European Network of Agricultural and Rural Policy Research Institutes (ENARPRI) Working Paper No. 1, 18 pages
The July package of the Doha Round of trade negotiations stipulates that a tiered-formula approach should be used to significantly reduce market access barriers, implying that the EU would have to make larger cuts to its high external tariffs in comparison with other WTO members such as the US. This paper provides a preliminary assessment of the likely impact of this approach on EU agricultural sectors. Numerical simulations of a multilateral market-access reform scenario show that such cuts would lead to across-the-board decreases in intra-EU trade flows compared with a baseline projection. While intra-EU trade flows would decrease, the EU’s trade with the rest of the world would increase. Yet such increases would not be symmetric – imports into the EU would increase more than exports, resulting in larger external trade deficits or smaller external trade surpluses in many EU agricultural products. Further, the resulting adjustments in member states’ production and net trade positions are not equal: new member states would generally lose part of their export shares in the EU market to external competitors, as highlighted in the cases of bovine meat and dairy products. Finally, simulation results show that although EU welfare as a whole improves, the distribution of such gains across EU member states is uneven. EU-15 countries generally gain from improved efficiency as a result of the reform. The new member states, however, will only experience marginal efficiency improvements but will likely suffer terms-of-trade losses, thereby losing some of the related benefits of joining the EU.