SIA OF WTO NEGOTIATIONS: Specific Agreement No. 3

SIAs on Agriculture, Forestry and Distribution Services

Charlemagne Building, European Commission, 27/01/04

Core WTO Steering Committee for SIA Studies

DG	Name	DG	Name
AGRI	MASTROSTEFANO Marina NORRIS Robert	ENTR	LANGENDORFF Julius Willem D’ANGELO Alexandre
SG	SCHELLEKENS Pierre	EMPL	DELARUE Rudi ABRUZZINI S.
REGIO	DE MICHELIS Nicola	ENV	EDERY Caroline
AIDCO	SCHWAIGER Ingrid		PELLEGRINI Mattia
DEV	LIXI Ana		ASPINWALL, David
	LOPRIENO, Marco		WHITE, Stephen
	LANOVA, Iva		ROWAN, Linda
ECFIN	HUGHES Angela	INFSO	JOHNSTON Peter
	HAYDEN, Mark	RTD	CHRISTOFORIDES Nikolaos
	WICHERN, Ranier		TAMBORRA Marialuisa
	WILLIAMS, Kevin
TRADE	CURRAN Louise JONES Owen John SCHLEGELMILCH  Rupert	IPSEN Jytte PETERS Eric Renate Nikolay

Steering Committee Sector Members:

DG	SIA sector Study
	Agriculture	Forest	Distribution services
DEV	F. Van Houtte P.Mikos	N.Scotland
ENV		J.Bazill
AGRI	R.Norris M.Mastrostefano
EMPL	F.Ziegler	F.Ziegler	S.Hanciaux V. Rouxel-Laxton
ECFIN	R.Wichern	M Hayden
TRADE	O.Jones	E.Peters	N.Bernier -ABAD

Contractors:

GEORGE, Clive (IDPM)

SIMULA, Markku (Indufor)

MORRISSEY, Oliver (ODI)

ARKELL, Julian

JOHNSON, Michael

General meeting, 10h00 – 13h00, held in CHAR 10/214

1. The SIA studies are not intended to replace the EC’s Impact Assessment (IA) procedures, but will feed into IAs conducted under those procedures. The aim is to make a practical and realistic contribution, on the basis of well-founded analyses, to the formation of policy by the European Union, as well as its trading partners.

2. Contractors will co-ordinate with each other on linkages between the three sub-projects - agriculture, forestry and distribution services. This includes the influence of agriculture on forestry, and the relationships between retailing, commodity chains and agriculture.

3. Implications of the EU’s Economic Partnership Agreements (EPAs) which are under negotiation between now and 2008 with African, Caribbean and Pacific (ACP) countries will not be assessed within the SIA, but will be included in the broader baseline context. The same approach will be taken for other regional trade agreements, including significant US ones.

4. The Commission will give the contractors guidance on co-ordination of the forestry study with work on the FLEGT initiative (Forest Law Enforcement, Governance and Trade).

5. Consultation will be a continuing process during the SIA studies, and will be carried out in particular at key stages such as the presentation by the consultants of Inception and subsequent reports, with the aim of securing as wide a range of comment as possible. The purposes of consultation should be clearly defined, and should distinguish clearly between objective consultation, involving essentially the gathering of factual material, and consultation of a more subjective nature entailing the gathering of views. Material prepared for the purposes of consultation should include clear definitions of the scenarios being assessed and of the baseline situation.

6. Consultations on distribution services should include large distributors, associations of small distributors, and labour organisations. Differences in structure of the industry between northern Europe, southern Europe and accession countries should be allowed for.

7. EC will provide contractors with their list of consultees.

8. Scoping will home in on core issues under each element of SIA and product/country selection for specific focus. There is potentially a vast choice of specific non-tariff measures to consider, and major issues will be identified in the scoping. Of the large number of possibilities and special interests, there is a need to focus on probabilities and effects of relatively wide importance.

9. The assessment of impacts regarding distribution services will focus more on developing countries than within Europe, since the EU market is already highly liberalised.

10. The definition of scenarios will be similar to that in previous studies, with a baseline representing the full implementation of existing agreements including the results of the GATT/WTO Uruguay Round; an outer bound of variable factors comprising realistic assessment of further liberalisation which may be achievable sector by sector; identification of any threshold effects; and individual analysis of discrete negotiation options to be carried out in detail. The scenario definitions for each of the three studies will as far as possible be consistent and will focus on the key elements of the sector, including the most pertinent non-tariff measures.

