Workshop on Raw Materials

Transcription

1 Workshop on Raw Materials Why Differential Export Taxes Must Be Disciplined by the World Trade Organization: The View of the Mexican Oils & Fats Sector Asociación Nacional de Industriales de Aceites y Mantecas Comestibles, A. C. Paris, France October 30th, 2009

2 Background Export taxes are a form of export restriction. Export duties are not prohibited nor regulated by the WTO. At least they are not regulated as are import tariffs. Currently, export duties are imposed by around one third of WTO members. In contrast, on the basis of recognition that export taxes distort trade many regional and some bilateral agreements have prohibited them.

3 Background Empirical evidence has shown that in normal situations, the use of an export tax is unlikely to be a first-best policy. The typical justifications for imposing an export tax are: to improve a country s terms of trade to reduce inflationary pressures to encourage export diversification as a response to tariff escalation to ease government revenue collection to increase the income of the poor But a more appropriate policy response is to target the cause of the problem as close as possible to its source.

4 Background The usual justification for imposing export taxes is that they might have short run benefits or that they might be a second-best policy option when firstbest policies can not be implemented by some countries. In this case, an appropriate application of export taxes as a short-run policy measure would require the specification of an explicit timetable for their removal.

5 Differential Export Taxes (DETs) System When a country uses differential export taxes it favours processed products by taxing exports of a raw material at a higher rate than exports of the processed products. Differential export taxes have the same economic effect of an export subsidy to the processed products.

6 Differential Export Taxes (DETs) System DETs must be disciplined by WTO in a similar way as are import tariffs. Define them as an exclusively temporary shortrun policy measure. To establish time periods to reduce and then gradually eliminate them. Doha Round of WTO negotiations should be the first step to regulate differential export taxes and the export subsidy effect they have.

7 What actions are needed? It is essential that the WTO Doha Round agreement includes clear and specific provisions to eliminate the differential element of export taxes by an end date. The export subsidy effect of DETs can be eliminated without a major change in the country s tax structure. A more practical approach would require WTO members to make efforts to notify applied export taxes as a starting point. Then, as in the case of import tariffs, such export taxes would have to be bound in the near future.

8 DETs Impact on Mexican Oils & Fats Sector The differential export taxes applied to the oilseeds production chain (beans, oil and meal) work in a way that local oilseed processors of the exporting country applying DETs receive an unfair competitive advantage compared to local oilseed processors of the net importer countries. DETs allow the local oilseed processors of the exporting country to have access to cheaper soybean supply. Farmers are somehow forced to sell their crops to the local oilseed processors and punished by the price they have to take.

9 Unfair Competition: DETs Advantage

10 DETs Impact on Mexican Oils & Fats Sector In importing countries, differential export taxes affect oilseed crushings because the local supply of oils & fats must compete with imports of oils & fats that benefit from the unfair advantage (unfair competition) given by DETs. This unfair competition becomes more relevant in countries where import tariffs of raw materials and processed products have been removed. On the other hand, DETs unfair advantage is also affecting Mexican exports of oils & fats to markets that Mexican firms had gained access with a great deal of effort in the last few years. For example, export destinations like Central American and Caribbean countries.

11 DETs Impact on Mexican Oils & Fats Sector Mexican Exports of Vegetable Oils to Cuba (Metric tons) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, ,950 Annual Average Exports Annual Average Exports From 1993 to 2000, Mexico s exports to Cuba of vegetable oils averaged almost 9 thousand metric tons. But with the arrival of vegetable oils from countries using DETs, from 2001 to 2008, the average exports of Mexican edible oils was just 3 hundred metric tons.

12 Concluding Remarks CREATE AWARENESS on the need to create binding disciplines on export taxes within the WTO. Import tariffs are bound and subject to reductions in the WTO. Export taxes should have the same treatment. More strict disciplines on the issue of differential export taxes because of the subsidy effect they have and the unfair competition they create.

13 Thank you very much for your kind attention! Asociación Nacional de Industriales de Aceites y Mantecas Comestibles, A. C.