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Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

World agricultural trade outlook for the enlarged EU and its new neighbours

East-West Agriculture Forum Berlin

Berlin, 17 January 2003

Ladies and Gentlemen,

Thank you for inviting me to the East-West Agriculture Forum. I am happy to be with you once again this year, as I consider it very important to discuss the connection between enlargement and relations with our new neighbours in the context of world farm trade and the Doha Development Agenda.

Interdependence - political and economic - with the Union's future new neighbours is already a reality, of course. But being immediate neighbours will create a whole new dimension to our relations. Both sides, the enlarged EU and its new neighbours, should have an equal stake in promoting transnational flows of trade and investment through working together even more.

Our new neighbours will become increasingly key partners to us. We can increase economic growth and external trade to our mutual benefit, creating an enlarged area of political stability and fostering exchange of human capital, ideas, knowledge and culture. Together we must promote regional cooperation and integration, which are preconditions for political stability, economic development, and the reduction of social divisions in our shared environment.

The political dimension of our new geographical proximity has long been a topic of discussion. Today, in accordance with the wishes of the conference organisers, we are to concentrate on trade.

According to an old Russian proverb, "Russians are slow to mount but ride fast." [Russkiye medlenno sopryagayut, no potom bystro skachut.]

This is a very good description of trade relations in recent years: negotiations designed to create trade liberalisation have generally been a slow, laborious process, but once completed the positive effects on trade expansion have been rapid and durable.

As you know, politicians have a reputation for always putting a positive spin on things. So if I do this now you may be somewhat wary. Particularly if I tell you that I see a bright future for trade between the enlarged EU and its new neighbours.

For isn't there the risk that the EU with 25 or more members might become inward-looking, having created an even larger internal market with well over 450 million consumers?

My answer is a clear "No". The facts and history paint a different picture.

True, the EU is already the largest single market in the world. Yet this does not disadvantage our neighbours, but brings them tangible advantages.

First: a harmonised market. After enlargement, in a little over three months' time, our neighbours will have direct access to an even bigger harmonised market. In practical terms this will mean, for instance, that Russian products can be sold on the entire EU market stretching from Sweden to Spain. This is because the same safety and health protection rules apply across the EU. Simplification and standardisation will benefit in particular small and medium-sized enterprises, for whom the costs of compliance with trade procedures are proportionally higher.

Second, the EU internal market has enormous purchasing power, and this will get even bigger after enlargement. What is more, over at least the past decade purchasing power in the ten accession countries has been growing twice as fast as in the EU-15. This means great market opportunities.

Third, in reality the EU has never, in successive enlargements, turned inward but has become increasingly integrated in world trade. Since 1995, for instance, EU exports have increased by a total of 73%, and imports by 81%.

It is true that overall EU trade with the ten accession countries expanded by a massive 68 billion euros between 1999 and 2002. But that does not mean that we have been keeping our eastern neighbours out of our markets. Because, at the same time, both EU trade and, quite independently, the trade of the ten accession countries with the former Soviet states in the past few years has more than doubled. And all that despite the major financial crisis in Russia!

I therefore see no reason why this trade trend should change at all in the future provided that our future new neighbours continue their reforms.

And, finally, recent studies have invariably concluded that the EU enlargement will have a positive impact on our new neighbours. One such study concluded that the wealth increase in the Russian Federation as a result of enlargement will be nearly 2%.

That covers the short-term future of trade perspectives between the EU-25 and our new neighbours.

If we want to maintain these neighbourly dynamics, we must also maintain the momentum of further trade liberalisation in the multilateral context. This means getting back around the table in Geneva to pick up the pieces left in September last, following the breakdown of the Cancún Ministerial conference.

For the agricultural negotiations this means that we need to agree on the negotiating modalities within the next few months. This will not be easy, but then agricultural negotiations are never easy. But with goodwill on all sides I believe this can be achieved. The European Commission will certainly make every effort in the coming months to get such a result, with the full backing of the Member States.

It is encouraging that the US trade representative Bob Zoellick also announced recently that the year 2004 should not end up wasted and that the United States also wants to get the negotiations back on track.

I would like to remind you that the EU offered months ago to phase out all forms of export subsidies on products that are important to the developing countries, provided that the other WTO members are also prepared to curb their export subsidies. However, we are still waiting for a response to this offer.

