Export Competition Issues in the WTO

1
Export Competition Issuesin the WTO
Linda Young Montana State University Bozeman, MT,
USA June 16, 2005
2
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

3
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

4
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

5
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

6
Share of Total Export Subsidies Notified to the
WTO, 1995-2001
Source ICONE (based on WTO notifications)
7
EU Export Subsidy Notifications by Commodity, 2001
8
U.S. Export Subsidy Notifications, 2001 2002
9
Major Accomplishment

• Phasing out great deal of support
• Achievement should not be risked due to details
• 5-10 years still a good agreement

10
Export Credits
Export Credits,1 Year or More, 1998

• July Framework Elimination of programs with more
  than 180 days repayment
• Transition period (3-5 years suggested)
• Reduce dollar value of transactions covered

11
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

12
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

13
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

14
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

15
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

16
STEs Special and Differential Treatment

• Increasing recognition that markets dont always
  perform functions abandoned by the state
• Removal of STEs has/can result in lack of RD
• If co-existence mandated, consider exemption or
  longer transition period

17
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

18
Other Viewpoints

• More restrictions?
• Oxfam in cash form and more restrictions
  onin-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

19
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

20
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
• SD treatment for developing country concerns
  including food aid and export credit program for
  specified recipient

21
Share of Total Export Subsidies Notified to the
WTO, 1995-2001
Source ICONE (based on WTO notifications)
22
Share of Total Subsidy Element in Export Credits
among Participants to the OECD Export Credit
Arrangement, 1998
Total US300 million
Source OECD
23
Share of Total Export Credits with Length of1
Year or More among Participants to the
OECDExport Credit Arrangement, 1998
Total US3.9 billion
Source OECD
24
Share of Total Export Credits among Participants
to the OECD Export Credit Arrangement, 1998
Total US7.9 billion
Source OECD
25
U.S. Project Food Aid, 1990-2002(grain
equivalent)