Voluntary Report - public distribution

**Date:** 11/24/2003

**GAIN Report Number:** MO3024

MO3024

**Morocco**

**Trade Policy Monitoring**

**Free Trade Negotiations with EU: Tomatoes vs Bread Wheat**

**2003**

**Approved by:**

![](media/image1.wmf)Merritt Chesley

U.S. Embassy, Rabat, Morocco

**Prepared by:**

Aziz Abdelali

**Report Highlights:**

This report provides further details and analysis, to supplement USEU
GAIN report E23201, describing further liberalization of agricultural
trade between Morocco and the EU. Morocco tomato exports to the EU will
be accorded preferential access, in exchange for preferential access for
EU bread wheat exports to Morocco.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Rabat \[MO1\]

\[MO\]

Ref: GAIN Report E23201, "EU And Morocco Reach Agri-Trade Liberalization
Deal"

GAIN Report MO1026, "EU Continues To Limit Morocco's Tomatoes Exports"

GAIN Report MO3023, "Wheat Duty Revised Down"

The Morocco-EU Free Trade Agreement, implemented in March 2000,
envisioned further reciprocal concessions in agriculture. After several
months of intensive negotiations, the EU and Morocco came to an
agreement on October 25, 2003 to further liberalize their agricultural
trade. The new agreement concentrates on the two most prominent, as well
as sensitive, items traded between the two sides: Moroccan tomato
exports to the EU, and EU wheat exports to Morocco. Details on how the
quotas will be implemented are still being developed. For this reason,
it is not clear when the agreement will be in force, although
speculation focuses on January 2004.

**Moroccan Tomatoes to the EU**:

The quotas established in the Morocco-EU Free Trade Agreement are
duty-free. Further negotiations in September 2001 and now in 2003 have
succeeded in both enlarging the quota and extending the spring season
(The additional quota provided for MY 2004/2005 and beyond can be
utilized anytime from November to May). However, if Moroccan exports
during one campaign exceed the total quota for that year, a quantity of
20,000 MT will be deducted from the additional quota of the following
year.

Table 1. EU Duty-Free Quotas for Moroccan Tomatoes (MT)

<table>
<colgroup>
<col style="width: 20%" />
<col style="width: 6%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 11%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><p><strong>Implementation</strong></p>
<p><strong>Date</strong></p></td>
<td><strong>Oct.</strong></td>
<td><strong>Nov.</strong></td>
<td><strong>Dec.</strong></td>
<td><strong>Jan.</strong></td>
<td><strong>Feb.</strong></td>
<td><strong>Mar.</strong></td>
<td><strong>Apr.</strong></td>
<td><strong>May</strong></td>
<td><p><strong>Additional</strong></p>
<p><strong>Quota*</strong></p></td>
<td><h6 id="total">Total</h6></td>
</tr>
<tr class="even">
<td>March 2000 **</td>
<td>5,000</td>
<td>18,601</td>
<td>36,170</td>
<td>30,749</td>
<td>33,091</td>
<td>27,065</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>150,676</td>
</tr>
<tr class="odd">
<td>September 2001<sup>***</sup></td>
<td>5,000</td>
<td>22,601</td>
<td>38,170</td>
<td>30,749</td>
<td>33,091</td>
<td>27,065</td>
<td>7,500</td>
<td>4,581</td>
<td>-</td>
<td>168,757</td>
</tr>
<tr class="even">
<td>MY 2003/2004</td>
<td colspan="8" rowspan="4">Monthly Quotas not yet determined</td>
<td>-</td>
<td>175,000</td>
</tr>
<tr class="odd">
<td>MY 2004/2005</td>
<td>15,000</td>
<td>190,000</td>
</tr>
<tr class="even">
<td>MY 2005/2006</td>
<td>30,000</td>
<td>205,000</td>
</tr>
<tr class="odd">
<td><p>MY 2006/2007</p>
<p>And beyond</p></td>
<td>45,000</td>
<td>220,000</td>
</tr>
</tbody>
</table>

\* To be used between November and May.

Sources: \*\* EU-FTA Agreement text, \*\*\* EACCE (Moroccan Export
Quality Control Office) Bulletin.

In fact, Moroccan tomato exports to the EU have steadily declined from
their MY 1998/99 peak of 172,107 MT. Since the Morocco-EU Free Trade
Agreement went into force, exports have gone from an 85 percent fill
rate to slightly more half. This is due to a variety of factors,
including outbreak of white fly in key growing areas, and diversion into
other fruits and vegetables for the EU market, because of the pressure
of the quota regime. Tomatoes, as a percent of total vegetables exported
to the EU, have declined significantly in the past several years.

