Saturday, May 06, 2006

EU isolated on sensitive products

The EU is looking increasingly isolated over the question of 'sensitive' products in the stuttering Doha Round, even though it may be prepared to give ground on its insistence that eight per cent of product lines should be deemed 'sensitive' and given special levels of protection. However, it is now the only major player insisting that tariff quota increases for such products be calculated as a percentage of imports rather than a percentage of domestic consumption.

The World Bank has pointed out that the designation of only 2 per cent of products in developed countries and 4 per cent in developing countries as sensitive would 'virtually eliminate the poverty impacts of a Doha agreement.'

Of course, what 'sensitive' means is 'politically sensitive in the EU and in particular in key member states'. Sugar is a very likely candidate for this treatment. However, the EU confectionery industry is arguing against further protection, pointing out that it is being undermined by imports of cheap confectionery from Asia. They argue that if sugar became a sensitive product it could cost them €1.2bn a year which would go into the pockets of the sugar industry.

As it so happens, the world price sugar is increasing anyway because of rising oil prices and the consequent diversion of greater quantities of sugar, in particular in major producer Brazil, for ethanol production.

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