September 2008 ICTSD Programme on Agricultural Trade and Sustainable Development

Implications for Mauritius

of the July 2008 Draft
Agricultural Modalities

By Gowreeshankursing Rajpati
Mauritius Sugar Authority
September 2008 l ICTSD Programme on Agricultural Trade and Sustainable Development

Implications for Mauritius of the July

2008 Draft Agricultural Modalities

By Gowreeshankursing Rajpati
Executive Director, Mauritius Sugar Authority
i Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

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Citation: Gowreeshankursing, R (2008). Implications for Mauritius of the July 2008 Draft Agricultural
Modalities. International Centre on Trade and Sustainable Development, Geneva, Switzerland.

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ISSN 1887-3551
 ICTSD Programme on Agricultural Trade and Sustainable Development ii

Contents

Executive Summary iv

Introduction 1

I. The Mauritian context 2

A. Agriculture in Mauritius 2
1 Why cane 2

2 Biomass as a source of clean energy 2

3 The Environment 4

4 Food Procurement 5

B. The Challenges 5
1 Changes in respect of preferential agreements 5

2 Reform 6

3 Policy Responses 7

C. Strategy at the WTO 8

B.The Falconer paper and the specific case of Mauritius 8

B.1 Domestic support. 8

1.1 Trade distorting support. 9

1.2 The Green Box 9

1.3 Summary of support 10

1.4 Domestic support from the export perspective. 11

B.2 Market Access 12

2.1. Sugar 12

2.1.1 Sugar in the Uruguay Round. 12

2.1.2 Tariff reduction and determination of

Ad Valorem equivalents (AVEs) 13

2.1.3 Sensitive products and Tariff Quota expansion 13

2.1.4 Tariff simplification 15

2.1.5 Tariff escalation 16

2.1.6 Tariff quotas 16

2.1.7 Special safeguard clause. 17

2.1.8 Tropical products. 18

iii Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

2.1.9 Longstanding preferences. 20

2.1.10 Choices to be made by the ACP 20

2.2 Off-season exports and cut flowers 21

2.3 Food security products (e.g. poultry and potatoes) 22

2.4 Local fruits and vegetables 24

2.5 Imports 24

3 Export competition 24

3.1 Export subsidies 24

3.2 Article 9.4 of the AoA 25

3.3 Export Credits, Export Credit Guarantees or

Insurance Programmes 25

3.4 Agricultural exporting State Trading Enterprises 26

4 Export prohibitions and restrictions and export taxes 26

5 Geographical Indications 27

C. Concluding remarks 27

endnotes 33

Annex 31
Custom duties on products originating in ESA States.
 ICTSD Programme on Agricultural Trade and Sustainable Development
v

Executive Summary

The importance of sugar cane

Sugar cane, the crop which has over time proven to be the crop most suited to the agro climatic
context, is much more than a cash crop in Mauritius. In fact its multifunctional role is such that
the country has no other alternative but to continue the cultivation of this crop. This role spans
the economic, social, energy, food procurement and environmental domains. In this context, a
comprehensive and descriptive analysis has been included in the paper. This part also explains the
impact of the EU sugar reform on Mauritius where it took a heavy toll on planters and employees
and underscores the fact that Mauritius and indeed, the other ACP countries will not be able to bear
further price decreases stemming from the Doha negotiations.

In this regard, the ACP Council of Ministers meeting in Addis Ababa in June 2008 has adopted a
resolution on sugar where the preferred options of the ACP are spelt out as well as the limits of what
the ACP could accept, failing which the ACP would not be able to join the consensus.

The Falconer text

Overall assessment

The Falconer text in its language on the three pillars appears to comply with the mandate given in
para 13 of the Doha Declaration. Regarding special and differential treatment, the text spells out
a vast array of measures and does provide for flexibility. In comparison to the the Uruguay Round,
the Doha Round,Net Food Importing Developing Countries (NFIDCs), Small, Vulnerable Economies
(SVEs), Recently Acceded Members (RAMs) and the beneficiaries of longstanding preferences are
fully recognised and appropriate language has been proposed.

The overall level of ambition in the market access pillar is on the high side and very exporter
friendly and would, if no corrective measures are taken, lead to results which the world has
never experienced in the sixty year history of the GATT/WTO and would be confronted with major
upheavals. Especially in the food and energy sectors, where the spectre of de facto embargoes
under the guise of export restrictions, prohibitions and export taxes has resurfaced.

The proposals to exempt from reduction commitments developing countries having a total bound
AMS not exceeding US$ 100M, the statement to the effect that the modalities do not in any manner
whatsoever diminish the acquis of the NFIDCs and the LDCs pursuant to the 1994 Marrakesh Decision
and the 2001 Decision on Implementation Related issues and Concerns. These are all clear signs that
the July text is adapting itself to better address the food security issue.

Domestic Support

While there are many provisions in favour of Developing Countries (DCs) under this pillar, the
real issue is the capability to grant support. For NFIDCs and SVEs generally constrained by the
conditionalities imposed by donors/lenders and the dearth of financial resources, the Special and
Differential treatment (S&D) provisions may unfortunately turn out to be more of an academic
nature. This reasoning is valid for the Export Competition pillar. It is therefore no surprise that
the most meaningful pillar for NFIDCs and SVEs is the market access one where no fund outlays are
required and in fact fund receipts are involved.

The Falconer text makes proposals for deep cuts of trade distorting support of developed countries
and makes allowance for Special and Differential Treatment (S&D) for developing countries (DCs).
iv Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

In addition, significant measures are provided for the NFIDCs which are exempted from reduction
commitments. Mauritius, an NFIDC, did not make any commitments in the UR in respect of Domestic
Support. However, most of the measures used to support agriculture, sugar and non sugar, correspond
to the schemes defined in Article 6.2 of the Agreement on Agriculture (AoA) or fall within the de
minimis tolerance.

The Falconer text does not impact on applied domestic support in the case of Mauritius as such
support fell under the purview of Article 6.2, de minimis and Annex 2. In fact, the text provides a
fair amount of policy space, in Article 6 and in Annex 2, which however, requires some fine tuning to
enable the country to implement its ambitious food security strategy as enunciated in the 2008/09
budget speech. The amendment to exempt from reduction commitments DCs having a total bound
AMS not exceeding US$ 100 M would ensure that DCs such as Mauritius would have all the necessary
space, including Article 6 and Annex 2, to operate.

The EU Sugar Régime reform has abolished the intervention mechanism and the intervention price
and has introduced a reference price which depends on the market and acts as a guide for prices.
If on the one hand, it is assumed that the reference price is not an “applied administered price”,
then there is no longer any domestic support granted to sugar. If on the other hand, it is assumed
that the reference price is an administered one, the analysis of the text shows that the risks of the
product specific AMS for sugar being exceeded are non-existent.

Market Access

Market access in the case of Mauritius concerns five categories of products. Firstly, sugar exported
to the EU; secondly, off season fruits and vegetables and cut flowers exported mainly to the EU;
thirdly, products which are essential for the provision of proteins and carbohydrates and fourthly,
fruits and vegetables. The first four categories relate to local production. The last and fifth
one comprises imports, the main ones being rice, wheat/flour, pulses, potatoes, onions, spices,
unrefined edible oil, maize, soybean meal, meat, milk and dairy products and fruits such as citrus
fruits, apples and grapes.

Sugar

ACP/LDC exports and EU production were insulated against third country sugar even after the
reduction commitments of the Uruguay Round (UR) were implemented. The relation between the
level of the final tariff and the intervention price, the type of binding of the tariff, the adequacy
of the SSG and the limitations to third country competition represent the effective “preference
margin”. The proposals of the Falconer text in respect of sugar exports to the EU have therefore
been examined from this perspective.

The approach in the Falconer text in what matters for Mauritian sugar exports to the EU is quite
different from the one adopted in the UR. Firstly, tariffs have to be converted into ad valorem
equivalents (AVE) for purposes of applying a tiered formula which incorporates very high reduction
rates for all tiers. Secondly, deviations are permitted from the tariff cuts of the tiered formula in
respect of a very limited number of products termed sensitive products, however, compensatory
measures in the form of tariff rate quotas equivalent to specified percentages of domestic
consumption and allocated upfront have to provide for. Thirdly, little weightage is given to current
access. Fourthly, the binding of all tariffs is in ad valorem terms. Fifthly, the limitations on the use
of the special safeguard clause (SSG). Sixthly, the fullest liberalisation of tropical products without
any definitive list and this allows the debate on sugar to be more bitter than sweet. Seventhly,
attempts to reconcile the issues of tropical products and longstanding preferences.
 ICTSD Programme on Agricultural Trade and Sustainable Development
vii

The 36 percent cut has taken a very heavy toll on planters, employees and the economy and
further cuts would be unbearable. Accordingly, Mauritius has to negotiate for the most appropriate
package in the WTO negotiations. In this regard, the challenge for Mauritius is twofold: first,
should it try to limit ambition or should it negotiate for a carve out for sugar as a product that has
received a longstanding preference. In fact, ever since 1919, Mauritius and a good many of the ACP
countries have been continuously benefiting from preferences. Second, determine what is the best
combination of measures to attain the carve out for sugar. Should there be a peg in several issues
or should the focus be only on one measure?

The replies to the various questions stem from a two fold analysis of the Falconer text in the
context of the EU which will absorb the totality of Mauritian sugar exports. The first exercise has
been carried out to assess the effectiveness of the various measures of the market access pillar
to cope with difficult world market situations. Pour mémoire the system that evolved from the EU
commitments in the UR was robust enough to cope with extreme situations such as those of 1999
when raw sugar prices went as low as 5 US cents /pound and white sugar prices were equally at low
levels. The currency fluctuation aspect has also been factored in and a dollar/euro/rate of 2.00 has
been taken.

The AVE for sugar notwithstanding the fact that there is no agreement on the methodology to
calculate the AVE for sugar on account of the opposition of Mauritius and some sugar exporting ACP
has been computed by comparing the pre 2005 ( pre reform of the EU Sugar Regime ) administered
price to the world price. The highest figure in the fourth tier, 70 percent, has been taken and the
one third and the two thirds deviations assessed.

Simulations have been effected in respect of the Trigger price Thus it has been reduced by 36
percent (sugar price reduction), 23.1 percent (tariff reduction at two thirds deviation) and 46.9
percent (tariff reduction at one third deviation). The SSG has been tariffied on the basis of an
average SSG of 113 €/t and then reduced by the rates at one third and two third deviations and
the result added to the normal tariff.

A yardstick has been chosen to assess the effectiveness of a measure. It is termed the “cover of the
reference price” i.e the ratio expressed as a percentage of the sum of the tariff, the world price
and the SSG, if applicable, for white sugar to the reference price for white sugar. A cover of 105
percent or more is considered as effective. White sugar has been used given the shift of Mauritian
exports from raw sugar to white as from 2009.

The analysis shows that tariff simplification would further erode the preference margin when prices
are low on the world market i.e at the time when protection is most needed. There is therefore no
substitute for the binding of tariffs in specific terms.

Recourse to the SSG is essential. However, for the various values of the trigger price of the SSG used,
only the tariff obtained from the two thirds deviation when added to the SSG and the world price
ensures a cover of the reference price in excess of the 105 percent threshold cover. It is also a fact
that no amendment to the current trigger price, i.e. 531 €/t ensures protection for both one third
and two thirds deviations. In this regard, ACP Ministers have called for the for the maintenance of
the current Special Safeguard Clause (SSG) for sugar and products with a high sugar content.

The application of the proposals relating to tropical products would mean the demise of this
industry in all ACP countries and it is no surprise that the ACP at the highest political level have
forcefully expressed their opposition to the inclusion of sugar, not a tropical product by virtue of
its worldwide coverage, in the list of tropical products.
vi Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

The second analysis exercise concerned the quotas stemming from the compensation payable for
deviations from the tiered formula for sensitive products. In this regard, it has been found out
that quota expansion at a fast rate would not be in the interest of the ACP. Firstly, the amounts of
sugar resulting from GATT Article XXIV: 6 negotiations together with additional quotas arising from
the Doha negotiations (in higher amounts for the two thirds deviation) representing around one
million tonnes (which would be essentially supplied by the highly competitive large exporters) have
the potential to disrupt markets and depress prices. Secondly, the additional sugars would crowd
out EU sugar with a negative impact on markets. Thirdly, these quantities in a situation where
additional sugar would come in incorporated products or in a situation where the WHO drives down
consumption would once again disturb markets.

Last but not least, the unintended effects of rapid tariff quota expansion would impact negatively
on the non-LDC ACP who are constrained by quantitative limitations and who have paid for their
access through reciprocal, albeit asymmetrical, trade accords. There may be then the need to
revisit the sugar part of the Interim Agreements of the EPAs.

Off-season exports and cut flowers

A tariff analysis taking into account the tiered formula and the proposals for tropical products
in the EU market, by far the most important one for such products shows that for cut flowers,
mangoes, pineapples, papayas, lychees and pithaya the preference margin procured by duty free
access will disappear. In such circumstances, exports would have to be based on compliance with
phytosanitary norms, product quality, off season and just in time delivery elements. The issue of
environment footprints will also arise in the near future.

More and more in the developed world and even in many emerging developing economies, market
access opportunities will be governed by commercial deals which are shaped primarily by what
the hypermarkets and price discounters consider as being the preferred choice of consumers and
subsidiarily by what is agreed in the WTO. This is particularly applicable to fruits, vegetables and
flowers and much less on sugar although fair trade considerations are slowly invading sugar trade.

SP and SSM

The SVEs would enjoy substantial flexibility in respect of the SP in that they can designate as many
tariff lines as they choose as Special Products. The tariff lines so chosen need not be subject to any
minimum tariff cut and need not be guided by the indicators. Poultry, eggs and potatoes are the
most likely products to be chosen as SPs in the case of Mauritius on account of their importance in
ensuring a fair level of food security.

The G33 has undertaken an assessment of the SSM and considers that several areas have to be
reviewed to address the concerns of the group. Moreover, some of the proposals are considered
by this group as constraints to the use of the SSM. The G33 had called for the reintroduction of
flexibilities in respect of the SVEs which existed in the February 2008 draft modalities text and the
July text incorporates such flexibilities.

