Consequences of Change in EC Rice Regime

By Syed Ather Waqar MBA-E (Main)

World Trade Organization

The crucial role of the WTO is to provide a common institutional framework for the implementation of the agreements concluded at the Uruguay Round. The organization is the result of the Uruguay Round of negotiations (1986-1994) and was formally created in 1995

WTO
The World Trade Organization (WTO) deals with

the global rules of trade between nations.

Its main function is to ensure that trade flows as

smoothly, predictably and freely as possible.

The Uruguay Round was the preparatory stage for

the launch of the WTO.

The Round was based on the General Agreement

on Tariffs and Trade (GATT).

Annex Definitions of Rice

Round Grain Rice, the grains of which are of a length

not exceeding 5.2 mm and of a length/width ration of less than 2. Medium Grain Rice, the grains of which are of a length exceeding 5.2 mm but not exceeding 6.0 mm and of a length/width ratio no greater than 3. Long Grain Rice, Rice A, the grains of which are of a length exceeding 6.0 mm and of which the length/width ratio is greater than 2 but less than 3. Rice B, the grains of which are of a length exceeding 6.0 mm and of which the length/width ratio is equal to Paddy rice. Paddy Rice, rice which has retained its husk after threshing. Husked Rice, paddy rice from which only the husk has been removed.

Importance of GIs
India and Pakistan experienced the need for and the

importance of the protection of GIs in the basmati rice case. The problem arose when the US Patent Office issued patents in 1997 for three new strains of rice. These strains could be sold under the name basmati. In 1998 the US Rice Federation submitted that the term basmati was generic and referred to a specific type of aromatic rice. In response, Pakistan and India jointly filed a petition seeking to prevent US-grown rice from being labelled or advertised as basmati. Despite the rejection of petition by US Department of Agriculture and Federal Trade Commission, the US Patent Office barred the patent holder from using the generic name basmati. This rice can be only sold as Texmati or any other name that clearly informs the consumer that the rice is not from the Punjab region.

Proposal of Change in EC Rice Regime

The proposal of the withdrawal of abatement of

duty concession was presented by EU Farm Commissioner Franz Fischer and the import arrangements for basmati rice were amended. This resulted in unlimited imports of husked basmati from India and Pakistan to enter the EU, at an import duty concession of 250 a tonne, reducing the net import duty from 264 a tonne to 14 a tonne. In so doing the EU maintained that Pakistans super basmati was not a pure basmati and that the action was taken to counter alleged abuse and fraud in relation to the duty abatement.

Problem Faced By Pakistan

Despite the inflated claims since the inception of trade

liberalization under the WTO in 1995, trade distortions and restrictions continue to be rampant in the global market. A country like Pakistan, with limited exports, can hardly afford to adjust to sudden shocks because of changes like the one imposed by the EU through reforms in its rice trade policy. Rice is one of the key non-traditional export commodities of Pakistan. Basmati and irri are the two main types of rice cultivated, consumed in and exported from here. Basmati is a traditional, long-grain (indica), aromatic variety especially suited to the Kalar tract of Punjab

Problem Faced By Pakistan (contd)

Pakistan enjoys a natural comparative advantage in

basmati rice production, which has an assured market in several foreign countries where aromatic, long-grain rice is preferred. The European Union (EU) is one of the leading export destinations, partly because a sizable population from the subcontinent lives in the EU and relishes basmati rice. Pakistan exports basmati rice worth US$531 million to the EU, 80% of which is super basmati. The performance of this crop has long-term implications for both a sizable number of small farmers and the national economy. Such a restriction could potentially lead to the ousting of Pakistan from the European rice market, inflicting heavy losses on Pakistans economy and depriving poor

WTO A Platform
Under Article XXVIII of GATT1994 it was obligatory

on the part of the EU to undertake negotiations with the WTO member countries expected to be affected, before making such a change in the rice import regime. The Common Agricultural Policy (CAP) reforms therefore mandated the Commission to open negotiations about modifying import arrangements, so as to modify existing variable levy arrangements for rice and replace them with a new system of tariff rate quotas (TRQs).

Negotiations and Outcomes

A

non-tariff solution was commended as an approach to take in the WTO negotiations between the EU and the third-country suppliers. On a bilateral basis, both the EU and Pakistan continued interacting both formally and informally, and it was reported formally in August 2004 that exports of Pakistans super basmati would resume from the beginning of the EU fiscal year in September 2004, as the EU had decided through an exchange of letters to re-include super basmati in its duty rebatement list.

Implementations
Following measures were agreed to implement the

agreed negotiation.
A Community control system based on DNA analysis at

the border shall be created. Pakistan shall actively co-operate with the EC to set up such a control system and the EC shall provide the appropriate technical assistance in this matter. Pakistan will protect basmati rice as a geographical indication. The EC would welcome an application for protection as a GI of basmati rice under Council Regulation (ECC) No. 2081/92 of 14 July 1992 on the protection of geographical indications and designation of origin for agricultural products and foodstuff.