11. The nine core indicators for sustainable development outcomes and two for sustainable development processes will be retained as a broad indication of areas to be studied and for summarising results. Specific indicators to describe significant impacts identified during the studies will, where possible, be taken from relevant existing indicator sets.

12. The Commission will provide information on SD indicator sets that have been proposed by the EC for tracking the Millennium Development Goals. Relevant international sets will be taken into account as well.

13. The technical analysis will combine predictive techniques with the results of retrospective studies.

14. The EC is undertaking parallel economic modelling studies, whose methods and results will be made available to contractors during the course of the project. The Commission is also funding two of UNEP’s series of country case studies. Relevant results from all of these will be used in the SIA.

15. The contractors will update the list of information requested from the Commission, by 3 February. The Commission will provide written responses by 17 February.

16. The information requested includes the negotiating positions of most interest to the EC, scenarios for discrete options, key elements of various positions, current status, other evidence/studies that have informed the position.

17. The Commission’s assistance is also sought with identifying the main economic, social and environmental issues of concern within the EU, and within other countries, including which groups are representing/championing these interests. This will allow consultants to identify issues that are ‘well known’ and impacts that have been covered, so that the SIA can focus on other potentially important issues.

18. Contractors will maintain regular contact with the full Steering Committee throughout the project.

19. Inception reports for the three studies will be submitted by mid-April 2004. During the inception phase the Commission will comment on any initial drafts that may be prepared.

Agriculture meeting: 1500-1800 hrs – held in CHAR 15/214

1. The consultant announced that the first steps in the study will be:

· Review of existing studies of impact of agricultural liberalisation (including NGO studies, gainers from exports and preferences, effect on consumers).

· Review of negotiating positions.

· Preliminary data analysis. For a sample of ACP countries initially, the analysis will look at changes in tariffs on agricultural products in the 1990s and associated trends in imports (including from the EU). This will contribute to an initial assessment of: elasticity of demand for agricultural imports; evidence of import surges when tariffs are reduced; evidence of imports of subsidised EU products; products and countries for further study. Participants highlighted the importance of also analysing perspectives for expanded exports from ACP, as well as the need to sufficiently consider other factors (than tariff changes) in ACP countries which may explain variations in imports.

2. In scoping, the intent is to focus on issues and aspects (products and countries) on which the SIA can make an interesting contribution within the time constraints. Focus will be on issues/aspects that have not already been extensively covered, and selecting countries/products that capture important issues in the public debate (rather than reflecting what may be important to special interests).

3. Impacts within the EU and US will be studied in less depth than in developing countries. Sub-sectors covered in Stockholm study will feed into the SIA where relevant (e.g. to country cases).

4. The analysis of social impacts will take account of differences between types of agricultural holdings, including differences between commercial and traditional agriculture.

5. All broad product categories will be considered (cereals, meat, dairy and ‘other’ – distinguishing at least tropical, vegetables and oilseeds). Particular attention will be paid to:

· Major food cereals, based on the conclusions of the Stockholm study on food crops.

· Beef – the major meat subject to negotiating issues, highly protected in many countries, and Beef Protocol affects ACP countries. Also useful to address SPS issues.

· Cotton – a major export crop for many developing countries, but affected by subsidies.

· Sugar – a major export crop for developing countries, highly protected in US and EU, and Sugar Protocol creates special trading conditions for certain ACP countries.

· Vegetables – may focus on green beans or legumes generally. A good case study to address non-traditional exports, global commodity chains and link to study on distribution services.

· Participants highlighted that on cotton and sugar in particular, there were already many studies available regarding the impact of trade liberalisation, that soybean may not be relevant to the study since trade was already liberalised, and that the dairy sector was probably less relevant for most developing countries.

6. Scenarios. It was agreed that the assessment will be based on two scenarios, the status quo and a relevant intermediate liberalisation position such as the Derbez text. Specific options may be considered as appropriate, e.g. concessions for countries/products in which impacts are severe and flanking is not an option. The study will aim to identify intermediate NTBs or threshold effects. It was agreed that trade policies cover market access (of which tariffs are only one aspect), domestic support, and export support.