Domestic market

The flexibilities offered by para 121 in terms of tariff reduction afford the space for action.
However, the real challenges facing the fruit and vegetables sectors are more in terms of
quality and timely supply in a country that is aspiring to receive 2 million tourists in the
medium term and to become a reliable player in upmarket real estate development to fuel
its economic growth.
 ICTSD Programme on Agricultural Trade and Sustainable Development
ix

Mauritius has three final rates which were finalised in 1993/4 and submitted to the WTO and
incorporated. 37 percent for bovine meat, milk and dairy products, potatoes, onions, peas, coconuts, almonds,
bananas, oranges, grapes and apples. 82 percent for green and black tea, wheat, maize, semi-milled or milled
rice, shelled groundnuts, preserved tomatoes and frozen orange juice. All other items are at 122 percent.

At all times in a basically net food importing country which imports most of its requirements, zero tariffs
were applied on basic food items. As time went by, Mauritius became a more and more open economy and
rates of applied duties fell accordingly. Thus there is a wide difference between bound and applied rates
and this has the potential of enhancing the bargaining power of Mauritian negotiators in the final stages
of the Doha negotiations.

Moreover, pursuant to para 121 of the Falconer text, Mauritius has the possibility to exclude SPs from
reduction commitments and to apply an overall rate of 24 percent. Given the small number of SPs, although
the two products identified could mean a higher number of tariff lines, it is expected that the overall rate
for non SP products would be fairly close to 24 percent.

The situation in an NFIDC that is worried by export restriction and prohibition measures and has to combat
inflation is quite complex. It has to resolve an apparent paradox where it has on the one hand, to encourage
local production and protect it and on the other hand, to ensure that imports are as cheap as possible.
Mauritius is in this situation. It is endeavouring to obtain adequate policy space at the WTO and creating
conditions to maintain affordability of food. In this regard, the recent budget has abolished custom duties
on a number of products such as canned tomatoes and other vegetables; chicken and eggs, yogurt,
peanut butter, salted nuts and ground nuts i.e products which are being produced locally.

Export competition, export restrictions and prohibitions and export taxes

The provision of para 151 which refer to the protection of the legal acquis of the NFIDCs and the LDCs would
enable these two categories of countries to negotiate for greater flexibility in respect of the measures in the
export competition pillar. Mauritius had canvassed actively for additional flexibility in respect of Article 9.4
of the Agreement on Agriculture and the Falconer text is satisfactory.

It is unfortunate that at a time when food prices are rising and that so many countries are becoming food
insecure that the tight rules are being implemented on export credits, export credit guarantees and insurance
programmes. The flexibility given on timeframes to repay export credits to NFIDCs and LDCs is insufficient
and there should be flexibility/incentives given in respect of risk cover, the extent of risks taken by exporting
countries and foreign exchange risk hedging. In this regard, the provisions of para 151 would be useful
negotiating tools.

Para 6 of Annex K addresses the concerns of Mauritius, considered as a small, vulnerable economy. This
provision would enable the single desk seller, the Mauritius Sugar Syndicate a non profit making association
regrouping all sugar producers, to continue its activities and ensure that producers enjoy the benefits of
economies of scale which such an organisation can bring about.

Meaningfully balancing the rights and obligations of exporting and importing countries necessarily means that
export restrictions and prohibitions and export taxes be adequately disciplined.

Just as for export taxes , there are no proposals on geographical indications. So far only wines and spirits
are covered but not the vast array of products of great import to a large number of DCs. The question of
balance has been raised in respect of developed and DCs and regarding the rights and obligations of exporting
and importing countries. Balance is also pertinent in the case of GIs when the numerous norms, described
above in the case of the powers of hypermarkets and discounters, which the DCs have to comply with when
exporting their products are taken into consideration.
viii Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

Concluding remarks

The Falconer text to a very large extent meets the requirements of Mauritius in the Domestic Support
pillar. In the Export Competition one, the only improvement relates to the scope of S&D for NFIDCs and
LDCs. Regarding the domestic market, the proposals in respect of the Market Access pillar go a long way
to meet the concerns of Mauritius except for the issue of greater flexibility in the use of the SSM.

However, for issues of major concern to Mauritius there is either uncertainty or the inadequacy/
absence of proposals. Regarding sugar, the level of ambition for reduction of border protection
viewed against the backdrop of fluctuations in world market prices and dollar/euro exchange rates
and the unresolved issues of tropical products and longstanding preferences create a climate of
uncertainty at this stage of the negotiations that would have to be addressed.

