3 IMPORT ARRANGEMENTS FOR RICE
(27058)
14984/05
COM(05) 601
| Draft Council Decision on the conclusion of an Agreement in the form of an exchange of letters between the European Community and the Thailand pursuant to Article XXVIII of GATT 1994 relating to the modification of concessions with respect to rice provided for in EC Schedule CXL annexed to GATT 1994
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| Legal base | Articles 133 and 300(2)EC; QMV
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| Document originated | 25 November 2005
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| Deposited in Parliament |
1 December 2005 |
| Department | Environment, Food and Rural Affairs
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| Basis of consideration |
EM of 11 December 2005 |
| Previous Committee Report |
None, but see footnotes |
| To be discussed in Council
| 20 December 2005 |
| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
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Background
3.1 Following the GATT Uruguay Round negotiations, the system
under the Community's rice regime whereby import levies varied
according to the difference between the Community threshold price
and world prices was replaced by a series of fixed tariffs, operating
alongside a ceiling on the price of imported rice linked to the
intervention price.
3.2 In 2000, the Commission put forward proposals for reforming
the rice regime, which would have involved the abolition of the
intervention price system, and would thus have had major implications
for the import arrangements. In the event, these proposals were
overtaken by the more general mid-term review of the Agenda 2000
reforms, which eventually resulted in the retention of an intervention
price, albeit with the level of support reduced by 50% as from
1 September 2004. However, although this turned out to be a much
less radical change than envisaged, it nevertheless still had
an impact on imports, because of the corresponding reduction in
the ceiling prices. The Commission therefore notified the WTO
in June 2003 that the Community intended to modify the tariff
arrangements in this area, in order to safeguard the position
of its own producers, and it put forward on 7 July 2004 two documents,[9]
which reflected the agreement it had reached with
India and Pakistan on the application of fixed tariffs for husked
and milled rice. These were to apply from 1 September 2004 until
30 June 2005 (in the expectation that in the meantime an amendment
would be tabled to the basic instrument setting up the Community
rice regime (Regulation (EC) No. 1783/2003)).
3.3 The Commission was not at that stage able to
negotiate an acceptable agreement with two other important suppliers
(the United States and Thailand), and, in their Report of 21 July
2004, our predecessors noted that the United States had said that
the proposed tariff on husked rice would make its produce completely
uncompetitive on the European market. They also noted on 13 October
2004 that, when the proposal was approved by the Council, the
UK had voted against it because of the lack of agreement with
Thailand and the United States, and had urged the Commission to
continue negotiations with a view to finding a mutually acceptable
outcome.
3.4 However, as we ourselves noted in our Report
of 4 July 2005, an agreement was subsequently reached with the
United States[10] (but
not with Thailand), which would maintain a duty of €65
per tonne for husked rice, but which would enable this to be reduced
to €30
per tonne, according to the volume imported. It was also proposed
that this agreement would be implemented on a provisional basis
with (retrospective) effect from 1 March 2005 until 30 June 2006
at the latest, in the expectation that the Commission would table
a proposal to amend the Community's rice regime so as to give
permanent effect to these arrangements.
The current proposal
3.5 The Commission finally reached agreement with
Thailand in July 2005, and this document invites the Council to
approve its terms, which would:
- maintain the bound rate for
semi-milled and milled rice at €175
per tonne, but provide a mechanism for the duty to fall to €145
per tonne, depending on the actual level of imports;
- provide for a new zero rate annual tariff rate
quota of 13,500 tonnes of semi-milled and milled rice, of which
4,313 tonnes would be allocated to Thailand;
- apply an import duty of €65 per tonne for
broken rice (although the bound rate would remain at €128
per tonne); and
- increase the current tariff rate quota for broken
rice to 100,000 tonnes at a reduced duty rate of €45 per
tonne.
As in the case of the Agreement with the United States,
it is proposed that these arrangements should be implemented on
a provisional basis (in this instance, with retrospective effect
from 1 September 2005), and that the Commission will in due course
table its proposal for amending the Community's rice regime in
order to give permanent effect to the new import arrangements
agreed with the four principal supplying countries.
The Government's view
3.6 In his Explanatory Memorandum of 11 December
2005, the Parliamentary Under-Secretary of State (Sustainable
Farming and Food) at the Department for Environment, Food and
Rural Affairs (Lord Bach) says that the key issue here is the
consistency between this agreement and those reached earlier with
India, Pakistan and the United States, and that the Community
rice industry —
including milling interests in the UK —
has expressed concerns about this, which the UK, as Presidency,
will seek to address as discussion is taken forward. He also says
that the UK industry has expressed concerns about the future of
rice milling, given the effect of these agreements on the margin
available to the millers (see below).
3.7 This last point is also addressed at greater
length in the partial Regulatory Impact Assessment which the Minister
has provided. This points out that, since the UK imports husked
(brown) rice and mills it into white rice, the import system —
and in particular the difference in the applied duty between husked
and milled rice —
is fundamental to the viability of the millers. Prior to the CAP
reforms, the minimum margin was €152 per tonne, but, under
the position which obtained immediately after those reforms, the
profits of the rice milling sector in the Community as a whole
were projected both to be more uncertain and to fall. However,
the Agreement with India and Pakistan re-established a fixed differential
(of about €110 per tonne), whilst the average duty differential
following the Agreement with the United States was expected to
be around €132.50 per tonne. According to the Assessment,
a similar figure is expected as a result of this Agreement with
Thailand, though the projections do not take account of the further
reduction in the milling margin which would result from the proposed
decrease in the duty on broken rice.
Conclusion
3.8 We recognise that this document relates to
the fourth, and last, of a series of negotiations which the Community
has undertaken with its principal rice suppliers, and that, were
it not to be approved by the Council, it would be necessary for
the Community to re-open negotiations with Thailand —
a prospect which is clearly unwelcome. However, we also note the
concerns which the Community rice industry has raised over the
consistency between this Agreement and those reached earlier,
and in particular the concerns which have been expressed over
the viability of the rice millers in the UK. Consequently, although
we are drawing this document to the attention of the House, we
do not feel able to clear it, until the Minister has been able
to clarify the position, particularly as regards the UK Presidency's
attempts to address these concerns in the negotiations in Brussels.
9 (25817) 11294/04 and (25818) 11295/04; see HC 42-xxix
(2003-04), para 1 (21 July 2004) and HC 42-xxxii (2003-04), para
20 (13 October 2004). Back
10
(26585) 9198/05; see HC 34-i (2005-06), para 32 (4 July 2005). Back
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