7. The Commission will provide relevant documents for use in establishing a scenario covering domestic support, subsidies, export refunds, food aid, etc.

8. Selection of country case studies. The SIA will look at impacts on regions (ACP, Latin America and Asia), and will distinguish country types in terms of development level (which may cross regions). The analysis should specify the group of countries for which the case study is considered to be representative. Possible countries are:

· Tanzania – least developed country, but with a relatively strong agriculture sector and diversified exports (coffee, tea, cotton, green vegetables).

· Ghana – developing country, non-diversified exports (mostly cocoa), contentious issue in agriculture trade (chickens, tomatoes, rice).

· Brazil – large, middle income developing country with highly diversified agricultural exports (and potential), moderate levels of protection.

· India – large developing country with very high levels of domestic protection, but export potential in certain products (e.g. sugar).

9. The following aspects were stressed, in order for the exercise to have real added value beyond existing studies and to avoid producing very theoretical results:

· Need to pay special attention to environmental and social impacts. If the SIA concentrates mostly on economic impacts, it will have little value added in comparison to the numerous existing studies on the impact of trade liberalisation on agriculture. The scope and methodology envisaged for the environmental and social impact assessments will be presented in the inception report.

· Need to take into account in particular the adjustment costs of the expected evolutions due to trade liberalisation (avoiding considering only beginning and end situations); and the influence of internal policies, which can mitigate or reinforce the impacts of trade liberalisation.

· Need to take into account certain specificities of the agricultural sector, which are important determinants of the impact of trade liberalisation, e.g.: i) price fluctuations (not only average levels), to which agricultural products are particularly subject; ii) timing of trade flows within the year, since impacts of imports can be very different depending on their seasonal distribution (in season or counter season); iii) high relative importance of SPS conditions in comparison to tariffs, in terms of impacts on trade flows.

Distribution services meeting: 1500-1800 hrs – held in CHAR 9/128

1. The distribution sector is extremely diverse, and its structure varies widely from country to country. In most developed countries distribution is increasingly dominated by large enterprises. In less industrialised and developing countries distribution takes place mainly through small family units and individuals, often with large participation of the informal sector.

2. The degree to which access for foreigners to national distribution markets has been liberalised varies widely. The greatest liberalisation is generally in highly developed countries, with less liberalisation in transition and developing economies.

3. Inevitably it is the larger distribution enterprises which have most interest in gaining access to foreign markets, since they have the resources to take advantage of the opportunities available to them; but equally they will not invest unless the local market has enough potential to justify the substantial resources which are needed to set up a new distribution network.

4. Many different studies have been made of distribution activities both in individual countries and in international trade. The SIA of distribution will take these studies into account and will seek to identify factors which are common consequences of liberalising market access. Within the time and resources available it is impossible to make a comprehensive study of all the many aspects of distribution in almost 150 WTO member countries. The SIA must be carefully directed and targeted so as to produce results which are clear, and of practical use to governments in deciding on policy towards further liberalisation.

5. The SIA will take into account the current degree of liberalisation of the distribution services markets of various countries, ranging from the high level of liberalisation already undertaken by the European Union under the GATS to the much lesser liberalisation which some other countries have accepted, or have offered in the current negotiations.

6. Distribution services and access to national markets are also closely linked with a wide range of factors, including transport systems, tourism, conditions of employment, environmental impacts, financial services and economic regulation. Where the liberalisation of distribution services would have significant consequences in other areas of activity or policy, those areas will be taken into account.

7. The study will cover the full range of distribution services, but it will also take into consideration the distribution of particular products, or product markets in specific countries, where this is relevant or instructive. The SIA will focus in the first place on retail distribution, in particular the activities and interests of large retail groups, although the wholesale distribution sector will also be taken into account where relevant. It will recognize the rapidly growing role played in distribution by electronic commerce (E-commerce), but will not focus in detail on E-commerce, because E-commerce raises many issues which are much wider than the distribution sector.

8. The SIA will also consider the impact of further liberalisation in distribution services on the issue of temporary movement of workers, which is an important issue in the current negotiations on GATS.