The inadequacy of the proposals on export restrictions and prohibitions and the absence of proposals
on export taxes in a situation of food crisis and the application of these measures by some countries
early this year is matter for serious concern to Mauritius an NFIDC which has to import nearly all the
food it consumes.
 ICTSD Programme on Agricultural Trade and Sustainable Development
Introduction
The paper is made up of two parts. The first
one explains the particular Mauritian context
and shows why sugar is so vital for Mauritius.
The second one examines the Falconer text
TN/AG/W/4/Rev.3 (hereinafter referred to as
the Falconer text or the July 2008 Modalities
document) in respect of the three pillars and
the part on export restrictions and prohibitions.
The analysis given here refers to the Falconer
text but it is recognised that the text is no more
than a reflection and a fair assessment made
by Ambassador Crawford Falconer. It highlights
the state of play in the negotiations where
1
every Member or Group is expected to canvass
its positions continuously and work towards
compromises wherever possible.
Of the nine countries selected for the series
of country studies, Mauritius is not only the
smallest one but also possesses very specific
characteristics that may apply to a range of
developing countries. It is therefore considered
appropriate to have an elaborate presentation of
the situation of agriculture in Mauritius and the
challenges facing it so as to better understand
the impact of the Falconer Text on Mauritius.
2 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
I. The Mauritian context
A. Agriculture in Mauritius
1. Why sugar cane?
Mauritius is a country which has no hydro,
mineral or fossil fuel resources, but it is
endowed with a fair extent of land which can
permit food and energy production and with
pristine lagoons which are the key to the
development of tourism in islands. Mauritius
is known all over the world to be a sugar
island. Human settlement and the country’s
development over the last two centuries
are intimately associated with sugar cane.
Sugar occupies more than 90 percent of
arable land and the production of some 60
percent of vegetables and the near totality
of potatoes is undertaken in cane interlines
or in rotational land i.e. land available in
between two seven year cane crop cycles.
Sugar cane has emerged in Mauritius and
indeed in many islands having a similar
agro climatic environment, on account of
its considerable resistance and resilience
to adverse climatic conditions, drought and
more particularly to cyclones, are recurrent
features in the South West of the Indian
Ocean. Ever since the early nineteenth
century, numerous crops have been tried
through specific and often costly research
and field testing programmes, but none
has been able to adapt, on a commercial
scale, to Mauritian conditions in particular
to cyclones.
Cyclones do impose constraints to islands.
In this regard, it is worth pointing out that
the 1990 UN Disaster Relief Organization
Review on the economic impact of disasters
since the 1970s reports that of the 25 most
disaster prone countries, 13 are Small Island
Developing States.
2. Biomass as a source of clean energy
The International Energy Agency has recently
warned that the world is moving to a “slowing
The existence of preferential sugar agreements for
export of sugar to the UK and then the European
Communities (or EU) on a continuous basis ever
since 1919 has enabled the harmonious commercial
development of this appropriate crop.
While Mauritius has a long history in sugar, it
is a fact that it will never be able to compete
with the sugar majors which have less physical
constraints and are able to enjoy massive
economies of scale. Therefore a margin of
preference has been, is, and will always be
needed for countries such as Mauritius.
The consequence of the inadaptability of crops
and activities other than sugar cane on account
of agro climatic reasons coupled with the limited
size of Mauritius, 1860 square kilometres and at
most 85000 hectares of cultivable land, have led
to a situation where Mauritius has to import nearly
all that it consumes. Thus, the totality of rice,
wheat/flour, meat, milk and dairy products, edible
oil, pulses, spices, maize and oil cake (for poultry
production) consumption is imported. However, the
country is nearly self -sufficient in fresh vegetables,
poultry and eggs and produces a fair proportion of
the potato, onion and fruits on demand.
Sugar cane is much more than a cash crop in Mauritius.
In fact its multifunctional role in Mauritius is such
that the country has no other alternative but to
continue the cultivation of this crop. This role spans
the economic, social, energy and environmental
domains. The presence of this activity is critical
for tourism, electricity generation and, in the near
future, for the transport sector through the use
of ethanol. It is also a key element in respect of
the food procurement strategy and in terms of the
foreign earnings that are obtained.
supply and minimal spare capacity” situation
and in that sense confirms the predictions of
 ICTSD Programme on Agricultural Trade and Sustainable Development
the proponents of the “Peak oil” theory. In
such circumstances, any country engaged in
agriculture had to make every endeavour to
optimise food and energy production.
The cane plant in Mauritius provides a commodity for
export as well as a significant amount of electricity
in an island totally devoid of fossil fuels and
without any possibility of grid interconnection.
As pointed out in the FAO sponsored Special
Ministerial Conference on Agriculture,
Environment and Natural Resources in Small
Island Developing States held in 1999 in Rome:
“Fossil fuels typically constitute the largest
import item in many SIDS. This makes them
vulnerable to increased petroleum prices and
places a heavy burden on their balance of
payments (e.g. Kiribati). SIDS diseconomy of scale
in transport, storage facilities and distribution
requires more energy for transportation and
power generation than any other country and is
a major impediment to economic development
and environment protection.”
These points made some nine years back
are even more topical today. The viable and
sustainable production of sugar cane provides
a fitting response in the case of Mauritius to
address the energy issue. Sugar manufacture in
Mauritius and in most sugar producing countries,
is self sufficient in terms of energy through the
burning of bagasse (the fibrous part of sugar
cane) and the generation of energy. Once the
energy needs of the sugar factory have been
satisfied, electricity generated through the
combustion of bagasse can be sold to the grid.
The generation of electricity from bagasse and
its sale to the grid started in 1957 in Mauritius,
some 50 years back. Sales of electricity were
of the order of some 50 million KWh in 1986 at
the time the Uruguay Round was launched. They
came to 80 million KWh in 1995 when this Round
was concluded.
3
In 2008, some 450 million kWh obtained from
bagasse would be exported to the grid i.e.
nearly 20 percent of total demand. By 2015,
some 600 million KWh would be dispatched to
the grid. The use of higher fibre and higher
cane biomass varieties and the use of a fair
proportion of cane field residues will increase
the contribution of cane biomass energy to
nearly 1100 million kWh. The generation
of the same amount of energy would have
required the import of nearly 650 000 tonnes
of coal implying the additional emission of
nearly 2 million tonnes of carbon dioxide.
Savings on imports at a coal price of some
200 US$/tonne 1 would amount to nearly 130
million US$ yearly.
The efficiency in converting bagasse into
electricity is already high in Mauritius (90 KWh
per tonne of cane milled), second only to Reunion
Island where 110 KWh are exported for every
tonne of cane milled. Further developments
would put Mauritius in the pole position In
fact, what is being done in Mauritius in terms
of the use of bagasse and cane biomass can be
compared to what Brazil has done in ethanol
from cane.
Cane biomass electricity is much cheaper
than electricity from solar or wind. In this
regard, biomass electricity can through
cross subsidisation facilitate the purchase by
utility concerns of more expensive forms of
renewable energy.
The use of molasses to produce ethanol was
so far constrained by a host of economic
factors, the most important being the price
of oil. Now that circumstances have changed,
some 30 million litres i.e. 20 percent of
current demand can be produced from 120
000t of molasses. Currently, the totality
of transport fuel (gasoline and diesel) is
imported. Recourse to ethanol from molasses
could increase the self sufficiency level in
transport to some 10 percent.
4 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
3 The Environment
This is a critical aspect for a small island,
for its citizens and its tourist industry.
Accordingly, environment protection and
preservation are imperative. The assessment
of the environment footprint is expected to
play a major role in the years to come and
in particular with regard to the tourism and
leisure industries. The most adequate vehicle
to uphold the environment and minimise
environment footprints is the agricultural
sector viewed from the broad perspective.
Mauritius, an island state of some 1860 km2 has
a very fragile ecosystem. The critical factors are
firstly, that the island is surrounded by a fragile
coral reef barrier that protects its lagoon, its
marine life and its sandy beaches and secondly,
that the lands of Mauritius have a thin top soil
layer. Any disruption of the existing equilibrium
through the absence of cane or large scale
abandonment of cane would cause irreversible
damage to the whole ecosystem, with far
reaching implications on the environment, the
fishing sector, the tourism industry and the
economy at large.
Sugar cane covers more than 40 per cent of
the island’s surface area to which it provides
protection against the vagaries of the weather.
After more than three and half centuries of
cultivation, it constitutes a homogeneous and
stable stratum within which equilibrium has been
achieved. Sugar cane cultivation enables the
establishment of a permanent cover throughout
the year protecting against soil erosion while
maintaining moisture and increasing organic
matter content.
Sugarcane cultivation and processing has
a relatively low negative impact on the
environment and indeed several beneficial
impacts, in comparison to other land-uses and
can therefore contribute to environmental
protection. For instance, it uses relatively low
doses of agro-chemicals, through inter-alia
recourse to biological control, breeding and
adoption of cane varieties resistant to pests and
diseases, in comparison to other tropical crops
such as fruit and vegetables. It is wind resistant
and its strong root system that binds the soil.
Being a perennial crop, it maintains the soil
structure untouched for several successive years
and is thus a very effective in controlling soil
erosion. Modern processing methods have been
adopted resulting in a very clean and efficient
industry in comparison to other industries, with
a range of cost-effective options for recycling
and re-using waste streams.
If sugarcane was to be replaced with a less
stable crop in the steeply sloped marginal areas,
then soil erosion and subsequent sedimentation
and/or eutrophication problems may occur in
downstream reservoirs or lagoons, as nutrients
are washed off in top-soils. The same conditions
would occur if more agro-chemically intensive
crops are grown.
The environmental life-cycle benefits of
sugar cane are significant, in that almost
all of the by-products and waste streams
are utilised in some way or other in an
environment friendly manner, e.g. bagasse/
cane trash for power generation, filter
cake/combustion ash as a soil conditioner,
molasses as livestock feed ingredient or
for the production of bio-fuel, vinasse for
fertigation, composted or concentrated
vinasse as an organic fertiliser etc.
Sugarcane is also associated with aesthetic
benefits, for example in the greening of
islands such as Mauritius for tourism. It has
to be pointed out that cane cultivation is
maintained in certain areas of Hawaii for the
specific purpose of ensuring greenery for the
tourism industry. Thus the sugar industry
provides two key assets to tourism: a green
landscape and avoidance of pollution of
lagoons through soil erosion.
The following is relevant regarding sugar cane:
(i) of all cultivated plants, sugar cane is the
most efficient converter of solar energy and
in this sense is firstly, a major sequestrator
of Carbon Dioxide and secondly, a major
source of energy;
 ICTSD Programme on Agricultural Trade and Sustainable Development
(ii) optimisation, using existing state of the
art technologies, of the biomass potential
of the cane plant without affecting sugar
production would for a cane yield of
100 tonnes/ha result in the export of
12 000 kWh of electricity (avoiding the
use of some 7 tonnes of coal) and the
production of some 750 litres of ethanol
from molasses for blending in a 20/80
mix with gasoline, avoiding the use of an
equivalent amount of gasoline2;
(iii) appropriate varieties, biological control
of insects have resulted in only herbicides
being used in cane cultivation;
4. Food procurement
The import component in the case of sugar,
excluding foreign exchange savings through the
optimal use of its by products, is very low and
represents less than 10 percent of the value of
exports. Consequently, the net export earnings
from the export of sugar have for decades
enabled the country to have the means to
procure its food needs.
B. The challenges
1. Changes in respect of preferential agreements
The development of Mauritius has for decades
been dependent on preferential arrangements.
Sugar benefited from a tariff preference as
from 1919 and the concept of a guaranteed
price based on efficient costs of production
was introduced in the Commonwealth Sugar
Agreement of 1951. This Agreement was
improved in 1975 and appended as the Sugar
Protocol to the various Lomé Conventions and
then the Cotonou Agreement.
Industrial goods including textiles and garments
have been benefiting from tariff protection
ever since the First Lomé Convention in 1975.
Quota restrictions on third countries also
afforded protection from 1975 to 2004 when
the Multifibre Agreement came to an end. In
addition, Mauritius benefited from preferential
arrangements for its sugar and textile exports
to the US.
5
(iv) it is vital for soil conservation;
(v) its minimal use of pesticides and its
positive impact on soil structure avoid
sedimentation and eutrophication in the
pristine lagoons of Mauritius;
(vi) its substantial environmental benefits
would considerably mitigate the higher
environment footprint resulting from
the long distances tourists have to travel
when coming to Mauritius.
Until 2004, i.e the year preceding the reform
of the EU Sugar Regime, net sales under the
Sugar Protocol were most of the time covering
the food bill. Since then there has been a
reversal, sugar prices are going down and food
prices are ever rising. But net earnings from
sugar are still important.
In fact, no other country in the world has been
so much dependent on preferential trade and
the substantial economic growth over the
last three decades was essentially driven by
preferential accords. More than 95 percent of
Mauritian exports are shipped to the EU and
in this sense the Mauritian sugar industry is
critically dependent on the EU’s Sugar Regime.
The reform of the Common Agricultural Policy
of the EU, the anticipated outcome of the Doha
negotiations and the adverse finding of the WTO
Panel on the direct and indirect export subsidies
granted by the EU on sugar have prompted
a major reform of the EU Sugar Regime. The
main aspects of the reform relate to a price
reduction of 36 percent, the elimination of the
intervention/guaranteed price mechanism and
the reduction of production in the EU by some 6
million tonnes. One major consequence of the
6 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
reform is that the EU will no longer export sugar
to the world market and will be a net importer
of essentially ACP and LDC sugar and GATT 1994
Article XXIV:6 quotas.
Producers in the EU have been granted support
amounting to some 64 percent of the loss
incurred. Provision has also been made for
support, termed Accompanying Measures, to
the ACP, with conditionalities and economic and
social performance indicators, which amounts
to around 64 percent of the loss incurred.
However, the actual percentage of the loss
incurred that is being made good varies from
country to country. In the case of Mauritius,
which will lose some 570 M€ from 2006 to 2013
Accompanying Measures are estimated at some
250 M€ i.e some 44 percent of losses incurred.
The findings of the WTO Banana Panel had
a major impact on the Cotonou Agreement
which was concluded in 2000. Reference was
made therein that the EU and the ACP, in
particular, the non LDCs, would have by 31
December 2007 to conclude WTO compatible
trade arrangements in the context of Regional
Economic Partnership Agreements (EPA).
Regarding sugar, the EPA have created a new
situation. Firstly, the Sugar Protocol, which
concerned some 18 ACP countries, will be
phased out as from 1 October 2009 and sugar
preferences i.e no custom tariffs and no quotas
will be extended to all ACP countries which are
in a position to export sugar. Secondly, priority
of access which since 1975 was afforded to
the ACP signatories of the Sugar Protocol has
been modified in favour of the LDCs. Thirdly,
from 1 October 2009 to 30 September 2015, in
order to prevent market disturbances, volume
safeguard measures will be used whereby
the mfn duty would be applied whenever
quantities of imports are in excess of specified
quantities. Fourthly, a special surveillance
2. Reform
Major reform started ever since 2001, shortly
after the EBA initiative, leading to duty and
quota free access for sugar by the LDCs as
from 2008, was approved by the EU member
mechanism would be in place from 1 January
2008 to 30 September 2015 to ensure that
the volumes specified for the ACP are not
circumvented through access under tariff
heading 1704.90.90(sugar confectionery), 1806
10.30 (Cocoa powder containing 65 percent or
more sugar), 2106 90.59 (food preparations)
and 2106 90.98 (food preparations).
Two volume safeguard thresholds have
been incorporated in Regional EPAs. For the
2009/2015 period, quantities of non LDC ACP
exports will be limited to 1.38M tonnes in
2009/10, to 1.45 Mt in 2010/11 and 1.6 Mt
from 2011/12 to 2014/15. The overall imports
from all ACP States, non LDC and LDC, would
be limited to 3.5 Mt. The details of the regional
EPA applicable to Mauritius are at Annex 1.
As of 1 October 2015, there would be no
limitations on quantities; however, safeguard
measures would come into force for tariff
heading 1701 when the market price of white
sugar falls during two consecutive months below
80 per cent of the European Community price
prevailing during the previous market year.
The current Sugar Régime lapses on 30
September 2015, the provisions applicable as
of 1 October 2015, referred to above, could be
signs that the EU market would tend towards
complete liberalisation and that tariffs and
other border measures resulting from the
Doha negotiations would be the only forms
of preferential treatment for the ACP. In such
circumstances, EU prices would be directly
linked to the level of border protection.
In the new sugar environment, conditions of
fierce competition would prevail. In a country
such as Mauritius, limited by physical and
economic constraints which impact adversely
on yields and costs of production, reform has
been bold, deep and comprehensive.
states. From 2001 to 2008, two thirds of the
employees of the sugar industry, who enjoy
permanent employment, have accepted
voluntary retirement packages. The number of
 ICTSD Programme on Agricultural Trade and Sustainable Development
sugar factories has been reduced from 11 to 6 and
this number will come down to 4 in two years time.
In addition, the practice of exporting raw sugar
since 1929, which resulted from a UK Government
policy decision discouraging the import of white
sugar, will stop in 2009. Thereafter, Mauritius will
export white sugar to the EU.
Reform has taken a heavy toll on employment
and on the revenue of small and medium
producers in a country where in year 2000
one family out of every three in the rural
areas depended directly or indirectly on
sugar revenues. For decades, sugar provided
meaningful revenue to the planters and
gainful employment to employees who
enjoyed permanent employment. Proceeds
from sugar were instrumental in ensuring the
social upliftment of vulnerable segments of
the nation. Similar upliftments have been
witnessed in the Caribbean islands relying on
sugar and bananas.
3. Policy responses
The country has to cope with three major shocks:
the substantial erosion of preferences in respect
of sugar and textiles with erosion looming ahead
for the fisheries sector; the steep increase in
the price of oil and its attendant consequences
on the prices of fertilisers; and the major rise
of the price of food. The petroleum import
bill has risen from Rs 6.5 billion in 2000 to Rs
22.3 billion in 2007 and is expected to be even
higher in 2008. The share of petroleum in the
total import bill has gone up from 12 percent in
2000 to 18 percent in 2007 and would exceed 20
percent in 2008.
To sustain growth and to adapt to the erosion
of preferences, Mauritius moved to the services
sector namely financial services, ICT, real estate
development in particular the Integrated Resort
Schemes and the stepping up of the tourism
sector to cater for some 2 million tourists as
compared to slightly less than a million now.
Apart from financial services all the other sectors
are emerging ones and in that sense still fragile.
Tourism and real estate development appeal
to consumer segments that are very environment
7
The 36 percent reduction in spite of the receipt
of Accompanying Measures is to all intents and
purposes a drastic one. Further reductions
would be unbearable and render the sugar cane
activity non-viable with consequences on export
revenue and energy production from biomass.
To complicate matters, Mauritius has since
a few years been facing a string of unusual
climatic events, in the form of cyclones, sudden
downpours and prolonged drought. These
events have impacted adversely on sugar and
agricultural production.
The dismantling of the Multifibre Agreement
impacted negatively on the textile and garment
sector. From 2003 to 2005, the sector was
overhauled with a view to enhance vertical
integration. 25 percent of the employees of
this sector were laid off and output fell and it
is only in 2007 that positive growth has been
encountered in the sector.
conscious and for whom the issue of environment
footprint is going to be critical. In this regard, it
has to be noted that Mauritius compared to many
islands is a distant and therefore may in a superficial
