 billion
Source: OECD
Linda Young
Share of Total Export Credits among Participants to the OECD Export Credit Arrangement, 1998
Livestockproducts 16%
Vegetableproducts 16%
Cereals 28%
Processedproducts 10%
Other 23%
Wool & hair 7%
Source: OECDTotal: US$7.9 billion
Linda Young
U.S. Project Food Aid, 1990-2002(grain equivalent)
0
1
2
3
1990 1992 1994 1996 1998 2000 2002
MM
T
U.S. project food aid Monetized food aid