9. Because of the range of activities covered by distribution services and the wide differences between national markets, some specific case studies will be undertaken. As far as possible these will reflect the nature of distribution services as between different geographical regions and between countries of different levels of development. They will aim to learn practical lessons from the individual country analyses which can then act as useful pointers or indicators in relation to other countries or distribution sectors which face similar issues.

10. Civil society groups to be consulted regularly during the SIA will include industrial and commercial representatives, commerce social partners, consumers, and environmental and other interests. The full results of this work will be made available for public discussion and comment.

Forestry meeting: 1500 – 1800 hrs – held in CHAR 8/186

1. The forestry study is politically charged as stakeholder’s values and preferences influence how forests are used. The issues continue to be hotly debated in international arenas. This emphasises the need for sufficient consultations.

2. There is a need to define the forestry sector. As a working hypothesis the sector will include primary forest production for timber and non-timber forest products and their primary processing (sawmilling, wood-based panel, pulp and paper production). It will also be important to consider further processing in the wood-working industry (furniture and joinery) due to their importance to supply chains.

3. The overall analytical framework presented by the consultant was deemed appropriate. It was pointed out that the focal area of the study will be trade liberalisation, forest products markets, commercial and subsistence logging, and sustainable forest management/deforestation/degradation.

4. The study will assess the impact on forests of the trade liberalisation measures foreseen in the Doha Round of WTO negotiations, in particular the impact of further liberalisation of trade in forest products. Forests are often an important buffer for the poor in developing countries through their many non-market functions closely related to the livelihoods of rural populations (e.g., fuelwood supply, availability of non-timber forest products for subsistence consumption, and various environmental services of forests).

5. Many impacts may be indirect, coming from the increase in various social and economic activities, which are brought by overall trade development. Extra-sectoral factors should therefore be considered. In this context the linkage with the agriculture study is important. The nexus is land use decisions which are influenced by economic considerations of landowners, which in turn may be affected by terms of trade for agricultural or other products. There will be a need to coordinate between the two studies and to attempt to quantify impacts as far as possible.

6. It was recognised that in developed countries tariff rates are already generally relatively low for forest products. Therefore, as regards tariffs, there will not be a need for more than two scenarios (present situation and full liberalisation). In the second step, the possible impact of flanking measures will be assessed (with/without). The number of scenarios is not as important as the elements of the scenarios and what are the thresholds for flanking measures to achieve significant desired impacts.

7. Intraregional trade is important in many forest products and regions. In developing countries tariffs in forest products are often high and therefore liberalisation may in some instances have a larger impact through intra-regional South-South trade than trade with developed countries. This aspect will need to be taken into account in the study.

8. Several potential [flanking] measures aimed at ensuring the sustainability of forests whose products are traded will be considered, such as forest certification and related labelling, public procurement, verification of legality of origin, log export bans and restrictions. It was pointed out that certification should not be presented as or implied to be a formal trade barrier. So far, ecolabelling is not a negotiating item of the DDA. On the other hand, public procurement needs to be studied. Export bans could be analysed in the light of DDA outcome. There may be some elements in the services sector influencing forests. The TBT Agreement could also be relevant. SPS issues can have impacts on forests and should be considered.

9. The study will consider the EU FLEGT Action Plan and it will be able to draw on the results of a parallel impact assessment of the proposed regulation on timber licensing scheme. The forestry SIA study was encouraged to provide additional reflections on the issue, in particular on possible options other than the timber licensing scheme for preventing the entry into the EU of illegally harvested timber, as called for by some stakeholder groups.

10. Rules of origin should be considered in the study. If we want to know the influence of trade on forests we should at least know where the product comes from.

11. The study should consider impact on the EU forest sector. Changes in competitiveness can influence primary processors using imported logs (e.g. veneer). There are also repercussions for SME sector in Europe as such companies use a large share of the imported tropical timber. Profit margins in sawmilling have been low in the past, so a small change in factor environment (wood price) can make a large impact on the economics of an individual SME.

12. There was also some discussion about case study countries, with the suggestion that these not only comprise developing country timber exporters, but also a developing country/LDC timber importing country. It was noted that it would be interesting for Brazil to be a case study for both the agriculture and forest studies, given likely interactions between these sectors and trade liberalisation.

13. A tentative outline of the inception report was distributed to the participants for eventual comments.