European Union policies continue to be an impediment to world agricultural trade liberalization despite significant internal reforms, the World Trade Organization has concluded.
In its annual review of EU trade policy published in late October, the WTO praised the EU for changing its Common Agricultural Policy by “lowering distortions, achieving greater market orientation and reducing agricultural support mainly through the decoupling of payments from production.”
However, WTO analysts complained that tariffs on agricultural products remain too high and too arbitrary.
As well, the EU policy of dealing with developing countries through preferential trade agreements that are selective “continue to limit foreign competition and to generate surpluses of some products,” said the trade review published in Geneva. “The policy has made subsidies important for exports of certain surpluses, as well as of some processed agricultural products.”
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It led to an overall WTO judgment that while the EU is generally implementing a trade liberalization policy, it is lagging on agriculture.
“Further liberalization of the EC’s agriculture, notably through simplification of its tariff structure and reduction of duty rates, as well as the downsizing of levels of support, would substantially contribute to the promotion of world trade,” said the WTO.
Its annual report largely ignored the impact of 2004 EU expansion, which added tens of millions of new east European farmers in 12 countries and made agricultural policy more complicated and expensive to administer. WTO analysts said they would pick up the impact of expansion and absorption of the new farmers in the next annual review.
The admonition about unacceptable subsidies and trade protectionism comes at an awkward time for the EU as it heads into WTO negotiations proclaiming itself a champion of trade liberalization and a model for world agricultural policy reform.
One of the EU targets at WTO talks is the Canadian Wheat Board monopoly, which it calls an inherent export subsidy. The WTO conclusion that the EU continues to subsidize export of commodities produced to excess because of import competition restrictions undercuts the European stance as a reformed trade and subsidy sinner.
The EU joined other WTO countries July 31 in accepting a negotiating agreement that makes elimination of export subsidies one of the goals of this negotiating round.
