November 12, 2002

European Commission and US conclude negotiations on new cereal import regime

The European Commission and the US have agreed on a new regime for imports of medium and low
quality wheat, and barley. For medium and low quality wheat a tariff rate quota (TRQ) of 2 981
600t will be open, starting on 1 January 2003. The US will benefit from a country allocation of
572 000t. The duty will be 12€/t in the quota. Outside the quota the duty will be kept unchanged
at 95€/t. For barley one quota of 50 000t will be open for malting barley, with a duty of 8€/t, and
another quota of 300 000t with a duty of 16€/t will be open for other barley. Outside the quotas
the current duty of 93€/t will be kept unchanged. Both quotas will start on 1 January 2003 as
well. For all the other cereals, the current system to calculate EU import duties, which takes US
Commodity Exchange quotations as representative for world cereal market prices, remains in
place. The deal has still to be approved by the EU member states.

"I am very pleased with this agreement", said Franz Fischler, EU Commissioner for Agriculture,
Rural Development and Fisheries. "It will enable us to correct the misfunctioning of the cereals
import regime and restore the balance in our market", he added, "whilst keeping our markets
open to imports of cereals, and especially of high quality products, from all supplier countries".

Background

The current system to calculate EU import duties for cereals takes US Commodity Exchange
quotations as representative for world cereal market prices. These quotations, by the addition of
both commercial premiums applied on the US market and transport costs, are then converted
into theoretical CIF-Rotterdam prices, which are compared to 155% of the EU Intervention price.
The difference between these two values is the import duty periodically set by the EU
Commission. During the last year, new exporters have started to sell grain at prices well below
other world market prices.

Commission and Canada conclude negotiations on new cereal import regime

Following the successful conclusions of negotiations based on Article XXVIII of GATT, the
European Commission and Canada have agreed on a new regime for imports of medium and low
quality wheat and barley. For medium and low quality wheat a Tariff Rate Quota (TRQ) of 2 981
600 t will be opened, starting on 1 January 2003. Canada will benefit from a country allocation of
38 000 t, the US of a country allocation of 572 000 t and rest of the quota will be open to other
importers. The duty will be 12€/t in the quota. Outside the quota the duty will be kept unchanged
at 95€/t. The agreement is subject to approval of the EU Member States. For barley one quota of
50 000 t will be open for malting barley, with a duty of 8€/t, and another quota of 300 000 t with
a duty of 16€/t will be open for other barley. Outside the quotas the current duty of 93€/t will be
kept unchanged. Both quotas will start on 1 January 2003 as well. The Commission will now
consult with Russia and the Ukraine, who are cereal exporters to the EU but not yet members of
the WTO. For all the other cereals, the current system to calculate EU import duties remains in
place.

"I am glad that - after the US - we now have also reached agreement with Canada", said Franz
Fischler, EU Commissioner for Agriculture, Rural Development and Fisheries. "The new system will
help stabilise the EU cereal market", he added, "whilst keeping our markets open to imports of
all cereals and especially of high quality cereals from all countries. This deal also accommodates
recent exporters interests, as it provides Russia and Ukraine with reasonable export opportunities
that go even beyond their average exports in recent years."

Background

The EU had notified to the WTO its intention to modify its import regime for cereals on 26 July
2002, based on Article XXVIII of the GATT. Article XXVIII of the GATT enables WTO members to
modify concessions contained in their schedules of commitments. The Understanding on Article
XXVIII specifies the rules to follow to calculate the amount of compensation that a WTO member
should provide when an unlimited tariff concession is replaced by a quota. The current system to
calculate EU import duties for cereals, which will remain in place for cereals other than medium
and low quality wheat and barley, is based on representative world market prices and the import
duties will continue to be calculated on the basis of the difference between world prices and 155%
of the EU intervention price.