analysis be construed as a high environment
footprint generating destination. The role of sugar
cane in minimising the overall footprint of the
country has been described above.
From the 1980s, Mauritius adopted an export
led economic strategy on the premise that there
would be a balance of obligations between
exporters and importers in particular regarding
trade flows in food.
This premise is no longer valid. Indeed, 2008
witnessed a situation where some major exporters
from the developing world adopted either
export taxes or export restrictions/prohibitions
against a backdrop of unprecedented increases
of food prices and oil.
The 2008/09 Budget Speech spells out the
policy measures in respect of food security and
renewable energy so as to meet the formidable
challenges ahead.
8 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
Regarding food security the focus is upon attaining
the highest level of self sufficiency through local
and regional (Madagascar, Mozambique and
Tanzania all three being LDCs) production and
on reshaping demand for healthier foods. In this
regard, rice and potatoes are targeted in terms
of carbohydrates, maize and soya as inputs
for poultry and egg production, soya as a raw
material for the production of edible oil, and
soya beans and pulses as vegetable proteins.
As concerns energy, the emphasis is on energy
saving and maximal recourse to renewable energy.
It is planned to double the share of renewable
C. Strategy at the WTO
The strategy of Mauritius in respect of
agriculture ever since 1997, when the
Analysis and Information Exercise started,
has been shaped by the characteristics of its
agriculture and its regional alliances. Paper
AIE 51 presented in 1999 marks the start of the
Mauritian initiatives at the WTO. It is at Annex
2 to this report for ease of reference.
The cornerstones of the Mauritian strategy
have been firstly, the adequate protection of
the preferences for sugar exports, secondly,
the full and operationalised recognition of the
constraints of Net Food Importing Developing
Countries (NFIDC) and those of small and
vulnerable economies (SVE), and thirdly, the
provision of adequate policy space to allow
agricultural development in a Small Island
Developing State (SIDS).
B. The Falconer paper and the specific case
of Mauritius
1. Domestic support
While there are many provisions in favour of
Developing Countries (DCs) under this pillar
including the one added in the July text to
para 163, the real issue is the capability to
grant support. For NFIDCs and SVEs generally
constrained by the conditionalities imposed
by donors/lenders and the dearth of financial
resources, the Special and Differential
sources in terms of electricity production to around
40 percent of demand within the next decade.
Cane biomass already contributes to some 18
percent of electricity production and the projects
relating to enhanced quantities of cane biomass
could bring this figure to nearly 33 percent i.e
more than 80 percent of the effort to be made on
renewables would be realised from cane biomass.
Cane also holds the potential of contributing to
self sufficiency in respect of transport fuels. Last
but not least, cheaper energy from cane biomass
can facilitate the purchase and thereby the smooth
development of the more expensive renewables
namely solar and wind energy.
To better defend its interests, Mauritius
has in terms of alliances gone beyond its
natural geographical and economic reaches
namely the ACP and the African group. In
this context, Mauritius has been an active
member of the then Multifunctional Group,
had in 2001 organised a 50 WTO member
attended conference on Non Trade Concerns,
and was a very active proponent along with
78 other WTO members of the Uruguay
Round formula. In terms of organised
groups, Mauritius is in addition to the ACP
and the African group is a member of the
G33, the G10, the group of NFIDCs and the
SVE group.
As a member of the COMESA and the SADC,
Mauritius also participates in coordinating
meetings whenever they are held.
treatment (S&D) provisions may unfortunately
turn out to be more of an academic nature.
This reasoning is valid for the Export
Competition pillar. And it is no surprise that
the most meaningful pillar for NFIDCs and
SVEs is the market access one where no fund
outlays are required and in fact fund receipts
are involved.
 ICTSD Programme on Agricultural Trade and Sustainable Development
1.1 Trade distorting support
Mauritius did not make any commitments in
the Uruguay Round in respect of Domestic
Support. However, most of the measures used
to support agriculture, sugar and non sugar,
correspond to the schemes defined in Article
6.2 of the Agreement on Agriculture (AoA) 4
or fall within the de minimis 5 tolerance. In
both cases, no reduction commitments are
required.
The analysis in respect of Domestic Support
and the other pillars takes into account
G/AG/5/Rev.8 which gives the list of
the NFIDCs and Annex I of the Falconer
text which lists out the small, vulnerable
economies. Mauritius falls into the two
categories in Agriculture.
For the NFIDCs, paragraphs of particular
relevance are para 7 which exempts NFIDCs
from making reduction commitments in
respect of Overall Trade Distorting Support;
para 17 which exempts NFIDCs from making
reduction commitments in respect of Final
Bound AMS; para 32 which allows the NFIDCs
to continue having recourse to the provisions
of Article 6.4(b) of the AoA 6.
As indicated above, Accompanying Measures
have been secured by Mauritius from the EU
as a result of the reform of the EU Sugar
Regime. A certain amount will, over a time
span of seven years which started in 2006,
be used to restructure and modernise the
production set ups of and small and medium
planters. The restructuring programme is in
line with what is referred to in Article 6.2.
1.2 The Green box
The various amendments proposed in the
Green Box provide further policy space for the
developing countries. Regarding food security,
the amendments to footnotes 5 and 6 represent
positive steps. However, there is need for some
fine tuning having regard to the very acute food
crisis, which will unfortunately not be short-lived.
In this connection, the following is relevant:
9
Para 141 of the Falconer text refers to the
provision by longstanding preference granting
Members of “targeted technical assistance,
including additional financial and capacity
building assistance to help address supply-side
constraints and to promote the diversification of
existing production in the territories of preference
receiving Members”. A fair part of such resources
could be construed as domestic support.
To address the problem of food security in food
insecure countries, most of which are either
LDCs or NFIDCs, the World Bank and the EU
have been forthcoming and have indicated that
additional resources would be made available.
Such resources would in many countries accrue
in the form of General Budget Support and
Governments would then use these funds for
agricultural development and production.
The way forward could either be to specify that
Article 6.2 is applicable or to clearly specify
that funds used for food security purposes are
exempt from AMS commitments through the
use of language similar to the one used in the
proposed new subparagraph (h) to be added to
para 2 of Annex 2 of the AoA.
In addition, the amendment to para 16 made
in the July text whereby DCs with a total
bound AMS of US$ 100 M or less would not be
subjected to reduction commitments provides
the policy space for all DCs who have a total
AMS not exceeding US $ 100M, whether bound
or otherwise, to have recourse to domestic
support measures.
(i) food security goes beyond just nutritional
food security and this element would
have to be factored in;
(ii) food need not only be acquired for the
poor but also for many segments of the
population and this would have to be
accounted for; in case it is difficult to
10 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
extend the coverage to all DCs, it could
be made available for LDCs and NFIDCs;
(iii) in many countries, single desk buying
(STEs) do not exist and food procurement
is undertaken by non governmental
entities, (Some may consider the
language of footnote 6 to be sufficiently
broad to cover all situations others may
consider it to mean only food procured
by Government).
Given the fact that NFIDCs and LDCs have
a dearth of financial resources and are
constrained by limitations to the budgetary
deficits, it is assumed that the key concept in
para 3 and 4 and footnotes 5 and 6 of Annex
2 is in respect of who procures and not about
the sourcing of funds as many countries are
expected to be receiving grants (World Bank
and EU funds mentioned above) to reduce
food insecurity.
There are two types of crop insurance in
Mauritius, the most important one caters
for the whole of the sugar industry and
is producer funded. Sugar insurance by
producers is unique to Mauritius. It is
considered that this insurance scheme falls
outside the purview of AoA. Much smaller
1.3 Summary of support
Table 1 indicates the forms of support granted to Mauritian agriculture and their categorisation
in terms of the provisions of the AoA.
Table 1: Ventilation of forms of domestic support
Item Article 6.2 De Minimis
Government - -
Service
Programmes:
general services
Restructuring Yes Yes
cane plantations
through the use of
EU Accompanying
Measures
Direct and indirect Yes Yes
support to food
crop growers from
Government and
other sources of
funds
schemes exist for other crops and are directly
or indirectly Government funded. The major
thrust to be given to food crop production
would be essentially based from funds
coming from Government’s budget. The
proposals for the DCs in para 8 in particular
the lower loss thresholds that would apply
for losses, the flexibility for baseline data
and the possibility, in the new footnote 8, to
aggregate losses for sectors and regions are
positive developments in the sense that they
would facilitate the establishment and use
of crop insurance schemes.
The Falconer text does not impact on applied
domestic support in the case of Mauritius as
such support fell under the purview of Article
6.2 and Annex 2. In fact, the text provides a
fair amount of policy space, in Article 6 and in
Annex 2, which however, requires some fine
tuning, to enable the country to implement
its ambitions food security strategy as
enunciated in the 2008/09 budget speech.
In addition, the Falconer text, with some
modifications, would have to ensure the
exemption from domestic support reduction
commitments of funds accruing under the EU
Accompanying Measures and from the World
Bank or other lenders and the EU.
Green Box Outside the AoA
and the WTO
Yes
- -
- -
 ICTSD Programme on Agricultural Trade and Sustainable Development
Table 1 continued
Item Article 6.2 De Minimis
Support to Yes - Yes
agriculture in
environmentally
sensitive areas
Crop insurance - -
sugar
Crop insurance - -
other crops
Sale of sugar - -
below cost of
production or
below world
market price to
the domestic
market
1.3 Domestic support from the export perspective
Agricultural exports of Mauritius are in respect
of sugar and molasses, off-season fruits and
vegetables and cut flowers. In value terms
more than 95 percent of these exports are
destined to the EU market, sugar and molasses
accounting for nearly 99 percent of the exports
to the EU. The same order of magnitude applies
to the US.
Contraction of sugar production over the past
years and the removal of quantity limitations
on sugar exports to the EU have resulted in
the phasing out of Mauritian sugar exports to
the US.
Sugar, till the reform of the EU Sugar Régime
was, in terms of the provisions of the AoA,
benefiting from domestic support measures
essentially in the form of market price support.
Para 8 of Annex 3 of the AoA explains the
methodology used to calculate the market
price support of a product. The support is the
product of the quantity of production eligible to
receive support times the difference between
an applied administered price and an external
reference price being the average f.o.b. unit
value in a net exporting country or the average
cif unit value in a net importing country over
11
Green Box Outside the AoA
and the WTO
-
- Yes
Yes -
- Should be
considered as a
negative AMS
a specified based period. In the case of sugar,
the intervention price was deemed to be an
“applied administered price”.
The EU Sugar Régime reform has abolished the
intervention mechanism and the intervention
price and has introduced a reference price which
depends on the market and acts as a guide for
prices. If on the one hand, it is assumed that the
reference price is not an “applied administered
price”, then there is no longer any domestic
support granted to sugar. Accordingly, there is
no need to proceed further with the analysis of
the Falconer Text.
If on the other hand, it is assumed that the
reference price is an administered one, then
the provisions of para 21 and 22 of the Falconer
text have to be examined. These para state:
21. Product-specific AMS limits shall be set out
in terms of monetary value commitments in Part
IV of the Schedule of the Member concerned in
accordance with terms and conditions specified
in the paragraphs below.
22. The product-specific AMS limits specified in
the Schedules of all developed country Members
12 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
other than the United States shall be the average
of the product-specific AMS during the Uruguay
Round implementation period (1995-2000) as
notified to the Committee on Agriculture….
The AMS for sugar was computed in the UR as
the product of the quantity of sugar times the
difference between the then administered price
2. Market Access
Market access in the case of Mauritius
concerns five categories of products. Firstly,
sugar exported to the EU; secondly, off season
fruits and vegetables and cut flowers exported
mainly to the EU; thirdly, products which
are essential for the provision of proteins
and carbohydrates and fourthly, fruits and
2.1. Sugar
2.1.1 Sugar in the Uruguay Round
ACP/LDC exports and EU production were
insulated against third country sugar even after
the reduction commitments of the Uruguay
Round were implemented, on account of the
following elements :
(i) the initial and final bound tariffs expressed
in specific terms were significant in
comparison to the intervention price. The
initial tariff for raw sugar was equivalent
to 101 percent of the intervention price.
The figure for the final bound tariff was 65
percent;
(ii) the Special Safeguard Clause (SSG)
afforded adequate additional protection
and even in years such as 1999 when world
sugar prices went as low as 5 US cents /
lb of raw sugar, third country sugar could
not enter the EU market;
(iii) the quantities imported by the EU
from the ACP were duly reckoned in
the determination of whether there
would be additional access in the form
of tariff quotas. The application of
para 7 of the document “Modalities
for the establishment of specific
and the then world price. This figure would be
the maximum which cannot be exceeded. The
“applied administered price” which prevailed
at the time of the UR is being reduced by 36
percent as from 1 October 2009. In this regard,
the proposals at para 21 and 22 ensure that the
risks of the product specific AMS for sugar being
exceeded are non-existent.
vegetables. The first four categories relate
to local production. The last and fifth one
comprises imports, the main ones being rice,
wheat/flour, pulses, potatoes, onions, spices,
unrefined edible oil, maize, soybean meal,
meat, milk and dairy products and fruits such
as citrus fruits, apples and grapes.
binding commitments under the reform
programme (MTN.GNG/MA/W/24 of 20
December 1993)” which indicated that
“current access opportunities, which
during the base period are in excess of
minimum access opportunities as defined
in para 5 above, shall be maintained
and increased over the implementation
period” resulted in no TRQ for third
country sugar; there was therefore no
internal competition to ACP sugar;
(iv) sugar did not feature in the indicative list
of tropical products used in the Uruguay
Round (this indicative list is included
in Annex G of the Falconer text); the
preambular part of the AoA refers to “the
fullest liberalization of trade in tropical
agricultural products”.
The relation between the level of the final
tariff and the intervention price, the type of
binding of the tariff, the adequacy of the SSG
and the limitations to third country competition
represent the effective “preference margin”.
The proposals of the Falconer text in respect
of sugar exports to the EU will therefore be
examined from this perspective.
 ICTSD Programme on Agricultural Trade and Sustainable Development
Given the shift to be made by Mauritius in its
exports to the EU from raw to white sugar as from
2.1.2 Tariff reduction and determination of Ad Valorem equivalents (AVEs)
There are three steps involved. First, the
conversion for purposes of implementing the tiered
formula of the specific duties and other complex
duties into ad valorem equivalents (AVE); second,
the selection of a band and third, the rate of cut
to be applied to the final bound tariff7.
Mauritius and a certain number of ACP countries
have ever since May 2005 challenged the
methodology proposed to determine the AVE for
sugar lines in chapter 17. As at date there is
no consensus on the methodology to be applied.
To this end , it is noted that footnote 7 of
“Report by the Chairman of the Committee on
Agriculture to the TNC” incorporated as Annex A
to the Hong Kong Ministerial Declaration. (WT/
MIN(05)DEC)8 indicates that “The method for
calculating the AVEs for the sugar lines is still to
be established”.
Moreover, TN/AG/W/3 of 12 July 2006
distinguishes sugar from other products and in
para 26 of Annex A (“Draft guidelines for the
conversion of final bound non ad valorem duties
into ad valorem equivalents “), it is indicated
that “For all tariff lines for raw and refined
sugar, [world prices] [or other prices] will apply”
The brackets in this para highlight the absence
of agreement on sugar tariff lines.
For purposes of the analysis of the Falconer text,
the AVE for sugar would be determined by the
2.1.3. Sensitive products and Tariff Quota expansion
The Falconer text allows the designation
of sensitive products but requires that
compensatory measures in the form of Tariff
Quota (TRQ) expansion be taken. Para 74
spells out the relationship between the
deviations vis a vis the tiered formula and
the TRQ expressed in terms of domestic
consumption. The greater the deviation, the
higher the TRQ. Para 77 applies a reduction
factor in situations where the existing bound
tariff quota volume exceeds 10 percent or
more of domestic consumption.
13
2009, the analysis of the Falconer’s text will refer
to this type of sugar bearing HS code 1701.99.
ratio of the UR final bound tariff to the world
price (NY No 11 contract for raw, London LIFFE
for white sugar) as adjusted for freight for a
base period with both prices expressed in the
same currency i.e the euro.
There are two ways of choosing the base period,
any combination before 2005 i.e prior to the
sugar price reductions pursuant to the reform of
the EU Sugar Regime or after 2005 i.e when price
reductions became effective.
Regarding base periods, it is noted that there are
several ones. 1995 to 2000 or 1995 to 2004 in the
Domestic Support pillar; 1999 to 2001 in Annex A
of TN/AG/W/3 and 2003-2005 in Annex C (Basis
for calculation of tariff quota expansion) of the
Falconer text. All of the periods are pre 2005
ones and the likelihood is that the base period
for sugar would be a 2002-05 or a 2003-05 one.
Taking the world market price referred to above
for the 2003-05 period the AVE for white sugar
is in excess of 75 percent, implying that sugar
would be in the last tier (where AVE have to be
greater than 75 percent) where the Falconer
text is proposing cuts between 66 to 73 percent,
these two figures being however in brackets. An
“other price” ( the term used in TN/AG/W/3)
which is more reflective of the ACP situation in
the current currency context is not very likely to
result in an AVE which is less than 75 percent.
In 1993, ACP and India imports amounting
to 1 304 700 t were in excess of 10 percent
of the domestic consumption of the EU 15.
These quantities were bound as a TRQ in the
UR schedules under a 4 digit HS code 1701 in
line with the provisions of the Sugar Protocol
and the EC/India agreement which allowed the
import into the EU of both raw and white sugar
from India and the ACP.
If the 2003-05 period is chosen i.e prior to the
EU becoming a 25 member Union, then market
14 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
access has to be viewed from the broader
perspective which includes not only the UR
negotiations but also the GATT Article XXIV:6
quotas and the Everything but Arms initiative.
Subsequent to the conclusion of the UR, the
EU granted further TRQ in the context of GATT
1994 Article XXIV: 6 negotiations relating to
the access of Finland. Negotiations regarding
the accession of Rumania and Bulgaria into the
EU from the perspective of this Article would
lead to additional quotas of some 530 000 t
raw value. All such negotiated quantities are
bound at the WTO. In 2001 the EU came up with
the Everything but Arms (EBA) initiative for
the LDCs which provided a phased entry from
2001 to 2007 with duty and quota free access
becoming possible as from 2008.
The importance given to existing market access
opportunities in the Falconer text is minimal
and is in line with the very high ambition aimed
by the text. Indeed, those countries having
provided meaningful access opportunities and
those which have facilitated access of LDC
originating products are being given meagre
credits, much lower than was applicable in
the UR.
Moreover, the text ignores the provisions of para
47 of the Hong Kong Ministerial Declaration,
namely “developed country members….. agree
to implement duty free and quota free market
access for products originating from LDCs” and
Annex F thereof , namely “provide duty free and
quota free market access on a lasting basis , for
all products originating from all LDCs by 2008
or no later that the start of the implementation
period in a manner that ensures stability,
security and predictability”. The EBA initiative
of the EU fully implements the provisions of
both para 47 and Annex F.
In a new provision, as compared to the
May text, which is at para 76, the July text
indicates that “If, after application of all its
tariff reduction commitments (i.e. including
its sensitive product deviation entitlements),”
a developed country Member would still have
some of its tariff lines in excess of 100 percent
ad valorem, that Member shall be entitled
to retain these values provided that it
applies a higher expansion of 0.5 percent
of domestic consumption for those tariff
lines concerned. There is a more limitative
proposal which is bracketed.
Does this provision impact on white sugar,
HS code 1701.99. At an AVE of 186 percent a
