The drinks industry will play a key role in the next round of WTO talks in Cancun in September. But as Keith Nuthall reports, it will also be holding its breath, as decisions concerning subsidies, free trade and names of origin loom closer that may radically alter the industry for good.
Go deeper with GlobalData
Anti-Globalisation activists will not like it, but there are signs that September’s World Trade Organisation summit in Cancun might be able to deliver what has eluded political leaders since the WTO’s agricultural liberalisation talks began in 2000: the beginnings of a deal.
It is the talk of the corridors at the WTO headquarters in Geneva, Switzerland: the United States and the European Union have confirmed that they have been negotiating over the past two weeks to work out an agreement over the goals of these long negotiations.
And why does this matter? Because for the first time since these talks began, two key WTO players are making a real effort to compromise. Until now, speeches at the special committees hosting the negotiations have repeated entrenched positions. In short, no one has been going anywhere.
This apparent progress also matters a great deal to the drinks industry, because the agricultural agreement covers almost all of its products, from wine, spirits and beer to fruit juices and soft-drinks. Up for grabs in the agricultural agreement is market access: the removal of restrictive trade quotas, the lowering or removal of tariffs and the removal of production and sales subsidies that make it hard to compete overseas.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe US has long been complaining that the EU has a much worse record on these areas than it has, especially regarding subsidies. Meanwhile, Brussels has been pointing its finger at the Bush administration’s much-criticised Farm Bill, which raised agricultural subsidies in the US. So why is it now that the Americans and Europeans are closeted together and trying to patch together a constructive agreement on mutually improving market access?
Diplomats in Geneva say that the EU’s recent decision to reform its Common Agricultural Policy explains a lot. Before that painful decision was taken, involving much teeth pulling from France, there was not a whole lot to talk about. But with the EU Council of Ministers taking the decision in June to start decoupling primary drinks and food production from aid linked to amounts grown and harvested for manufacturers, some elbow-room has been created. With Brussels adopting direct payments for drinks ingredient and food producers, that do not reflect the amounts produced, the EU is moving towards the system favoured in the US, which likes to claim it is free of production subsidies.
So Brussels now has something to offer Washington, in terms of abandoning subsidies, and all eyes are on the Americans to respond. A skeleton agreement was due to be released this week and it will be examined in detail by meetings of heads of WTO delegations that are being staged this month.
If the world’s diplomats are at least mildly happy with it, there is a chance that a substantial agreement on drinks and food market access can be struck at the world trade summit at Cancun, Mexico, from September 11-14. A good deal of diplomatic schmoozing will be required however, because other key players, such as the free trading Cairns Group of countries (representing big wine producers such as Australia, New Zealand and Argentina), Japan, and developing nations, will not want to be bounced into a deal by the US and the EU, as has happened in previous WTO talks.
A summit agreement would in the next few months be translated into a so-called ‘modalities’ deal, which would give numerical targets for WTO member governments to achieve in a new agricultural agreement, (so many percentages off tariffs, so much wider import quotas, and so on). The stage would then be set for a year or so (until January 2005) of bilateral horse-trading in Geneva, where diplomats try to agree cuts in protection that enable them to meet the modalities targets.
If these stakes seem high, they are actually rather higher. The agriculture agreement is the key to the success of the wider-ranging Doha Development Round, which was launched in 2001, with negotiators saying that progress in its other areas is dependent on agreement over drinks and foodstuffs. Some of these other trade topics are of direct relevance to the drinks industry, such as the WTO sanitary and phytosanitary agreement on border health controls, and, crucially, on intellectual property – the much fabled and long discussed deal on a register of protected geographical indications for wine and spirits.
At a recent informal meeting of trade ministers in Montreal, Canada, the US trade representative Robert Zoellick indicated that imaginative thought was even being injected into this longstanding political logjam. Linking Brussels’ abandonment of production subsidies with possible private funding of trademark systems for “some products in Europe that people worry about” he suggested diverting public money between these two areas as a way of protecting traditionally made European products, of which wine and spirits are of the highest concern to Brussels.
Whether this idea is enough to drag the EU away from its plan for a government administered system preventing the illicit use of geographical indications is another question, but it might become part of a deal. In the meantime Zoellick mused on an irony highlighted by a Mexican colleague: “European countries spent 500 years colonising us and then we finally get free and they want to have us pay for the names.”
