WRITTEN QUESTION E-2075/99

by Agnes Schierhuber (PPE-DE) to the Commission

(12 November 1999)

Subject: Liberalisation in the context of the WTO negotiations

The WTO Millennium Round is scheduled to include negotiations on further liberalisation in the agricultural sector. Further liberalisation is appropriate, however, only if it helps to increase the prosperity of farmers and consumers.

1. Has there already been an official evaluation by the WTO and/or the Commission of the impact that the Agreement on Agriculture reached during the GATT Uruguay Round has had on prices and incomes in the EU, the USA and the rest of the world (evaluations up to and including 1999)?

2. How does the Commission evaluate the impacts of the GATT Uruguay Round? I would appreciate an evaluation not only of the two exceptional years 1995 and 1996 but for the whole period from 1995 until 1999. I would similarly appreciate it if the assessment focused predominantly on quantities and price trends in the markets rather than simply on the development of world trade in value terms.

3. Has liberalisation actually produced benefits for the consumer?

4. Have food prices fallen, and to what extent?

5. Has food safety and quality improved as a result of the opening up of markets and the SPS agreement?

6. What view should be taken in this context of the WTO panel that monitors the prohibition of imports of beef produced with the aid of growth hormones?

7. What is the relationship between the expansion of world trade and the general trend in incomes in the EU and other WTO member countries, and how is any rise in incomes distributed among the population?

Supplementary answer given by Mr Fischler on behalf of the Commission

(14 February 2000)

1. Impacts of the agreement on agriculture have been simulated by the Economic research and analysis division (ERAD) of the World trade organisation (WTO), using the global trade analysis project (GTAP) model an applied computable general equilibrium model of the world economy. Welfare changes were expressed in terms of real income and were reported in terms of billions of US$ 1 992. Positive results for economic welfare from the agreement can be expected for the Community, the United States, Japan, and East Asia. Another analysis on the impact of trade liberalisation for goods and services was presented in 1995 by the World Bank. Also in this case the highest gains are expected for Japan and the Community.

2. An exact assessment of the General agreement on tariffs and trade (GATT) Uruguay Round (UR) impacts on prices and quantities is difficult to make, due to many external factors playing a role. Strong turbulence on the international market (e.g. the crisis in Asia and Russia) makes it difficult to isolate and calculate the particular net effects of the UR agreement. However, it involved for the first time the whole agricultural sector. Indeed, the UR was labelled by some as Bringing agriculture into the GATT and it was seen as the most far reaching negotiating effort yet undertaken. The correct implementation of the agreement up to now, suggests that to set clear and transparent rules on agricultural trade helped stop the increasing frictions among trading partners, which in the Eighties were depressing world markets.

3. In principle, liberalisation benefits consumers by increasing the competitiveness in the market, and thus allowing a wider choice among products at the best price. For the Community, agricultural trade has not been liberalised completely, but the common agricultural policy reforms have made significant efforts in shifting away from the most trade distortive policies (e.g. from price support to direct payments). This already benefits consumers who no longer have to pay the implicit price of protection when buying agricultural products. However, the input share of agricultural raw products has decreased over time for most final products bought by the consumer.

4. Regarding international prices, because of the many variables involved (see 2) it is difficult to isolate the influence of trade liberalisation on price trends and price variability. For the Community, the reduction in price support has led to lower prices for agricultural products, which partially translate into lower food prices (as the agricultural raw material is only a small part of the final food product).

5. There is no information concerning an improvement or a deterioration in food safety and quality resulting from the opening up of markets and the Sanitary and phytosanitary (SPS) agreement. In the long term the implementation of the SPS agreement is expected to improve food safety globally by way of co-operation and technical assistance to developing countries (Article 9).

6. The Community position that it has a right to establish higher standards of protection, for instance compared to international Codex Alimentarius standards, has been recognised by the WTO appellate body. It has also recognised that a WTO member could take measures founded in minority scientific views. Any measures should be based on scientific risk assessment.

7. From the economic perspective, trade liberalisation increases incomes through producers' and consumers' welfare. Producers enjoy larger markets and the opportunity of specialisation, and consumers enjoy lower prices due to increased competition. Assuming simultaneous and mutual liberalisation at world level and competitive markets, the distribution of these benefits would be proportional to the degree of liberalisation realised by each country and each sector. The distribution of the rise in welfare and incomes, which can be achieved within a country due to trade liberalisation, depends also on the tax regimes the country applies.