deviation of one third leaves a final tariff of
99 percent. For purposes of para 76 it is yet
to be ascertained whether for sugar the 0.5
percent would apply on an individual tariff
line at 6 digits or for a cluster of products
at 4 digits.
The deviations imply a price to be paid and
the one third one is the less costly in terms of
TRQ expansion. Indeed, this expansion has to
be viewed against a background where quantity
limitations are being imposed on the non LDC
ACP and the LDCs to avoid market disturbances.
On the basis of the figures of para 74, 76 and
para 77, and assuming that the EU stays within
the limits spelt out in para 719, one third
deviation could lead a TRQ equivalent 3 to 5
percent10 of domestic consumption i.e 480 000
to 800 000 t11. The two thirds deviation could
lead to TRQs of 640 000 to 960 000 t12.
The entry of these additional quantities calls
for some questions:
(i) Would these quantities as are the Article
XXIV:6 ones be over and above the 3.5Mt
threshold for the ACP (LDC and non LDC)
in which case EU producers would have to
further reduce quotas and it is probable that
further price cuts be needed; such additional
cuts being to the detriment of the ACP;
(ii) Price reductions would of course depend
on the timeframe in which quotas would be
expanded, a shorter timeframe is bound
to result in market disturbances whilst a
longer one is less of a market depressor.
Para 79 refers to four instalments, a first
one at the start of the implementation
period and 3 instalments at the expiry of
each twelve month period which means
that the additional access will take place
 ICTSD Programme on Agricultural Trade and Sustainable Development
over an effective, and short, timeframe
of three years.
(iii) Would the TRQ be within the ACP
EPA threshold in which case low cost
competitive exporters would crowd
out the ACP countries which have
secured, and paid for, their quantities
in the context of reciprocal trade
accords?
(iv) What would be the overall impact of the
entry of mfn, and possibly non ACP sugar?
Depending on the level of the in quota
tariff , the additional quantities coming
from cost competitive suppliers have the
potential to depress prices;
(v) Mfn sugar may also mean ACP sugar, how
would the new quotas be reconciled with
the provisions of the Interim Agreements
of the EPAs which have not reckoned with
the possibility of the existence of new
2.1.4 Tariff simplification
In para 101, wholly bracketed, the Falconer text
proposes that all bound tariffs be expressed in
ad valorem terms. This proposal is analysed for
a one third deviation situation from a 70 percent
fourth tier rate. The figure of 70 percent is
the mid-point between 66 to 73 percent being
negotiated for the fourth tier. For purposes of
the analysis, the following is relevant:
(i) the AVE for sugar for purposes of
applying the tiered formula would be
186 percent;
(ii) with a one third deviation from 70 percent
i.e a reduction rate of 46.9 percent, the
AVE would come to 99 percent and the
final specific duty to 222 euros;
(iii) with a two thirds deviation i.e a reduction
rate of 23.1 percent, the AVE would come
to 143 percent and the final specific duty
to 322 euros.
The real impact of tariff simplification has to
be assessed at times of low sugar prices. To
15
quotas in spite of what was on the table
in TN/AG/W/313 of 12 July 2006.
(vi) Would there be a revisiting of the sugar
provisions of the Interim Agreements of
the EPAs;
(vii) Would the deviations in respect of the
rates in the tiered formula be sufficient
to protect ACP and EU sugar, this issue is
addressed later.
Tariff expansion in respect of sensitive products.
The 1993 Modalities document proposed that
tariffs be expanded in equal instalments.
Para 79 proposes a more ambitious time table
through front loading although there has been
movement between the May and the July texts
in that the timeframe has been extended by a
year. In the light of the preceding para, such
a mode of implementation would be to the
disadvantage of the ACP/LDC exporting sugar
to the EU.
this end the prices of 1999 when the raw price
came down to 5 US cents /lb (110 US $/t fob)
will be used. The conversion to cif prices for
white sugar, taking into account recent trends
in freight rates, yields a white sugar price of
200 $/t. Another key element in the analysis
is the dollar/exchange rate. In 2001, the euro
was worth 0.82 $, it is now worth 1.6 US$ and
there are no signs that the appreciation of the
euro vis a vis the dollar will stop. To test the
system at its limits, a rate of one € equal to
2.0 dollars is taken. In these circumstances,
the world price is 100 €/t.
Table 2 shows the difference in protection
between a specific duty and an ad
valorem one in the future when the white
sugar reference price would have come to
404€/t. Protection, also termed the cover
of the reference price, is determined by
the ratio of the sum of the tariff and
the world price to the reference price
(404€/t) expressed as a percentage. For
this exercise, it is assumed that there is
no SSG.
16 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
It is assumed that at a cover of 105 percent
or more , sugar is adequately protected
from sugar coming from the third world
Table 2: Protective effect of a specific duty and an ad valorem one in times of low sugar prices i.e 100 €/t
Situation Additional duty Additional duty
(specific duty ) €/t (ad valorem duty)
€/t
One third 222 99
deviation
Two thirds 322 143
deviation
In the best of cases (a two thirds tariff
deviation) the exercise of tariff simplification
would require a price cut of 63 percent, as
opposed to the current 36 percent, to attain a
reference price cover of 105 percent. Such a
cut would be unbearable for theACP , the LDCs
and the EU producers.
It is clear that the process of tariff simplification
would further erode the preference margin
when prices are low on the world market i.e
at the time when protection is most needed.
In fact this process would negate whatever
2.1.5 Tariff escalation
The reduction of tariff escalation is an ongoing
process in Multilateral Trade Negotiations (MTN)
and has to be reckoned with. As mentioned
later on tariff escalation measures could result
in a relaxation of export taxes. The issue is not
so much the additional reduction proposed to
address tariff escalation but rather the depth
of the cut brought about by the tiered formula
and the binding of tariffs in AVE terms. Product
wise, cocoa powder containing added sugar or
other sweetening matter HS code 1806.10 has
2.1.6. Tariff quotas
The phasing in and the in quota tariffs of the
sensitive product compensatory quotas is of
import to the ACP/LDC exporting to the EU. The
issue of competition has already been addressed
above.
Para 79 of the Falconer text provides that: “The
first instalment shall occur on the first day of
implementation and be a minimum of one quarter
of the total additional domestic consumption.
and that the internal price is sustainable.
Otherwise, the price has to be adjusted to
restore protection.
Cover afforded Cover afforded by
by specific duty ad valorem duty
percent percent
80 49
104 60
additional protection, albeit limited, would
have been obtained by the costly designation of
sensitive products on account of the payment
of compensation by way of a TRQ. There is
therefore no substitute for the binding of tariffs
in specific terms.
The combination of the tariff reductions
proposed in para 61 and the process of tariff
simplification would lead to a very high
level of ambition which means that the term
“substantial” in para 13 of the Doha declaration
is interpreted from a maximalist perspective.
to be watched. In addition, the ACP would have
to ensure that the products for which the ACP
countries would be under surveillance in the
EPA do not find their way in the list of products
at Annex D on tariff escalation.
It is noted at para 86 that tariff escalation
treatment would not apply to “any product that
is declared as Sensitive”. The only question is
whether 1806.10 is more linked to Chapter 17
or to Chapter 18.
The remaining three-quarters of the total shall
be added in three steps at the expiry of each
subsequent twelve-month period”.
The ACP have been seriously beset by the 36
percent cut and need at least seven years from
2009, the year in which the 36 percent reduction
will take place, to restructure their sugar
industries and a price depressing expansion of
TRQs would be harmful to them.
 ICTSD Programme on Agricultural Trade and Sustainable Development
The in-quota tariff issue has to be viewed from
two perspectives as there would be two distinct
types of quotas. Firstly, the GATT Article XXIV:
6 quotas destined for refining operations and
secondly, the new quotas arising from the Doha
negotiations which are fairly likely to accrue to
port refining operations.
The UR bound tariff quota was in respect of
the 4 digit HS code 1701, it is assumed that the
EU given the nature of its Sugar Regime and its
contractual trade obligations would once again
have a tariff quota in terms of a 4 digit HS code
.This would enable it to address the possible
needs of its refiners (raw sugar) and industrial
users (white sugar) and the agro industry
(sugar containing goods). For Mauritius in its
new marketing strategy, the amount of white
sugar in the additional TRQs would be the most
pertinent figure.
In this context, it has to be recalled that the
ACP would, pursuant to the Regional EPA, be
subjected by the EU to a special surveillance
mechanism from 1 January 2008 to 30 September
2015 to ensure that the volumes specified for
the ACP are not circumvented through access
under tariff heading 1704.9099, 1806 1030,
2106 9059 and 2106 9098.
Para 105 refers to the reduction of in quota tariffs
and provides special conditions for developing
countries, SVEs and RAMs. It is proposed that
“all in-quota tariffs shall be reduced either
2.1.7. Special safeguard clause
This clause has been very effective to protect
ACP and LDC sugar from 1995 to date. Its efficacy
for sugar is based on three elements:
(i) the operating mechanism;
(ii) the methodology to derive the trigger
price; and
(iii) the ratio between the trigger price
and the “applied administered
price” (so far the intervention price
for sugar).
17
by (50-70) percent or to (zero-15 percent14),
whichever results in the lower tariff. This shall
be implemented on the same time-frame as for
final bound tariff reductions under the tiered
formula except that any mfn in-quota tariff rate
already bound at or below 5 percent per cent ad
valorem shall be reduced to zero at the end of
the first year of the implementation period.”
On the basis of the above, the in quota tariff
could in the case of raw sugar destined for
refining, on the basis of a 70 percent reduction,
28 euros/t for existing (Finland) and new
(Rumania and Bulgaria) GATT Article XXIV: 6
quotas. It is possible that the same tariff applies
for new quotas or that a tariff 15 percent of the
current world price15 is applicable i.e. 38 euros
/t16. The existence of substantial GATT Article
XXIV: 6 quotas (when the Rumania and Bulgaria
negotiations are concluded) could mean that
mfn sugar comes in with an average tariff of 33
euros/t. At such tariffs, sugar coming from the
very competitive major exporters would be in a
good position to compete with ACP/LDC sugar.
The EU market would be supplied by the EPA
countries, the non EPA LDCs , the non ACP LDCs,
the Article XXIV:6 quotas and the new quotas if
sugar is designated a sensitive product. Some
of the sugars would be covered by existing EU
rules which may or may not incorporate the
provisions of the forthcoming Annex E . Then
there would be the need to harmonise the
appropriate rules.
The Falconer text in para 117 stipulates that
“Developed country Members shall reduce
to 1.5 per cent of scheduled tariff lines
the number of lines eligible for the SSG”
or “Eliminate the SSG” . The EU and the ACP
have time and again underscored the need
for the maintenance of the SSG with the same
terms and conditions. It is assumed that the
mechanism governing the SSG as defined in
para 5 of the AoA will remain, however, its
final form would be decided in the course of
the negotiations.
18 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
In para 116, the text when referring to DCs
indicates that “the terms and conditions of
the SSG shall remain unchanged from the URAA
terms and conditions except that the tariff
rates concerned shall be updated to reflect the
outcome of the Doha Round negotiations.” The
text is silent as to what would happen to the SSG
for developed countries. Would the trigger price
remain the same or would there be modifications?
In this regard, the following is relevant:
(i) changing the value of the trigger price to
reflect either the changes in the internal
price of sugar or the rate of reduction of
tariffs;
(ii) changing the value of the trigger price
Table 3: Impact of possible modifications of the SSG
Type of modification of the SSG Cover of reference price for a
one third deviation ( percent)
Trigger price17 reduced by 36 102
percent
Trigger price reduced by tariff 95
reduction rate stemming from
one third deviation18 or two
thirds deviation19
SSG Tariffied20 and then 95
reduced21 by 46.9 percent and
23.1 percent
From table 3 it can be inferred that the one
third deviation does not afford adequate cover
whilst the two thirds deviation is effective
in all cases. A two third deviation without
the SSG provides a cover of 104 percent as
2.1.8. Tropical products
Two proposals are made in respect of tariff
reduction at para 138 of the text. In the first one,
tariffs would be reduced by 85 percent and no
country would be able to designate any product
deemed a tropical one as a sensitive product.
In the second one, the reduction referred to
in para 61(d) i.e between 66 and 73 percent
subject to certain adjustments would apply. It
is also assumed that the opponents of the SSG
would object to the use of the SSG for sugar.
If sugar were to be included in the list of tropical
products, a reference price cover of 105 percent
to maintain the current ratio of trigger
price to the administered price; this
figure turns out to be the same as the one
for a 36 percent price reduction;
(iii) tariffication of the SSG on the basis
of applied SSG over a base period and
then reducing it by the relevant tariff
reduction rate.
On the basis of deviations of one third and two
thirds from 70 percent; worldwide prices of
100 € /t as indicated above and future tariff
bindings in specific terms, the impact of a
modified SSG has been assessed in terms of the
cover of the reference price. The results are
given in table 3.
Cover of reference price for a
two thirds deviation € ( percent)
127
135
126
indicated in table 2 above. If there is, no
change to the trigger price i.e. it stays at
531€/t this yields reference price covers of
126 percent and 151 percent for one third
and two thirds deviations respectively.
for white sugar would only be attained if the
world price is above 361 €/t. 22This price is well
above prices prevailing most of the time on
the world market. Accordingly, the proposal on
tropical products would represent a death blow
for the ACP and will compel the ACP to withhold
consensus. In the case of Mauritius, it would
spell disaster for an industry which is already
vital and will remain so in the future. Regarding
the consensus issue, the major difficulties
encountered and the very arduous negotiations
that took place in Doha in respect of the Cotonou
and banana waivers have to be borne in mind.
 ICTSD Programme on Agricultural Trade and Sustainable Development
The text in annex G contains two lists of
tropical products, a first one incorporating the
contentions of the proponents of the fullest
liberalisation in tropical products which contains
tariff lines 1701 11 (raw sugar) and 1701 99
(refined or white sugar) and a second one which
was an indicative list used in the Uruguay Round
and which does not contain any tariff line from
chapter 17 of the HS code.
The issue of fullest liberalisation is not a new
one in MTN and several attempts were made in
the past to arrive at a decision. Progress was
made in the UR and as indicated above reference
is made in the preamble of the AoA. In this
context, an indicative list at 4 digit level was
used in the UR. The list comprising those goods
which are essentially produced in tropical and
sub tropical regions referred to raw material,
unprocessed goods, semi processed goods and
processed goods. Substantial reductions were
made on many products and quite a few are at
rates which are lower than 10 percent.
Texts on the issues of tropical products and
longstanding preferences were negotiated in
the July 2004 Framework Agreement (adopted
by all WTO Members) and para 43 and 44 thereof
are relevant, namely:
43. “Full implementation of the long-
standing commitment to achieve the
fullest liberalisation of trade in tropical
agricultural products and for products of
particular importance to the diversification
of production from the growing of illicit
narcotic crops is overdue and will be
addressed effectively in the market access
negotiations.
44. The importance of long-standing
preferences is fully recognised. The issue of
preference erosion will be addressed. For
the further consideration in this regard,
paragraph 16 and other relevant provisions
of TN/AG/W/1/Rev.1 will be used as a
reference.”
The two adopted texts refer to the need to
address both issues and do not in any manner
19
whatsoever assign any hierarchy between
them.
The first list in Annex G aims at covering a
larger spectrum of products and in so doing
has included products of chapter 17 of the HS
code which are produced all over the world
and therefore arguably do not fall within the
definition of tropical products. This point has
been time and again stated by the EU and the
US who have unequivocally indicated that sugar
will never be considered as a tropical product
by them.
Winners and losers. The “friends” of tropical
products are winners on many counts:
substantial reductions of tariffs, limitation of
the designation of sensitive products, reduction
of tariff escalation and in all likelihood major
reductions in tariffs of genuine tropical products.
Last but not least, in the EU, and other GSP
schemes, actual tariffs are for a large number
of products lower that the WTO mfn bound
rates. The “recipients” of preferences, given
their limited territories and resource base, will
face substantial preference erosion.
Taking into account the provisions of agreed
texts, the winner/loser context, the proposed
hierarchy in the Falconer text (last indent
of para 14023) whereby tariff escalation and
tropical products have precedence over
preferences is difficult to understand. It must
be noted that the Falconer text does leave a
window where the interests of the two groups
could be reconciled in particular the mention
of Annex “X”.
A comparison of the first list in Annex G with
the list in Annex H, it is found that only 20
tariff lines appear on both lists out of 94 lines
in Annex G and 54 lines in Annex H. In quite a
number of cases, the tiered formula, the GSP
schemes would resolve matters.
In actual fact, areas where reconciliation would
be arduous are husked or brown rice (1006
20), bananas (0803 00) where the ACP and the
friends of tropical products have been fighting
via panels ever since the 1990s, cut flowers
20 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
(0603 10) where duties are low and would be
closer to 5.0 percent at the end of the Doha
Round and sugar (1701 10 and 1701 99).
Just as sugar, rice is not a tropical product and
Japan will never agree that rice becomes such
a product. Regarding the history behind Annex
5 of the AoA and Japan.
Regarding sugar, the following has to be noted:
(i) only very few of the friends of tropical
products are involved in sugar exports; at
least two of them are already exporting
more than the total ACP exports to the
EU under the Sugar Protocol;
2.1.9. Longstanding preferences
The first part of para 140 deals with the issue
of tariff reductions. The two proposals go in
the same direction, notwithstanding their
contents, namely that they purport to give
breathing space to the ACP. The first one gives
a ten year moratorium followed by a five year
implementation period and the second an
implementation period of 10 years i.e “two
years longer than the implementation period
for developing country Members for tariff cuts
under the tiered formula.”
Paragraph 16 of TN/AG/W/1/Rev.1 (Harbinson
text of 2003) referred to in para 44 of the
Framework Agreement provided for a 2 year
moratorium and a slightly longer implementation
2.1.10. Choices to be made by the ACP
Certain instruments in the market access pillar
can provide relief to the ACP. However, it is clear
that not all of them will be used at the same
time. In this regard, the ACP will have to make
choices: either para 140 or Sensitive products.
The above mentioned ACP Ministerial resolution
on sugar has clearly indicated a preference for
para 44 of the Framework Agreement and the
maintenance of the current SSG. In the event
sugar is designated as a sensitive product, which
appears clearly as a second choice, the ACP
Ministers call for the lowest TRQ expansion and
spread over as long a time as possible preceded
by a grace period. Moreover, the determination
(ii) the EU as a result of the WTO Panel on
export subsidies has removed some
6 Mt from the world market creating
opportunities for others and in particular
the cost competitive suppliers some of
which are advocating fullest liberalisation
of tropical products;
(iii) the ACP will enjoy preferential
access on the EU market in the
context of regional EPAs which have a
reciprocal dimension, in other words
the ACP have paid for the access of
their sugar as from 2009 whilst they
enjoyed non reciprocal trade accords
from 1975 to 2007.
period than the one applicable to developed
countries but the level of ambition in the
Market Access pillar was significantly lower
in the Harbinson text when compared to the
Falconer text.
As indicated earlier and as shown in the preceding
analysis on tariff reduction, tariff simplification,
deviations and compensation for designation
of sensitive products and the recourse to the
SSG, the level of ambition in the text poses a
serious threat to the ACP and indeed the LDC
sugar exporters, who are already affected by
the 36 percent cut. The high ambition would
lead to further price cuts which are going to be
unbearable and therefore unacceptable.
of the quantities of the TRQs would have to
reckon with current access.
The analysis above has shown at a fourth tier
tariff reduction of 70 percent that firstly, the SSG,
as is, is a very effective protective instrument
and secondly, the two thirds deviation is more
effective in protecting the ACP at very low sugar
prices However, the two third deviation is not for
free, it is accompanied by additional TRQ for some
640 000 to 960 000 t. Additionally the following is
relevant:
(i) the additional TRQs and the GATT Article
 ICTSD Programme on Agricultural Trade and Sustainable Development 21

