Prepared Foods of April 11, 2005 enewsletter

U.S. and European Union negotiators have concluded a new agreement that replaces the margin of preference (MOP) trade concession that the EU provided to the U.S. in the Uruguay Round of the old General Agreement on Tariffs and Trade.

The new bilateral pact preserves access for U.S. brown rice into the European Union member countries and avoids U.S. retaliation against the EU for failing to honor its obligations, USA Rice Federation leaders said.

"We believe today's agreement maintains the EU as the No. 1 market for U.S. brown rice," said Carl Brothers, chairman of the USA Rice Federation's International Trade Policy Committee and senior vice president, Riceland Foods Inc. "We commend our trade negotiators, especially Ambassador Allen Johnson, for supporting the U.S. industry in an extremely complex and lengthy negotiation."

The bilateral agreement replaces the margin of preference or MOP trade concession that the EU provided to the U.S. in the Uruguay Round trade agreement. The EU unilaterally withdrew the MOP concession last Sept 1.

Under rules of the World Trade Organization (WTO), which replaced the General Agreement on Tariffs and Trade, WTO members must provide compensation to other members if they withdraw a trade concession.

The agreement provides a variable duty structure that will allow applied EU duties to be substantially below the bound rate of 65 euros per ton (approximately $85 per ton). The applied duty could fall to as low as 30 euros per ton (approximately $40/ton).

The U.S. also retains its rights under Article XXVIII of the WTO rules to withdraw trade concessions if the EU fails to implement the new agreement.

"Preserving our WTO rights is absolutely critical to ensuring that the EU lives up to its obligations," said Brothers. "This point was well understood by our negotiators, and they were successful on our behalf."

U.S. brown rice exports averaged about 250,000 metric tons annually during the 2002-2004 period, with an average value of $163 million.

"We face considerable market access challenges in the EU, and this agreement is an excellent basis for moving forward," said Lee Adams, USA Rice Federation chairman and president, American Rice Inc.

"We have preserved the access granted to U.S. brown rice in the Uruguay Round as well as our rights in the WTO to take appropriate action if the EU backs away from the current agreement.

"Our next step is to move forward in the current round of WTO trade negotiations to press for lower tariffs and improved access in the EU for all types and forms of U.S. rice," said Adams. "We are eager and anxious to work with our trade negotiators toward this goal."