**EU Bread Wheat to Morocco:**

Since September 2000, the EU has had access to a quota of 456,000 MT, at
a duty of 144 percent. Although the EU has regularly exported over 2 MMT
annually, none of this trade has been under this quota, since the
prevailing duty has been lower than the EU preferential duty. Under this
new agreement, the EU will benefit from a 1.06 MMT annual quota, with a
38 percent tariff reduction from the base rate prevailing at the
beginning of October 2003 (135 percent).

After the EU negotiations were concluded, Morocco revised its wheat
tariffs down to 90 percent on October 16 (see MO3023). The EU agreement
includes a clause stipulating that the EU tariff will be adjusted to
compensate for any future fluctuations in the prevailing bread wheat
duties, to ensure that the EU maintains a significant preferential
access. However, the mechanism to achieve this has not yet been
published. The method of allocating the EU quota among importers has
also not yet been determined. It is likely that importers will make bids
to the Moroccan Cereals Office (ONICL) in order to be granted a waiver
to import under the preferential regime, similar to the tendering
process in place for ONICL imports of bread wheat destined for
subsidized flour for low-income consumers.

In exchange for this first-time truly preferential access for bread
wheat, the EU has agreed to quota reductions in years when the Moroccan
crop is good. Although, again, details are not known, the quota will be
reduced on a linear basis if local bread wheat production exceeds 2.1
MMT in a given season. At the most extreme, the quota will be a minimum
of 400,000 MT even if Moroccan bread wheat production is over 3.0 MMT.

Table 2. Estimated Quotas for EU Bread Wheat

Under Various Moroccan Production Scenarios

(Thousand MT)

+------------------------------------+---------------------------------+
| **Theoretical**                    | **Estimated**                   |
|                                    |                                 |
| **Local Production**               | **Quota Granted\***             |
+------------------------------------+---------------------------------+
| 2,100                              | 1,060                           |
+------------------------------------+---------------------------------+
| 2,200                              | 984                             |
+------------------------------------+---------------------------------+
| 2,300                              | 911                             |
+------------------------------------+---------------------------------+
| 2,400                              | 838                             |
+------------------------------------+---------------------------------+
| 2,500                              | 765                             |
+------------------------------------+---------------------------------+
| 2,600                              | 692                             |
+------------------------------------+---------------------------------+
| 2,700                              | 619                             |
+------------------------------------+---------------------------------+
| 2,800                              | 546                             |
+------------------------------------+---------------------------------+
| 2,900                              | 473                             |
+------------------------------------+---------------------------------+
| 3,000                              | 400                             |
+------------------------------------+---------------------------------+
| 3,100                              | 400                             |
+------------------------------------+---------------------------------+

\* Estimated by AgAtt Office on linear relation basis

As can be seen by comparing Tables 2 and 3, the new preferential quota
for EU bread wheat essentially secures the historical EU market share in
Morocco. In each of the past nine years, imports from the EU, without
preferential access, exceeded the level that would have been dictated by
a quota scheme tied to domestic production as outlined in Table 2.

Table 3. Historical Data for Wheat Production and Imports

(Thousand MT)

+--------------+-----------+-------------+-------------+-------------+
| **Beginning  | **Local** | **Total**   | **Imports** | **EU        |
| Year of MY   |           |             |             | Share**     |
| Jul./Jun.**  | **Pro     | **Imports** | **From EU** |             |
|              | duction** |             |             | **(%)**     |
+--------------+-----------+-------------+-------------+-------------+
| 1994         | 3,181     | 911         | 827         | 90.7        |
+--------------+-----------+-------------+-------------+-------------+
| 1995         | 652       | 2,566       | 1,283       | 50.0        |
+--------------+-----------+-------------+-------------+-------------+
| 1996         | 3,646     | 1,200       | 591         | 49.3        |
+--------------+-----------+-------------+-------------+-------------+
| 1997         | 1,435     | 2,334       | 1,237       | 53.0        |
+--------------+-----------+-------------+-------------+-------------+
| 1998         | 2,834     | 2,240       | 1,163       | 51.9        |
+--------------+-----------+-------------+-------------+-------------+
| 1999         | 1,354     | 2,517       | 1,805       | 71.7        |
+--------------+-----------+-------------+-------------+-------------+
| 2000         | 953       | 2,588       | 1,775       | 68.6        |
+--------------+-----------+-------------+-------------+-------------+
| 2001         | 2,278     | 2,388       | 926         | 38.8        |
+--------------+-----------+-------------+-------------+-------------+
| 2002         | 2,325     | 2,486       | 1,244       | 50.0        |
+--------------+-----------+-------------+-------------+-------------+

Source: Ministry of Agriculture, Official Trade Data