XXIV:6 quotas would mean that there would
be more than one million tonnes of mfn sugar
in the EU in comparison to non LDC ACP sugar
limited to 1.6 M tonnes;
(ii) additional mfn sugar entering at a very fast
rate would crowd out EU production with
serious risks of market disturbances;
(iii) mfn sugar would come from very competitive
major sugar suppliers;
(iv) sugar coming in incorporated products would
be over and above the above mentioned
TRQs;
(v) there is always a risk of the EU introducing
direct sugar limiting regulations and thereby
reducing sugar consumption; the recent
recommendations to this effect by experts
commissioned by the FAO/WHO have to be
borne in mind.
On the basis of the above, the choice made by the
ACP Ministers as evidenced in the above mentioned
Addis Ababa Resolution is logical. The last step is the
determination of the moratorium period and this is
linked to the start of the implementation period of
the outcome of the Doha negotiations and the end
of the current Sugar Regime which will be followed
by a nearly liberalised market with possibly lower
sugar prices. However, internal prices will depend
on the level of border protection which implies that
the ACP has to be very careful on this issue.

2.2 Off-season exports and cut flowers

The exports of these products are essentially destined
for the EU market and an analysis of the EU tariff
schedule has been carried out. The level of tariff
reductions, the fact that some of the products (cut
flowers 0603 10) fall within the purview of tropical
products imply that these exports would minimally
or no longer depend on tariff preferences.
Table 4 indicates some of the products of
interest for Mauritius and the fate of the mfn
tariffs thereon in the EU. The figures in the table
highlight the need to have recourse to measures
other than tariffs to maintain exports.

Table 4: Products of interest to Mauritius

Product Tariff line UR final bound Tariff after Tariff after fullest
tariff percent application of liberalisation of
tiered formula tropical products
percent percent
Cut flowers 0603.10.20: from 12.0 6.0 0.0 to 6.0
1.6 to 31.10 depending on which
option of para 135
is used.
0603.10.60: from
1.11 to 31.5 8.5 4.3 0.0

