Issues in examining the impact of WTO reform on the Beef and Dairy Sectors in the European Union

This paper uses a partial equilibrium commodity model of the EU agricultural market to examine the impact on the EU of two possible trade reform scenarios that could emerge under a World Trade Organisation (WTO) agreement. It explores the potential outcome up to 2017 under these scenarios, against a 2008 Baseline where trade policies are unchanged. A particular feature of the paper is that it explores the issue of sensitive product designation in some detail. It demonstrates the complexity of the operation of tariffs and tariff rate quotas in key commodity markets and highlights how these complexities may produce different outcomes for particular commodity sectors. It is found that sensitive product designation is of value to the EU beef sector in minimising the impact of tariff reductions and limiting the increase in beef imports. However, sensitive product status would be unlikely to be an attractive policy option in the case of the EU dairy sector. Despite the large reductions in tariffs applied to dairy products, remaining levels of tariff protection would be likely to provide protection for the EU market in excess of that afforded were dairy products designated as sensitive. This result is due to the increased volume of dairy imports that would occur with the expansion of tariff rate quota associated with sensitive product status.