Agricultural Market Access under the World Trade Organization: Identifying Sensitive Products in the EU

Abstract

Agriculture is at the centre of the Doha Round of multilateral trade negotiations at the World TradeOrganization. The US is aggressively demanding for significant reduction in tariff, but the EU isunable to lower its tariffs drastically because further tariff reductions will erode border protection forsome of its important agricultural products.In this study, EU agricultural products are examined by tariff lines at eight digit level to reveal thesensitive agricultural products in the EU. These products are butter, skim milk powder, beef meat,poultry meat, pig meat, white sugar, wheat, barley, and maize. A spreadsheet model is used as ananalysis tool to complement the various modelling approaches in identifying the sensitive agriculturalproducts of the EU. The spreadsheet projection model is a simple forecasting model that uses a set ofprojection values from other models to predict possible outcomes. The sensitivity of EU agriculturalproducts is analysed with various exchange rates (USD 0.90 per Euro to USD 1.50 per Euro), differenttariff reduction formulas (according to the EU proposal, WTO draft proposal, and US proposal), andthe separate tariff-cut limits in the Draft formula and US formula.Out of the many proposals submitted to the WTO for the tariff reduction formula, the US proposal isthe most extreme and the EU proposal is the most lenient with the G-20 proposal and the WTO draftproposal being in the middle. It is natural that the EU proposal will generate a lower number ofsensitive products compared to the WTO draft proposal, and the US proposal will generate the highestnumber of sensitive products.The results demonstrate that cereals such as wheat, barley, and maize are the most resilient to theerosion of border protection due to further reduction in tariffs in the projected Doha Round. Incontrast, poultry meat has the weakest border protection in the projected Doha Round. The examinedEU agricultural products are very sensitive to the fluctuations of exchange rate. In the projected DohaRound, there are no sensitive agricultural products in the EU if the Euro is very weak - USD 0.90 perEuro. On the contrary, a very strong Euro (USD 1.50 per Euro) will create the greatest amount ofsensitive products in the projected Doha Round.WTO members are entitled to select and designate an appropriate number of sensitive products.Proposals have extended from as little as one percent to as much as fifteen percent of tariff lines. TheEU has proposed eight percent of the tariff lines to be designated as sensitive products. In contrast, theUS and G-20 group have proposed only one percent of the tariff lines to be designated as sensitiveproducts. The WTO draft proposal estimated that the number of sensitive products may be betweenfour to eight percent of all agricultural tariff lines. Therefore, the EU may be eligible to designatebetween 88 to 176 tariff lines as sensitive products. This study has analysed only nine tariff lines outof the 2200 tariff lines for EU agricultural products. The examined EU agricultural products mayrepresent other tariff lines in the same product category, but potential sensitive products at eight digitlevel have to be analysed individually in order to choose the correct and exact number of sensitiveproducts for the EU.