Brussels, 19/09/2000 (Agence Europe) - In the multilateral negotiations on agriculture which opened in March this year within the WTO, the European Union will soon trigger off the attacking phase of its strategy, by tackling head-on the support instruments for exports largely used by the fiercest detractors: United States, Canada, Australia and New Zealand.
The position it is to present, on 29 September, in the context of a special session of the World Trade Organisation's agriculture commission, thus tackles American export credits, "abusive" food aid (to which the United States turns to ease its surplus markets and "capture" new ones) and by several State-owned trading companies on which the leaders of the Cairns group rest. Such practices, as unfair effect for trade as European export refunds, must be included in the negotiations in view of developing specific rules and disciplines and demands of transparency "to the benefit of all exporter members of the WTO, especially developing countries", sources in Brussels say, recalling that it is a condition, a condition of equity, to which the Union is prepared to consider a greater reduction in its own subsidies. More detailed stances have been announced for before the end of the year, regarding other thrusts of the European strategy in these negotiations.
The EU, second largest agricultural exporter in the world, is often depicted as a partner that most uses (85%) mechanisms of exports subsidies. This is totally false, sources in Brussels say, referring to other forms of support to which increasingly those who accuse the European "refunds" for their unfairness turn to. These "other instruments are subjected to less stringent rules and fewer demands of transparency, whereas they potentially affect trade in a significant manner", the European Commission argues in the position paper unveiled in Brussels on Tuesday. The Subsidies that the Union deploys to support its exports are for their part already subjected to restrictions and reductions (21% in term of volume and 36% in budgetary terms), which considerably reduces the risks of seeing them used in practice in an aggressive manner for capture markets, rather than to enable companies to react to price fluctuations without interference with the internal support prices, it adds in explanation. Another method is to resort to, as does the United States, to "deficiency payments", in the form of aid or loans, to enable internal prices to follow world prices and grant variable aid to producers. Though the effect (sometimes distorting) is the same, this practice is not supported by the WTO. It is also the case of export credits, providing far more attractive conditions (credit of 7-10 years with a minimal rate of interest) than the trade conditions generally available (credit over 6 months), or even food aid, used not to answer an emergency situation, but to evacuate a surplus and penetrate a market.
All the attempts to frame the export credits (direct, financing, refinancing, support to interest rates, donations, insurance or guaranties), which have been discussed since the end of the Uruguay Round within the OECD, have not produced any results until today, taking into account the opposition from, among others, the United States. However the EU would like to revive the discussion within the WTO as "such credits may have a similar effect as aggressive subsidies (to the detriment of competition), if the total costs of the financing of the acquisition of exported products are inferior to what would have been the case without these credits". Furthermore, an more detailed analysis is required, to the extent that the scope of this practice and the extent of its distorting impact cannot be determined with exactitude, given the large variety of forms it can take and the confidentiality of certain information concerning. Recently, Washington nevertheless proposed (see EUROPE of 1st July, pages 9-10) to reduce the length of the credits to lower to 30 months which is still far from normal trading conditions, it is observed in Brussels. The Union states it is able to accept the compromise of one year suggested by the chairman of negotiations in Geneva, or an intermediary 30-month agreement on condition that a duration closer to the current practice continues to be sought with a view to a final agreement. The Americans, however, also insist on greater flexibility in the use of food aid, a request that, for now, receives a blunt refusal. Contrary to the United States, the Union does not generally use its stocks for food aid. This must be a donation, and that is all there is to it. This was the view of the European negotiator who continued by saying it is inadmissible for the lesser advanced countries to contract financing which would make their external debt even heavier or that would make them commercially tied to the supplier of aid.
Europeans now fear that the existing international provisions (mainly the Convention on food aid of 1986) will not be sufficient for preventing abuse in this field, mainly the use of food aid for indirect subsidisation or export promotion. The volume of food aid deployed by certain countries tends to decline when world prices are on the rise (i.e. when aid is the most necessary) and the tendency is reversed when prices fall (when food products are the most accessible for the poorest populations). The Commission noted that this practice has known a veritable explosion over the last few years, mainly in the United States where it reaches 9 million tonnes for cereals alone. In some cases, the main aim of food aid granted seems to be to contribute to reducing surplus stocks which depress prices on the markets of donor countries, it stresses. The Commission considers, under these conditions, that the notion of food aid should be more strictly defined, notified and targeted to correspond to the needs of the receiver, to meet an official demand and to be carefully distributed with due note of the impact it will have.