0603.90.00 10.0 5.0 0.0 to 5.0

depending on which
option of para 135
is used.
Mangoes O804.50.00 0.0 0.0 0.0
Pineapples 0804.30.00 5.8 2.925
0.0
Papayas 0807.20.00 0.0 0.0 0.0
Other Fruits i.e 0810.90.91 and 0.0 to 8.8 0.0 to 4.4 0.0
Fresh tamarinds, 0810.90.92
lychees,
carambola,
pithaya
22 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
The most important exportable product is cut
flowers and in the US, for products under HS code
0603.10, the UR final bound tariffs are lower than
10 percent and would as per the proposals of the
Falconer text be reduced to 0 percent. In the
case of Japan, these final bound rates for 0603.10
are already at 0 percent. In such circumstances,
exports would have to be based on compliance
with phytosanitary norms, product quality, off
season and just in time delivery elements. The
issue of environment footprints will also arise in
2.3 Food security products (e.g poultry and potatoes)
This part is devoted to the Special Products (SP)
and the Special safeguard Mechanism (SSM) i.e
para 120 to 137 of the Falconer text. Three
aspects are of interest to Mauritius; firstly, the
depth and breadth of the provisions on SP and
SSM; secondly, the additional space provided for
small, vulnerable economies, and thirdly, the
products to be designated as special products.
The SP and the SSM part of the Falconer May
text have been analysed by the G33 in JOB (08)/
47 of 3 June 2008. This paper raises a certain
number of issues which if unaddressed would
constrain the DCs in the use of the SP and the
SSM. While Mauritius as an SVE can enjoy the
additional flexibility provided for in para 121
in respect of the SPs, the proposals of the G33
on the SSM are very pertinent for Mauritius.
SSM:
(i) The provisions of para 121 and para 122 of
the May text have been merged into what
is now para 123 of the July text with the
exception that the part which limited the
recourse to the SSM to a certain number
of products in any given twelve month
period has been deleted and this is to the
advantage of the G33;
(ii) Para 123 and para 124 of the May text have
been merged.The new text, para 124, still
proposes the use of the “preceding three
year period” as opposed to the G33 which
advocates the “most recent three year period
for which data is available” for the volume
based SSM; the G33 proposal is more adapted
to the specific situation of most DCs.
the near future. More and more in the developed
world and even in many emerging developing
economies, market access opportunities will be
governed by commercial deals which are shaped
primarily by what the hypermarkets and price
discounters consider as being the preferred
choice of consumers and subsidiarily by what is
agreed in the WTO. This is particularly applicable
to fruits, vegetables and flowers and much less
to sugar although fair trade considerations are
slowly invading sugar trade.
The following paragraphs indicate how matters
stand and have evolved from May to July.
Special Products :
(i) There are fewer brackets in the July
text on the flexibility that would be
available for the SPs but the figures
are lower than certain figures in the
February text;
(ii) The footnote that limited the transfer of
sensitive products not used to SPs in the
May text no longer appears in the July
text;
(iii) there is more flexibility for the RAMs in
the July text.
(iii) In para 124, the brackets on the trigger
levels have been removed. However,
the concept of “applied tariff” which
is unacceptable to the G33 has been
retained. This would mean that
additional duties would be minimal as
in many cases the applied tariff is low
or zero and much lower than the bound
tariff and this is well below what the
G33 is expecting;
(iv) The flexibility on volume or price
based remedies to exceed pre Doha
bound levels under certain conditions
extended to LDCs is in para 135 now
extended to the SVEs as was the case in
the February text;
 ICTSD Programme on Agricultural Trade and Sustainable Development
(v) Para 125: the G33 did not agree with
the inclusion of the bracketed part i.e
“except where a volume increase is
entirely attributable to a scheduled
tariff rate quota increase under Doha
implementation phasing” in the May text,
this provision still exists;
(vi) Para 126 and 127: the applicability of the
remedy starts whenever the import price
falls below 85 percent of the trigger price
as opposed to 70 percent in the May text;
there is more flexibility for the additional
duty which should not exceed 85 percent
of the difference between the import
price and the trigger price as opposed to
50 percent in the May text;
(vii) regarding the disclosure of the trigger
price the G33 points out that this can
only be done after the “initial use” of the
instrument;
(viii) Para 128: the G33 understands the term
“normally” as meaning each Member is free
to self-determine a suitable policy space
and exemptions to the normal application
of the cross-check mechanism;
(ix) Para 129: the exclusion of the provisions
of para 134 of the February text, which
allowed the inclusion of preferential trade
in the calculation of volume and price
triggers provided that the remedies are also
applied on preferential trade, is regretted
by the G33 and the inclusion of provisions on
such trade called for;
(x) Para 131: the G33 considers that this para
seriously limits the scope of application of
the SSM;
(xi) Para 132: the G33 calls for a longer
timeframe to notify its implementation of
the SSM to the Committee on agriculture;
23
(xii) Para 134 to 136 : provision is made for the
sum of duties to exceed UR bound rates;
(xiii) Para 137: the G33 wants Article 4.2 of the
AoA also to be amended in the light of
the provisions of the SSM.
(xiv) The SVEs would enjoy substantial
flexibility in respect of the SP and para
121 indicates that:
a. “In the case of small vulnerable
economies, including those among
them which are ceiling binding and
homogenously low binding countries,
they may, if they choose to do so, apply
the moderated tariff tiered formula
for SVEs provided for in paragraph 65
plus the Special Product entitlement
outlined above. Alternatively, they
may chose not to apply the tiered
formula but simply meet an overall
average cut of 24 per cent through
having in effect opted to designate
as many tariff lines as they choose
as Special Products. The tariff lines
so chosen need not be subject to any
minimum tariff cut and need not be
guided by the indicators.”
(xv) Poultry, eggs and potatoes are the most
likely products to be chosen as SPs in
the case of Mauritius on account of their
importance in ensuring a fair level of
food security.
(xvi) The ambit of food security is much
wider than SP and SSM or even tariff
reductions, indeed, the market access
provisions have to read alongside the
relevant measures explicited in the part
on domestic support and the forthcoming
analysis of food security issues from the
Export Competition and export restriction
and prohibition perspectives.
24 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
2.4. Local fruits and vegetables
The flexibilities offered by para 121 in terms
of tariff reduction afford the space for action.
However, the real challenges facing these
sectors are more in terms of quality and timely
2.5 Imports
Mauritius has three final rates which were
finalised in 1993/4 and submitted to the WTO and
incorporated. 37 percent for bovine meat, milk and
dairy products, potatoes, onions, peas, coconuts,
almonds, bananas, oranges, grapes and apples. 82
percent for green and black tea, wheat, maize, semi
milled or milled rice, shelled groundnuts, preserved
tomatoes and frozen orange juice. All other items
are at 122 percent.
At all times in a basically net food importing country
which imports most of its requirements, zero tariffs
were applied on basic food items. As time went by,
Mauritius became a more and more open economy
and rates of applied duties fell accordingly. Thus
there is a wide difference between bound and
applied rates and this has the potential of enhancing
the bargaining power of Mauritian negotiators in the
final stages of the Doha negotiations.
Moreover, pursuant to para 121 of the Falconer text,
Mauritius has the possibility to exclude SPs from
reduction commitments and to apply an overall
3. Export competition
The July text introduces under the heading
“General” new provisions, in para 151, on the
acquis of the NFIDCs and the LDCs, namely that
nothing in the modalities can be construed to
diminish in any way “the existing commitments
contained in the 1994 Marrakesh Decision on
NFIDCs and LDCs and in the 2001…..Decision26
on inter alia, commitment levels of food aid,
provision of food aid by donors, technical
and financial assistance in the context of
aid programmes to improve agricultural
3.1. Export subsidies
Access of ACP sugar was facilitated in the EU by
the fact that export subsidies were available on
a volume of EU sugar equivalent to the amount
of ACP sugar, SOME 1.6 M tonnes expressed in
supply in a country that is aspiring to receive
2 million tourists in the medium term and to
become a reliable player in upmarket real estate
development to fuel its economic growth.
rate of 24 percent. Given the small number of SPs,
although the two products identified could mean
a higher number of tariff lines, it is expected that
the overall rate for non SP products would be fairly
close to 24 percent.
The situation in an NFIDC that is worried by export
restriction and prohibition measures and has to
combat inflation is quite complex. It has to resolve
an apparent paradox where it has on the one hand,
to encourage local production and protect it and
on the other hand, to ensure that imports are as
cheap as possible. Mauritius is in this situation. It
is endeavouring to obtain adequate policy space
at the WTO and creating conditions to maintain
affordability of food.
In this regard , the recent budget has abolished
custom duties on a number of products such as
canned tomatoes and other vegetables ; chicken
and eggs ;yogurt ;peanut butter, salted nuts
and ground nuts i.e. products which are being
produced locally.
productivity and infrastructure, and financing
normal levels of commercial imports of basic
foodstuffs.”
Para 151 enables the NFIDCs and the LDCs
to firstly, seek for more flexibility in
respect of the financing of normal levels of
commercial imports, on say export credits
and secondly, on technical and financial
support to improve agricultural productivity
and infrastructure.
white sugar equivalent, entering the EU. This
arrangement which dated back to 1975 at the
time of the inception of the Sugar Protocol was
incorporated in the EU schedule in the UR.
 ICTSD Programme on Agricultural Trade and Sustainable Development
This incorporation was instrumental in enabling
many ACP sugar exporting countries to agree
to the conclusion of the UR. However, the WTO
Panel on export subsidies did not accept the
arguments of the ACP and found that the EU
was contravening its WTO commitments.
The reform of the Sugar Regime, inter alia on
account of the findings of the WTO Panel, has
completely overhauled the trade flows of the EU
which will become a net importer moving from the
status of major net exporter it had since the 1970s.
In this context, Mauritius which will face the
36 percent price cut, can only take note of
the proposals at para 152 and 153 which are
3.2. Article 9.4 of the AoA
Mauritius had canvassed actively for additional
flexibility in respect of Article 9.4 and the
Falconer text is satisfactory. Paragraph 4
refers to subparagraphs (d) and (e) of para 1
of Article 9. These two subparagraphs are for
ease of reference given below:
(d) “the provision of subsidies to reduce
the costs of marketing exports of
agricultural products (other than
3.3. Export Credits, Export Credit Guarantees or Insurance Programmes
It is unfortunate that at in a time of food
security rules are being implemented on export
credits, export credit guarantees and insurance
programmes.
NFIDC are being, in para 5 of Annex J, afforded
longer timeframe to repay credits given. This
3.4. Agricultural exporting State Trading Enterprises
Para 6 of Annex K addresses the concerns of
Mauritius, considered as a small, vulnerable
economy in this annex namely:
“In any case, agricultural exporting state trading
enterprises in least-developed country Members
and Members, small, vulnerable economies,
whether or not they enjoy such special
privileges to preserve domestic consumer price
stability and to ensure food security, shall be
permitted to maintain or use monopoly powers
25
in fact reflecting what has already taken place
in the EU.
The lesson to be drawn on the export subsidy issue
is that the Dispute Resolution System of the WTO
considers context and Agreements and schedules
from the legal perspective and avoids examining
political choices of countries, however difficult
they might have been. Thus in the export subsidy
Panel, the choices of the ACP and the motivations
thereof were not taken on board. The ACP and
indeed any Member should keep this aspect in
mind. The more as all modalities documents,
those of 1993 and those of 2006 to 2008, clearly
point out that these documents cannot be used in
dispute resolution.
widely available export promotion and
advisory services) including handling,
upgrading and other processing costs,
and the costs of international transport
and freight;
(e) internal transport and freight charges on
export shipments, provided or mandated
by governments, on terms more favourable
than for domestic shipments”.
measure however welcome is not sufficient for
the NFIDCs. Indeed, there should be flexibility/
incentives given in respect of risk cover, the extent
of risks taken by exporting countries and foreign
exchange risk hedging. These items are being slated
for phasing out as indicated in subparagraphs (b),
(c) and (d) of para 1 of Annex J.
for agricultural exports to the extent that they
would not be otherwise inconsistent with other
provisions of this Agreement and other WTO
Agreements.”
This provision would enable the single desk seller,
the Mauritius Sugar Syndicate a non profit making
association regrouping all sugar producers, to
continue its activities and ensure that producers
enjoy the benefits of economies of scale which
such an organisation can bring about.
26 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
4. Export restrictions and prohibitions and export taxes
These are very important issues for Mauritius. Early
this year, Mauritius had to face the full brunt of
export taxes and export prohibitions which were
imposed without any prior notice. Similarly, the
Philippines and some Asian countries had the same
predicament as Mauritius. Such decisions represent
a tall order for a small island which as an NFIDC has
to import most food items.
The text introduces proposals to reinforce the
language of Article 12 of the AoA. However, the
language is mild in regard to what took place early
this year.
The language will have to be amended27 as follows:
(i) prior notice should be given instead of
notification after the coming into force of a
measure as indicated in para 155;
(ii) provision of relevant information, including
the reasons, the duration of measures and
the list of major destinations of the product
or products to be affected by the measures;
(iii) the institution of a consultation process with
members whose food security would be
impaired;
(iv) the possibility to have an independent
assessment, if needed, to assess the
advisability of introducing export restrictions
or prohibitions report;
It should also be ensured that any new export
prohibitions or restrictions under Article XI.2(a) of
5. Geographical Indications (GIs)
Just as for export taxes29, there are no proposals
on geographical indications. So far only wines and
spirits are covered but not the vast array of products
of great import to a large number of DCs.
The question of balance has been raised in
respect of developed and DCs and regarding
GATT 1994 be limited to the necessary minimum
to prevent or relieve critical shortages of foodstuff,
taking into consideration the exporting Member’s
demand and supply for the relevant foodstuff as well
as food security situation of the importing Members.
No export prohibitions or restrictions for protective,
promotional or other commercial purposes shall be
instituted or maintained.
It is noted that there are no disciplines proposed
for export taxes28. In the past many of those
implementing export taxes pointed out that it was
an instrument to counter tariff escalation. Now that
tariff escalation is being meaningfully reduced, the
quid pro quo could be the introduction of disciplines
on export taxes.
Meaningfully balancing the rights and obligations
of exporting and importing countries necessarily
means that export restrictions and prohibitions
and export taxes be adequately disciplined.
From an S&D perspective, flexibility should
be introduced in favour of LDCs and small,
vulnerable economies for all measures relating
to export restrictions and prohibitions and
export taxes. In para 11 of Job(02)/182 (Annex 4)
a paper presented by Mauritius on 19 November
2002 entitled “Specific input by Mauritius :Food
Security “ it was pointed out that
(i) “there should be no export taxes on
food destined for LDCs and NFIDCs; and
there should be no export restrictions
in respect of food destined to LDCs
and NFIDCs”.
the rights and obligations of exporting and
importing countries. Balance is also pertinent
in the case of GIs when the numerous norms,
described above in the case of the powers of
hypermarkets and discounters, which the DCs
have to comply with when exporting their
products are taken into consideration.
 ICTSD Programme on Agricultural Trade and Sustainable Development 27

C. Concluding remarks
Tables 5, 6, 7 and 8 summarise the evaluation
of the Falconer text in the basis of the analysis
conducted above. The tables also refer to what
could be the Mauritian perspective. However, the
comments in the table are those of the author
of this paper and in no manner whatsoever
represent the official view of Mauritius. Each
table refers to a particular pillar .However, the
market access one includes GIs whilst the export
competition one includes export restrictions
and prohibitions and export taxes.
The requirements of Mauritius are based on the
numerous papers presented by Mauritius alone or as
member of a group ever since the Doha Round and
include Job (02)/161 (Annex 3) and Job (02)/182.

(i) Table 5: Evaluation of the Falconer Paper: Domestic support

Requirement of Falconer text Mauritius Comments from the Mauritian

Maintenance or broadening of
scope of Article 6.2
Maintenance of the percentages
in Article 6.4 on the de minimis
Recognition of status of NFIDCs
Maintenance of product specific
AMS for sugar in the EU
Protection for the use
funds accruing under EU
Accompanying Measures and
received in respect of food
security
Adequate policy space in Green
Box
Sources: by Gowreeshankursing Rajpati
perspective.
No change to Article 6.2 Acceptable
No change to de minimis Acceptable
figures of Article 6.4
Exemption from reduction Interesting notwithstanding the
commitments in respect of base fact that Mauritius did not make
OTDS and final bound AMS. any commitment on domestic
support in the UR.
Para 21 and 22 allow the The 36 percent cut in sugar
specific AMS of sugar to remain prices ensures that the product
unchanged. specific AMS as would be
scheduled at the end of the
Doha negotiations would not be
exceeded
Not very clear language. For Provisions of Article 6.2 or the
instance proposal in para 137 Green Box, or both, have to be
regarding financial assistance fine tuned.
to beneficiaries of longstanding
preferences has no counterpart
in the Domestic Support pillar
Subject to the point made Acceptable
above, amendments to the
Green Box provide adequate
policy space.
28 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
(ii) Table 6: Evaluation of the Falconer Paper: Market Access sugar
Requirement of Mauritius
Moderate level of ambition
Conversion to ad valorem
for sugar taking into account
specificities of the ACP
countries.
Designation of sensitive
products to fully reckon
current access of ACP and
the LDCs
AVE solely used for tiered
formula and no tariff
simplification
Maintain the current SSG for
sugar.
Sugar excluded from the list
of tropical products.
Moratorium and longer
implementation period for
tariff reduction along with
other measures, the SSG in
particular.
Sources: by Gowreeshankursing Rajpati
Falconer text
High level of ambition evidenced
by inter alia very high tariff
cuts, high compensation for
designation of sensitive products,
tariff simplification for all lines,
restrictions on the SSG.
No reference or change is made
to the provision of TN/AG/W/3 of
July 2006 where it was indicated
that the issue of AVEs for sugar
was not settled.
• High compensation and
limitation of importance of
current access to a much
lesser extent than what was
obtained in the UR.
• The proposal that a further
payment be made to cater
for a final AVE >100 percent
nullifies whatever credit
could be obtained for current
access.
• Frontloaded implementation
of tariff quota expansion
Tariff simplification proposed.
Restricts recourse of the SSG to a
limited number of tariff lines and
is silent on the fate of the trigger
price i.e its level and its possible
tariffication and subsequent
reduction as a tariff.
• Does not give a definitive
view as to whether sugar is
included in the list of tropical
products or not.
• Gives precedence to tropical
products and tariff escalation
over products benefiting from
longstanding preferences
in para 140, although the
possibility of having a special
list is mentioned.
The first part of para 140 caters
for the requirements of Mauritius
but there is no definitive proposal
in this para and the door is still
open for negotiations
Comments from the Mauritian
perspective.
Mauritius has two choices:
limit ambition or negotiate an
appropriate carve out for sugar
or do both.
Maintain the stance of may 2005
in respect of the conversion
of specific duties of sugar into
AVEs until such time as there
is no certainty on longstanding
preferences.
• Greater recognition
of current access and
recognition of the EBA
initiative.
• Long implementation period
for TRQ expansion and out
of quota tariff reduction.
This proposal would be very
damaging to Mauritius.
Negotiations on the fate of the
SSG and the trigger price have to
be closely monitored
• Sugar should not be in the
list of tropical products.
• There is no text which
assigns precedence of
tropical products and tariff
escalation over longstanding
preferences.
Moratorium and longer
implementation period for tariff
reduction along with other
measures, the SSG in particular.
 ICTSD Programme on Agricultural Trade and Sustainable Development
(iii) Table 8: Evaluation of the Falconer Paper: Market Access non sugar
Requirement of Mauritius
Take note that low tariffs on off
season products and flowers
will be significantly reduce and
even disappear.
Moderate tariff reduction for
tariffs used by Mauritius.
Maximum flexibility on SPs
Maximum flexibility on SSM
Reconcile food production and
affordable food
Extend GI protection to
products other than wine and
spirits
Sources: by Gowreeshankursing Rajpati
(iv) Table 7: Evaluation of the Falconer Paper: Export competition
Requirement of Mauritius
Maintenance of Article 9(4).
Effective measures in favour of
NFIDCs and LDCs in respect of
export credits
Maintenance and use
of monopoly powers for
agricultural exporting STEs
No export restrictions and
prohibitions on food destined
to LDCs and NFIDCs.
No export taxes on food
destined to LDCs and NFIDCs.
Sources: by Gowreeshankursing Rajpati
Falconer text
The combination of the tiered
formula and the reductions
applicable to products in the list
of tropical products will reduce
most tariffs of relevance to
Mauritius to zero and thereby
the preference margin on these
products.
Substantial flexibility afforded
to SVEs in para 119
Substantial flexibility afforded
to SVEs in para 119
Attempts to reconcile the
widely diverging positions of
exporters in particular from
the developing world and the
DCs who have serious food
security and rural development
concerns.
Substantial flexibility afforded
to SVEs in para 119.
Silent
Falconer text
Article maintained.
• Para 151 provides the
negotiating space to seek
further flexibilities for
NFIDCs and LDCs.
• NFIDCs and LDCs
benefit from only longer
timeframes.
Maintenance and use of
monopoly powers for
agricultural exporting STEs in
the case of LDCs and SVEs.
Mild proposals on this issue.
Silent on export taxes
29
Comments from the Mauritian
perspective.
Compliance with phytosanitary
norms, product quality, off
season and just in time delivery
elements and reckon with the
requirements of hypermarkets
and price discounters.
Acceptable.
Acceptable.
Align on the G33 position.
• Use flexibility given in para 119.
• Apply low tariffs or no tariffs.
Extend GI protection to
products other than wine and
spirits
Comments from the Mauritian
perspective.
Acceptable.
Use para 151 to obtain greater
lexibility for NFIDCs and LDCs
required in respect of risk
cover, the extent of risks taken
by exporting countries and
foreign exchange risk hedging
Acceptable.
Inter alia use para 151 to
canvass for joint Swiss/Japanese
proposal and ensure flexibility
for NFIDCs and LDCs
Inter alia use para 151 to
canvass for no export taxes
on food destined to LDCs and
NFIDCs.
30 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities
From these tables, it appears that the
Falconer text to a very large extent meets
the requirements of Mauritius in the Domestic
Support pillar. In the Export Competition one,
the only improvement relates to the scope
of S&D for NFIDCs and LDCs. Regarding the
domestic market, the proposals in respect of
the Market Access pillar go a long way to meet
the concerns of Mauritius except for the issue
of greater flexibility in the use of the SSM.
However, for issues of major concern to Mauritius
there is either uncertainty or the inadequacy/
absence of proposals. Regarding sugar, the level
of ambition for reduction of border protection
viewed against the backdrop of fluctuations in
world market prices and dollar/euro exchange
rates along with the unresolved issues of tropical
products and longstanding preferences; create
a climate of uncertainty at this stage of the
negotiations that would have to be addressed.
The inadequacy of the proposals on export
restrictions and prohibitions and the absence
of proposals on export taxes in a situation
of food crisis and the application of these
measures by some countries, early this year,
is matter for serious concern to Mauritius and
NFIDC which has to import nearly all the food
it consumes.
 ICTSD Programme on Agricultural Trade and Sustainable Development 31