Transitional Arrangements
As a transitional arrangement, the following has also been agreed to by both the parties. As from 1 September 2004 and until the date of entry into force of the above-mentioned Community control system, the EC would put in place a transitional regime with regard to husked rice (CN codes 1006 20 17 and 1006 20 98) of the varieties described above based on the following elements:
The ECs autonomous applied rate of duty shall be zero. However,

if market disturbance occurs, the EC will consult with Pakistans competent authorities to agree to an appropriate solution. If no agreement is reached, the EC reserves the right to revert to the bound rate of 65 a tonne for husked rice (CN code 1006 20). The EC shall establish separate tariff lines for basmati rice of the varieties indicated in the agreements with India and Pakistan. The competent Pakistani authorities shall continue to issue the authenticity certificates prior to the issuance of import licences, meaning that the current system of administration of the certificates of authenticity shall be maintained.

Article XXVIII of GATT 1994

Having regard to Council Decision 2004/618/EC of 11 August 2004 on the conclusion of an Agreement in the form of an Exchange of Letters between the European Community and Pakistan pursuant to Article XXVIII of GATT 1994 relating to the modification of concessions with respect to rice provided for in Schedule CXL annexed to the GATT 1994, and in particular Article 2 thereof, Whereas, Decision 2004/619/EC modifies the import regime for husked rice and milled rice in the Community. Decisions 2004/617/EC and 2004/618/EC lay down conditions for importing basmati rice. This change in regime makes it necessary to amend Regulation No. 1758/2003. In order to enable those Decisions to be applied on 1 September 2004, as provided for in the Agreements approved by those Decisions, it is necessary to derogate from Regulation (EC) No. 1785/2003 for a transitional period expiring on the date of entry in to force of the amendment to that Regulation, and no later than 30 June

Article XXVIII of GATT 1994 (contd)

Decisions 2004/617/EC and 2004/618/EC also provide for a

transitional import regime for basmati rice to be set in place until the entry into force of a definitive import regime for this type of rice. Specific transitional rules should be laid down. In order to be eligible for zero import duty, basmati rice must belong to a variety specified in the Agreements. In order to ascertain that basmati rice imported at zero rate of duty meets those characteristics, it should be covered by an authenticity certificate drawn up by the competent authorities. In order to prevent fraud, provision should be made for measures to check the variety of basmati rice declared. The transitional import regime for basmati rice provides for a procedure for consulting the exporting country in the event of disturbance on the market and possibly applying the full rate of duty if a satisfactory solution has not been found at the end of the consultations. It would be appropriate to define from what point the market may be considered to be disturbed.

Negotiations conducted following the 2003 reform

Transitional import duty arrangements was carried out with the EUs

main supplier countries (US, India, Pakistan, Thailand). Under these agreements the new import arrangements provide for the introduction of fixed duties of 65/t and 175/t for husked and semi-milled/milled rice respectively, and zero duty for specified varieties of husked basmati rice. However, a mechanism has been put in place for the duty on husked rice to fall to as little as 30/t depending on the actual level of imports. A similar mechanism provides for the duty on semi-milled/milled rice to be reduced to 145/t, provided that imports do not exceed 387,743Kt a year. The duty rates for husked and semi-milled/milled rice are fixed every 6 months. Agreement has also been reached on a reduction in the duty on broken rice to 65/t.

Legal Framework involved in Trading of Rice

Basic Regulations Council Regulation 1785/03 - defines products covered by the rice regime; specifies the marketing year; sets framework for fixing prices; market support system; intervention system; intervention standards and conditions; production refund; trade with Third Countries and general provisions. Council Regulation 1782/03 establishes common rules for direct support schemes under the CAP and certain support schemes for farmers. (Applies from 2004/05 marketing year). External Regime Commission Regulation 1549/04 - detailed rules regarding import duties and laying down transitional rules for imports of basmati rice. Commission Regulation 1342/03 - rice import and export licences. Commission Regulation 327/98 - tariff quotas for imports

Legal Framework (contd)

Commission Regulation 2286/02 - reduced import

duty for a restricted quantity imported from ACP countries. Commission Regulation 1518/95 - external trade in rice products. Commission Regulation 638/2003 detailed rules regarding imports of rice originating in ACP and OCT. Commission Regulation 1401/2002 detailed rules regarding imports of rice originating in the least developed countries 2002/03 to 2008/09. Commission Regulation 196/1997 detailed rules for application of Council Regulation 2184/1996 concerning imports of rice from Egypt. Commission Regulation 955/2005 zero duty quota for rice from Egypt.

Legal Framework (contd)

Commission Regulation 862/1991 reduced duty on

imports of rice from Bangladesh. Commission Regulation 2058/1996 zero duty quota of broken rice for production of food preparations. Internal regime Commission Regulation 2237/03 lays down detailed rules for applying certain support schemes provided for in Title IV of Council Regulation 1782/03. Commission Regulation 1722/93 - general rules on production refunds. Commission Regulation 708/98 - detailed rules for taking over rice into intervention. Commission Regulation 75/91 procedures and conditions for the disposal of paddy rice held by intervention agencies.

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