What the Republic and EU want out of next round

The Republic's vulnerability to international trade barriers as a small trading economy which exports four-fifths of what it produces makes it among the most ardent of the EU's free traders. Apart, that is, from the not insignificant farm sector.

But Irish diplomats say there is a remarkable convergence between the EU's collective position and the Government's aspirations for the next trade round.

The EU is pressing for a broad agenda and a three-year timeframe for the Seattle process, as the Trade Commissioner, Mr Pascal Lamy, explained last week to MEPs. "Liberalisation a la carte will no longer work," he insists. The complexity of the process is such that reconciling hugely different interests can only be done in the context of a global package in which there is something for everyone.

Secondly, new and crucial elements have to be brought into the World Trade Organisation (WTO) process, he said. On the one hand there are environmental, cultural and health concerns, ranging from genetically modified organisms to food safety and labour standards; on the other the "indispensible" dimensions of investment and competition policy.

And the EU will also be seeking changes to the WTO itself to increase the transparency and professionalism of its operations.

Yet if the general thrust of EU policy is towards supporting a liberalising agenda in goods and services, in agriculture the posture is most definitely defensive, with the Republic among those most determined to slow change.

The challenge, in the face of a Uruguay Round commitment to continue the process of dismantling farm subsidies, is to make the case for the "multifunctionality" of EU agriculture spending - to argue that the spending is as much about preservation of rural life as subsidisation of economic activity.

Uruguay pointed the way by requiring a cut of 20 per cent in domestic support for agriculture. But it allowed two significant exceptions known as the "Green Box" and the "Blue Box". The former consists of measures with no link to production such as insurance schemes, research or environmental payments, while the latter involved area and headage payments applied to limited amounts of production.

Import tariffs were reduced by an average of 36 per cent, while the member-states also accepted a cut of 21 per cent in volume and 36 per cent in expenditure on export subsidies (14 per cent and 24 per cent respectively for developing countries).

The reform of the Common Agriculture Policy (CAP) has also seen a dramatic shift away from price support to direct aid to farmers, in theory much more acceptable to our trading partners. Taken together, the 1992 reforms and Agenda 2000 will have led to cuts of 45 per cent in the intervention prices for arable crops and 35 per cent in the beef sector. Compensation to farmers has ranged from 50 per cent in the arable sector to 80 per cent in beef.

The EU will wish to expand the Green Box to include costs arising from animal welfare and food safety measures, to preserve the Blue Box, within which 50 per cent of Irish farmers' incomes were exempt from cuts prior to Agenda 2000, and to minimise further general cuts, particularly in export subsidies.

Already the decline in the quotas for subsidised produce which can be exported, particularly beef, has hit Irish farmers and pressure will be on to reduce export refunds yet further. The Minister for Agriculture, Mr Joe Walsh, has signalled, however, that if an attempt is made to cut back on them he will want to see the export credit schemes and food aid policies of others examined for hidden subsidies.

And among the most difficult elements in the entire round will be changes necessary to the Sanitary and Phyto-Sanitary agreement to strengthen the application of the precautionary principle to imports like GMOs or hormone-treated beef.

The opposition will come from the so-called Cairns Group of Australia, New Zealand, Canada and Argentina, who have made clear their radical opposition to all price-distorting subsidies.

And their initial position pours scorn on the general EU rationale: "Just as it would not be acceptable to introduce `multifunctionality' in the WTO for manufacturing and services, there is similarly no justification to apply it in agriculture. Nontrade objectives should not be used as a smoke-screen for protectionist policies."

The US, although closer to the Cairns group than to the EU, may, nevertheless, be vulnerable to EU arguments because of its own export subsidies and "one-off" aid to farmers in particular difficulties.

The EU's starting position, strongly backed by the Republic and its farmers, is that the Agenda 2000 deal done in Berlin on CAP reform is untouchable, and that everything else is negotiable. But the truth is that few expect Agenda 2000 to survive intact, not least the postponed reform of the dairy sector.

Meanwhile, on the broader agenda, of specific concern to the French is their ability to protect the French film market from the onslaught of Hollywood. The EU's mandate for the negotiations thus includes a highly controversial commitment to a cultural exception allowing France to defend diversity without which Paris insists it will not back any new deal.