Annexe
CUSTOMS DUTIES ON PRODUCTS ORIGINATING IN
ESA STATES
1. Without prejudice to paragraphs 2, 4, 5, 6 and 7 customs duties of the EC Party (hereinafter “EC
customs duties”) shall be entirely eliminated on all products of Chapters 1 to 97 of the Harmonized
System, except those of Chapter 93 thereof, originating in a ESA State upon the entry into force of
this Agreement. For products of Chapter 93 the EC Party shall continue to impose the applied MFN
duties. For indicative purposes the schedule of EC customs duties applicable to products originating
in a ESA State is appended to this Annex.

2. EC customs duties on the products of tariff heading 1006 originating in the ESA States shall be
eliminated as from 1 January 2010, with the exception of EC customs duties on the products of
subheading 1006 10 10 which shall be eliminated as from the entry into force of this Agreement.

3. The EC Party and the Signatory ESA States agree that the provisions of Protocol 3 of the Cotonou
Agreement (hereinafter the “Sugar Protocol”) shall remain applicable until 30 September 2009,
and that thereafter the Sugar Protocol shall no longer be in force between them. For the purposes
of Article 4(1) of the Sugar Protocol, the delivery period 2008/9 will last from 1 July 2008 to 30
September 2009. The guaranteed price for 1 July-30 September 2009 shall be decided following the
negotiation provided for in Article 5(4).

4. EC Customs duties on products of tariff heading 1701 originating in an ESA State shall be
eliminated as from 1 October 2009. Until EC customs duties are entirely eliminated, and in addition
to the allocations of tariff rate quotas at zero duty set out in the Sugar Protocol, a tariff rate quota
at zero duty of 75000 tonnes shall be opened for marketing year30 2008/2009 for products of tariff
heading 1701, white sugar equivalent, originating in the ESA States. No import license shall be
granted with regard to products to be imported under this additional tariff rate quota, unless the
importer undertakes to purchase such products at a price at least equal to the guaranteed prices
fixed for sugar imported into the EC Party under Sugar Protocol.

5. (a) The EC Party may, during the period between 1 October 2009 and 30 September 2015
impose the applied Most Favoured Nation duty on the products originating in ESA States of
tariff heading 1701 [sugar] imported in excess of the following levels expressed in white
sugar equivalent, which are deemed to cause a disturbance in the EC Party sugar market:

(i) 3.5 million tonnes in a marketing year of such products originating in States members
of the African, Caribbean and Pacific Group of States (ACP States) signatory to the
Cotonou Agreement, and

(ii) 1.38 million tonnes in marketing year 2009/2010 of such products originating in ACP
States that are not recognised by the United Nations as least developed countries. The
figure of 1.38 million tonnes shall increase to1.45 million tonnes in marketing year
2010/2011, and 1.6 million tonnes in the following four marketing years.

(b) The importation of products of tariff heading 1701 originating in any ESA State that is
recognised by the United Nations as a least developed country shall not be subject to
the provisions of sub-paragraph 5(a). However, such imports shall remain subject to the
provisions of Article 21 (safeguard clause)31.

(c) The imposition of the applied Most Favoured Nation duty shall cease at the end of the
marketing year during which it was introduced.
32 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

(d) Any measure taken pursuant to this paragraph shall be notified immediately to the Joint
ESA-EC Implementation Committee and shall be the subject of periodic consultations
within that body.

6. As of 1 October 2015, for the purpose of the application of the provisions of Article 21 (safeguard
clause), disturbances in the markets of products of tariff heading 1701 may be deemed to arise in
situations where the European Community market price of white sugar falls during two consecutive
months below 80 percent of the European Community market price for white sugar prevailing during
the previous marketing year.

7. From 1 January 2008 until 30 September 2015 products of tariff heading 1704 90 99, 1806 10
30, 1806 10 90, 2106 90 59 and 2106 90 98 shall be subject to a special surveillance mechanism in
order to ensure the arrangements provided for in paragraph 4 and 5 are not circumvented. In the
event of a cumulative increase of imports of such products originating in ESA States by more than
20 percent in volume during a period of 12 consecutive months compared to the average of the
yearly imports over the three previous12 month periods, the EC Party shall analyse the pattern of
trade, the economic justification and the sugar content of such imports and, if it considers that
such imports are used to circumvent the arrangements provided for in paragraphs 4 and 5, it may
suspend the preferential treatment and introduce the specific MFN duty applied to imports pursuant
to the European Community Common Customs Tariff for products of tariff heading 1704 90 99, 1806
10 30, 1806 10 90, 2106 90 59 and 2106 90 98 originating in ESA States. Sub-paragraphs 5(b), (c) and
(d) shall apply mutatis mutandis to action under this paragraph.

8. Between 1 October 2009 and 30 September 2012 with regard to the products of tariff heading
1701, no preferential import license shall be granted unless the importer undertakes to purchase
such products at a price not lower than 90 percent of the reference price set by the EC Party for
the relevant marketing year. The Parties take note that at the time of initialling of the Agreement
the reference price is contained in Regulation (EC) 318/2006.

9. Paragraph 1, 3 and 4 shall not apply to products of tariff heading 1701 originating in ESA States and
released for free circulation in the French overseas departments. This provision shall be applicable
for a period of 10 years. This period shall be extended for a further period of 10 years unless the
Parties agree otherwise.
 ICTSD Programme on Agricultural Trade and Sustainable Development 33

ENDNOTES
1. Current landed price of coal, this price is expected to continue to rise in relation to the
increase in the price of oil.

2. When ethanol is used at these levels, its lower calorific value compared to that of gasoline is
compensated by its octane enhancing effect. Thus one litre of gasoline can be replaced by
one litre of ethanol.

3. The addition has been referred to in the previous part.

4. government measures of assistance, whether direct or indirect, to encourage agricultural

and rural development are an integral part of the development programmes of developing
countries, investment subsidies which are generally available to agriculture in developing
country Members and agricultural input subsidies generally available to low-income or
resource-poor producers in developing country Members.

5. 10 percent for product specific support and 10 percent for non product specific support.

6. 10 percent de minimis.

7. Para 61 of the Falconer text specifies “Developed country Members shall reduce their final
bound tariffs in equal annual instalments over five years in accordance with the following
tiered formula.” (highlighting ours).

8. Para 4 of the Hong Kong Declaration points out that “We take note of the report by
the Chairman of the Special Session on his own responsibility (TN/AG/21, contained in
Annex A).”

9. Extract of para 71 of the Falconer text “Each developed country Member shall have the right
to designate up to [(4) (6)] per cent of tariff lines as “Sensitive Products”.

10. The figures are arrived by deducting the 1 percent referred to in para 74 for deviations which
are less than two thirds and 0.5 percent for bound current access in excess of 10 percent of
domestic consumption.

11. Consumption assumed to be 16 M tonnes white sugar equivalent.

12. Equivalent to 4 to 6 percent of domestic consumption.

13. Revised draft modalities for Agriculture.

14. It is assumed that the figure of 15 percent is an ad valorem one.

15. US $ 380/t or 253 €/t

16. 15 percent of 253 €

17. Trigger price = 340€, SSG =90 €

18. Trigger price =282€, SSG= 63 €

19. Trigger price =408€ , SSG= 123€

34 Gowreeshankursing Rajpati — Implications for Mauritius of the July 2008 Draft Agricultural
Modalities

20. Applied SSG = 113 € for an average price of195€/t

21. Additional tariff after tariff reduction.=58 € for one third deviation and 86 € for two thirds
deviation.

22. In today’s terms this means a world fob price of 520 US $/T, current prices are at 390 $/t,
most of the time sugar prices are below 520 $/t.

23. “Where, however, there is an overlap between products subject to this provision and those
covered by the tariff escalation and/or tropical products provisions, the latter provisions
shall prevail, except for the specific list of products identified in Annex X on which tariff
reduction commitments shall proceed as is specifically determined in that Annex.”

24. It was the combined efforts of the sugar producing countries, led by Brazil , Mauritius and the
US, at the FAO and the WHO that led to the rejection of the report of the experts.

25. 50 percent reduction for tariffs in the first tier, re para 61 of the Falconer text.

26. Decision on the Implementation-related Issues and Concerns of 14 November 2001.

27. These proposals are similar to those made by the joint Swiss/Japanese paper of April 2008.

28. The correct terminology would be “differential export taxes”.

29. Pour mémoire, para 49 of Annex A of the Framework Agreement states “Issues of interest but
not agreed: sectoral initiatives, differential export taxes, GIs.”

30. For the purpose of paragraphs 4, 5, 6 and 7 “marketing year” means the period between 1
October and 30 September.

31. For this purpose and by derogation to article 21, individual State recognised by the United
Nations as a least developed country may be subject to safeguard measures.
www.ictsd.org

ICTSD’s Programme on Agricultural Trade and Sustainable Development aims to promote food
security, equity and environmental sustainability in agricultural trade. Publications include:
• Value Chains and Tropical Products in a Changing Global Trade Regime.
Issue Paper N0.13 by Charles Mather, 2008
• Trade Effects of SPS and TBT Measures on Tropical and Diversification Products.
Issue Paper No. 12 by Anne-Célia Disdier, Belay Fekadu, Carlos Murillo and Sara A. Wong
• Tropical and Diversification Products Strategic Options for Developing Countries.
Issue Paper No. 11 by Santiago Perry, 2008.
• Implications of Proposed Modalities for the Special Safeguard Mechanism:
A Simulation Exercise.
Issue Paper No. 10 by Raul Montemayor, 2007.
• Trade and Sustainable Land Management in Drylands.
Selected Issue Brief, 2007.
• A Comparison of the Barriers Faced by Latin American and ACP Countries’ Exports of Tropical
Products.
Issue Paper No. 9 by Jean-Christophe Bureau, Anne-Celia Disdier and Priscila Ramos, 2007.
• South-South Trade in Special Products.
Issue Paper No.8 by Christopher Stevens, Jane Kennan and Mareike Meyn, 2007.
• The ACP Experience of Preference Erosion in the Banana and Sugar Sectors: Possible Policy
Responses to Assist in Adjusting to Trade Changes.
Issue Paper No.7 by Paul Goodison, 2007.
• Special Products and the Special Safeguard Mechanism: Strategic Options for
Developing Countries.
Issue Paper No. 6 by ICTSD, 2005.
• Lessons from the Experience with Special Products and Safeguard Mechanisms
in Bilateral Trade Agreements.
Issue Paper No. 5 by Carlos Pomareda, forthcoming.
• Methodology for the Identification of Special Products (SP) and Products for
Eligibility Under Special Safeguard Mechanism (SSM) by Developing Countries.
Issue Paper No. 4 by Luisa Bernal, 2005.
• Special Products: Options for Negotiating Modalities.
Issue Paper No. 3 by Anwarul Hoda, 2005.
• Tariff Reduction, Special Products and Special Safeguards: An Analysis of
the Agricultural Tariff Structures of G-33 Countries.
Issue Paper No. 2 by Mario Jales, 2005.
• The New SSM: A Price Floor Mechanism for Developing Countries.
Issue Paper No. 1 by Alberto Valdés and William Foster, 2005.

For further information, visit www.agtradepolicy.org.

ABOUT ICTSD

Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is
an independent non-profit and non-governmental organization based in Geneva. By empowe-
ring stakeholders in trade policy through information, networking, dialogue, well-targeted research
and capacity building, the centre aims to influence the international trade system such that it
advances the goal of sustainable development.