From Cancun: The road ahead for the trade and agriculture negotiations

Ladies and Gentlemen,

Good evening. It is a pleasure to be here today, indeed a relief to have made it after a week of intense discussions that looked, at one stage, like they might run over into this evening. However, whilst I am glad that they have not deprived me of this opportunity to visit Canada, I am sure that I do not need to tell you how frustrated and disappointed I am that last week's efforts did not prove to be more fruitful. That disappointment is particularly intense because the talks of course broke down before we had even reached the agricultural issues.

When we left for Cancun, I had hoped that I would be speaking to you today about the positive progress we had made. Instead, I come only with the message that we missed a sitting duck as far as agricultural trade reform is concerned.

Let me be clear from the start: we have all lost out because of the collapse of these talks. Yes, there are those who have lost more, for example, the countries that wanted to see a further reform of the agricultural trading system, and a consequent reform of U.S. farm policy. Or those that wanted to see the developing countries better integrated into the world trading system so that they too can fully benefit from it.

At the end of the day however, everyone that went to Cancun has come away empty handed.

In the aftermath, it was inevitable that the media would try to find a scapegoat for the breakdown of these talks. There were various reasons for their failure, but despite what critics say, I for one will not let the EU be held responsible. Similarly, it is difficult to accept the thesis that agricultural subsidies in the developed world are responsible for the breakdown of talks, given that we didn't even reach this issue in the discussions.

In the months building up to Cancun, a large amount of the onus for success seemed to rest on our shoulders. First, we were told that we had to reform our common agricultural policy for the talks to be a success: so we did. Then, we were told that unless we settled our differences with the Americans, the talks would fail. So in August we worked hard with our American partners to put together a compromise paper that would allow the talks to proceed. The two conditions for success were served into the EU's court: we returned on both accounts.

Let me start by expanding on the reform of our agricultural policy, seen by many of our trading partners as a pre-condition for Cancun.

The package agreed by EU member states in June combines the principle of decoupled farm support with a substantial reduction in support prices.

From 2005 onwards, the majority of farm payments will no longer be linked to production. Instead, they will come in the form of a single payment that is dependent not on production, but on our farmers providing the broader services that our citizens demand of agriculture: food safety and quality, environmental maintenance, and animal welfare.

Some of the resources currently available under market support will also be shifted across to rural development (a process we call modulation), making an additional 1.2 billion € per year available for rural development measures from 2007 onwards.

Again, this is about supporting EU farmers in the broader social role they play beyond the production of food. It will also help to ensure a sustainable policy for the future.

The reformed CAP has its external benefits as well. Not only does decoupling means less trade-distorting support, it has also helped us to pursue a more ambitious agenda in the Doha round.

Not everyone in Canada, or elsewhere, is aware that by the time our reform is fully implemented, the cumulative effect of the last three reforms will mean that the EU will have reduced its most trade-distorting agricultural support by 70%, and its export subsidies by 75% since 1993. On top of this, it also left us in a position to make further tariff cuts beyond what was foreseen in the Uruguay Round.

Where the impact of reform is most evident though, is in the constant decline of our net export position. For example, our share of the world market for wheat has fallen from 22.4% to 12.8% in the past ten years. And over the same period, our net export share of the world sugar market has also declined, from 18.5% to 15.8%.

Yes, there is more that can be done, and next week we will be presenting proposals to reform our tobacco, cotton and olive oil sectors, as well as putting forward ideas for the sugar reform.

But regardless of what our critics might say, the facts are there: our markets have become consistently more open, our trade distorting policies have consistently declined, and the CAP has become both more sustainable internally, and more acceptable internationally.

The second point I would like to stress is that the EU arrived in Cancun having already shown its commitment to the developing countries and the development agenda.

We had the "Everything But Arms" agreement behind us which opened up, unilaterally, the EU market to the 49 poorest countries in the world without demanding political or economic concessions. We also arrived with an enhanced generalised system of preferences in place under which a total of 143 countries and territories are able to benefit from preferential market access arrangements.

Combined, our concessions to the developing countries have helped the EU to become the main importer of farm goods from the developing countries. In 2002, we imported some 35 billion € worth of agricultural products from this group, which was more than our major trading partners combined.