The negotiations must therefore cover:

    the primarily European export refunds, which incidentally are the only ones subject to any clear discipline;

    export credits, which make up the lion's share of US export measures and which, despite the clear declaration in Article 10.2 of the Agreement on Agriculture, are still not subject to any discipline;

    some forms of food aid, also used by the United States in particular. This means those granted not for humanitarian reasons, but to reduce surpluses, for which there are no rules so far either;

    also state trading enterprises, whose export monopolies distort trade on a whole range of agricultural goods. For instance, the Canadian Government just recently decided to cover the latest losses by the Canadian Wheat Board;

    and various export taxes, some of which are also used to distort trade in agricultural goods. For instance, Argentina is currently subsidising the construction of the world's biggest soya mill through a distinct difference in export taxes on soya beans and soybean flour.

Simply pointing the finger at EU export refunds as the way to revive the agricultural part of the DDA is rather biased, when you realise as my examples show that other forms of export promotion are also on the increase rather than declining.

I would like us to remember that the WTO's objective is to cut any agricultural support that distorts trade, squeezes prices or harms the developing countries.

This starts with the most trade-distorting forms of internal support measures. In Doha we agreed that such support measures needed to be disciplined more strongly so as to facilitate reforms and I continue to abide by this. For it cannot be good to penalise prudent reforms by lumping all kinds of internal support measures together.

Nor did anyone stop to consider that the derogations for developing countries for aid measures that greatly distort trade and are particularly damaging to the environment, and which are now to be extended, specifically benefit the developing countries with the strongest economies.

If the poorest countries are truly to benefit from trade liberalisation, they need to be given much improved market access together with help to meet international production standards. The contribution of the industrialised countries must be fewer trade-distorting agricultural subsidies, a reform of US and other farm policies, and special treatment for the developing countries. And that is precisely what the EU is proposing.

Why do I mention all this in a debate that centres on the outlook for trade between the enlarged European Union and its new neighbours in the East? Quite simply because: for trade to flourish and prosper we need a firm foundation and a set of agreed and accepted rules to arbitrate any trade disputes.

The WTO is just that. But it can still be improved and that is what we are trying to do through the Doha Development Round negotiations.

Of course, you may quite rightly ask whether this result could not also be achieved in other ways, such as bilateral trade negotiations. Isn't this what the European Union did so successfully in the pre-accession period with the ten acceding countries, with negotiations leading to bilateral liberalisation? And wouldn't this also be in line with the tendency since the breakdown of the Cancún Ministerial, with some countries rushing to conclude free trade areas?

In my view, for a number of reasons we should continue to give priority to the multilateral approach and consider bilateral agreements as consolidating and complementing it.

The EU itself is proof of the fact that multilateral and bilateral relationships can coexist and work successfully together: we have bilateral agreements with many countries around the world, particularly developing countries, but at the same time we are open to the world in terms of our own "most-favoured-nation" treatment, with an overall average tariff of just over 5%. Even for agriculture, taking into account our own preferential access, the figure is only 10.5%.

In future trade negotiations between an EU-25 and its neighbours, the first priority must be to get all these countries firmly integrated into the WTO, and only then to pursue an expansion of our bilateral relations, for example in the context of the European Economic Area.

Regarding the accession of our new neighbours to the WTO, negotiations have long been underway. Already it is clear that it is not easy to bring countries like Russia into the WTO, because it is not just about agreeing tariffs. It also involves a considerable legislative programme to adapt the internal laws and regulations of each country in order to be in a position to fully implement future WTO commitments. But we should soon be seeing the light at the end of the tunnel.

The EU fully supports the accession of our new neighbours to the WTO, although you will understand that we must also look to our own interests, and this, on occasion, can make for difficult negotiations.

On agriculture, which is an area I follow particularly closely, I know that the negotiations are progressing well. And we have conceded that the countries negotiating their accession to the WTO need time for adjustment in certain areas. This is the case for example for the meat sector in the Russian Federation, where we accepted the introduction of tariff quotas for a transitional period. We are also trying to help find a solution for the level of support which the Russian Federation would be allowed to carry over into its WTO membership.

To conclude,

    trade between the EU and our future new neighbours already developed very favourably in the past. The same is true of trade between the EU accession countries and our future new neighbours. I therefore anticipate a positive outlook for trade between the enlarged EU and its new neighbours;

    for trade to flourish and prosper we need a firm foundation. We therefore have to get the WTO negotiations back on track and promote trade liberalisation. The EU is doing its utmost to this end;

    we also support the swift accession of our future new neighbours to the WTO;

    although the intention is not to move towards integration of the kind we have in the European Union, we also intend to progressively develop our good bilateral relations and the partnership between the EU and its neighbours.

The outlook is good. but this should not lead to complacency, as we still have a great deal left to do.

Thank you for your attention.

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