However, the most recent example of our commitment to the developing countries is shown in the cotton issue, which took centre stage in the agricultural talks. In this instance, the EU again proposed a constructive solution to address the problems in the current world market. We are already the largest importer of cotton in the world with a large share of the coming from Western and Central African ACP countries at zero duty.

And now we are about to propose to decouple support from production in our next set of reforms to ensure that support for this commodity no longer falls in the amber box. We have encouraged our partners to make similar moves.

The third point I would like to stress is that the EU approached these discussions in an open and flexible manner.

The EU's original offer on agricultural modalities should not be underestimated. Last February, we were already proposing to cut trade-distorting subsidies by 55%, reduce export subsidies by 45%, and reduce agricultural tariffs by an average of 36%, by no means a position that lacked either in ambition or in generosity.

In Montreal, at the mini-Ministerial in July this year, we took the initiative another set of concrete proposals, taking the EU position another step further. This time, we upped the stakes to offer a huge 60 % in trade distorting domestic support, going beyond the ambitions of the Uruguay Round, so long as we saw similar movement from the other sides.

In another major move on our part, we also expressed our willingness to eliminate export subsidies and expand tariff rate quotas for an agreed list of products. This came on top of, not instead of, the hand we had already dealt.

More importantly, we were given another condition for the success of Cancun in Montreal: we had to find common ground on agricultural issues with our American partners. And again, we delivered.

By mid-August, we had put forward a joint initiative with the United States that proposed, amongst other things, a special safeguard for the developing countries to protect sensitive products, a system of preferential treatment, and called on other developed countries to follow duty-free access initiatives such as EBA.

Ladies and Gentlemen,

I hope I have illustrated our flexibility, but let me reiterate that the EU constantly gave in the months leading up to Cancun:

• We improved, more than once, an already ambitious and generous agenda and moved a considerable way from our original standpoint;

• We strengthened our ability to participate constructively in the negotiations through a very substantial reform of the core aspects of the common agricultural policy; and then

• We compromised to reach an agreement with the U.S. on key issues.

So what is the EU's position now?

We will remain on the ambitious path on which we set out. As I said in the closing press conference in Cancun¹, we will continue to work on the process of agricultural reform towards a EU farm policy that is more competitive, more trade friendly, and more in tune not only with the interests of European farmers and citizens, but those of the developing countries and worldwide agricultural trading system as well.

We will also remain firm in our beliefs of what a development agenda must recognise:

• That all forms of support are not equally trade distorting and should be recognised as such;

• That developing countries merit differential treatment that recognises the different stages of development which they have reached;

• That market opening should result in consumers reaping the benefits not only in respect of the price of agricultural commodities, but also in terms of quality. Hence the importance of non-trade concerns and the protection of geographical indications remain key to the EU's standpoint.

Ladies and Gentlemen,

If I try to offer one positive reflection on the last week it is this: that the gaps on farm trade liberalisation have finally started to narrow down. That we did not manage to reach an agreement this time is regrettable, but I hope that the foundations are now there for us to be able to take talks further over the coming months.

I believe that if we had persisted, and if other parties had also been prepared to give, we could have found a deal for agriculture. I hope that this remains the case.

Cancun was crunch time. We had the choice of working out a better deal for farmers around the world or to stick with the injustices and the distortions of the past. For the time being at least, it seems we are left with the latter.

As for the EU, our offer remains on the table. We remain committed to the development agenda, we remain committed to the developing countries, and we remain committed to pursuing the reform of our internal policy.

The one thing I can say for certain at this stage is that the EU has not given up. We will continue to try and create a constructive dialogue over the next few months, and we will continue to play a central role in the progress of the development round.

Ladies and Gentlemen,

It is too early at this stage to predict how the process will now develop. What I can say for certain, however, is that future success will be dependent on all members of the WTO converging on a central position, and focussing on what we are trying to achieve.

This means reducing trade-distorting policies the world over, be they in developed, or developing countries. It also means improving market access and making the benefits of world trade fully accessible to all, notably those in the developing countries. Most importantly, though, it requires the political will and commitment of all parties to make it a success.

Yes, the developed countries should do more, but we need our developing partners to work with us if we are going to achieve a comprehensive reform that fulfils all the objectives set out in Doha.

Thank you for your attention.

¹ SPEECH/03/408