Agricultural trade issues at the WTO ministerial conference in Bali: Stakes and challenges for African countries

15 November 2013

Negotiations for the progressive liberalisation of global trade in agriculture under Article 20 of the World Trade Organization (WTO) Agreement on Agriculture (AoA) remain an important objective for African countries, which would also need complementary domestic policy reforms to enhance productivity and competitiveness.

One of the major outcomes of the Uruguay Round of multilateral trade negotiations was the integration of international trade in agriculture into the multilateral trading system. Although this significant development involved WTO members undertaking commitments to reduce tariffs, domestic support and export subsidies in agriculture, it merely represented a ‘stepping stone' towards the long-term objective of substantial progressive and comprehensive reform of world trade in agriculture. It is in this context that the envisaged continuation of the reform process was started in 2000 and was subsequently clarified under the Doha Ministerial Declaration in 2001.

Despite the overall stalemate in the Doha Round negotiations, Ministers at the Eighth WTO Ministerial Conference (MC8) in 2011, further committed to advance negotiations, where progress can be achieved. It is based on this understanding that members have been engaged in shaping the post-MC8 agenda, including advancing the work towards a package of ‘deliverables' at the Ninth WTO Ministerial Conference (MC9) in Bali.

The three core areas of such a package include a binding agreement on trade facilitation, as well as elements related to agriculture and development with specific priority devoted to issues of special interest to least-developed countries (LDCs).

Elements of the agriculture component of a possible Bali package

The quest for free trade in agriculture through the reform of global rules is at the heart of the ‘development' mandate of the Doha Round for both developed and developing country members of the WTO.  The significance of agriculture is clearly demonstrated by the existing ‘like-minded coalitions' in the negotiations, such as the Cairns Group, the G20, the G33, the G-10 and the net food-importing developing countries (NFIDCs).  In spite of the diverse interests of these groups, their overarching objective has been to promote the liberalisation of global agricultural trade markets as an important driver of international economic growth and development through, inter alia, substantial reductions in trade-distorting domestic support; elimination of export subsidies; as well as deep cuts to all tariffs, expansion of tariff quota access and improvements in tariff quota administration.

Various African countries are members of these different groups, reflecting their broad long-term interests and objectives in the Doha Round agriculture negotiations that  bring together the three pillars of market access, domestic support and export competition.  However, it is only three elements out of the broad long-term agriculture dossier that are under discussion for the Ministerial Conference in Bali: public stockholding for food security purposes, export subsidies and tariff rate quota (TRQ) administration.

G33 proposal on public stockholding for food security purposes

The G33 proposal seeks to amend the AoA by modifying the 'green box,' a category of spending that is believed to be minimally trade distorting and is without limits.  The objective of the modification, if adopted, is to increase the list of policies and services related to farmer settlement, land reform programmes, rural development and rural livelihood security. Also, against the background of the significant increases in food prices and the number of resource-poor farmers in need of support in developing countries since the AoA was put in place, the G33 proposal seeks to remove limits on public stockholding and food aid.

G20 proposal on tariff-rate quota administration

This proposal seeks tighter disciplines for administering tariff-rate quotas (TRQs) - which are presently being used by some members to charge higher tariffs on goods being imported after an initial quota has been filled. Some countries argue that the way the quotas are managed can be too cumbersome and hamper exporters' ability to access markets. However, apart from a few minor changes aimed at adapting the text of the proposal to more suitable ‘treaty language', no substantive changes have been introduced.

G20 proposal on export competition

Based on the recognition that export subsidies are the most distortive form of agricultural support, the export competition element of the agriculture component of a possible Bali package is contained in the proposal by the G20 for a Ministerial Decision requiring developed country members to amend their export subsidy reduction commitments by the end of 2013 as follows: (a) budgetary outlay commitments shall be reduced by 50 percent, and (b) export quantity commitments shall be reduced to the actual average of quantity levels in the 2003-2005 base period. The proposed Ministerial Decision on export subsidies also provides that "developing country members with scheduled export subsidy commitments shall reduce them by 25 percent by the end of 2016."

Other commitments contained in the proposal include flexibility for developing countries to continue to benefit from the provision of Articles 9.4 of the AoA for five years after the end-date for elimination of export subsidies; the prohibition of exports subsidies for cotton;  reductions by developed and developing country members in the volume of subsidised exports; and disciplines on export financing. The proposed disciplines, however, would not be applicable to export finance operations in which LDCs and NFIDCs are recipients.

Stakes and challenges for African countries

Although only a few African countries are members of the G20 and the G33, it is important to note that the current proposals by these groups reasonably address some of the agriculture trade issues on which a positive outcome at the Bali Ministerial Conference should be of interest to all African countries.

Agreement on the TRQ proposal in Bali should result in increased transparency, simplification of procedures and monitoring of tariff quota fill rates through the adoption of new mechanisms for consultation, redistribution of unused licences and new tariff quota administration methods.  Although members are reportedly finding agreement on the transparency elements of the proposal relating to TRQ administration, convergence on the special and differential treatment component is yet to be achieved.

From a long-term policy perspective, the G33 proposal has the potential of addressing some of the internal and external challenges, which have been critical to the underdevelopment of the agricultural sector of African countries. While the internal challenges relate to the lack of infrastructure and insufficient production by poor small-scale farmers, the external challenges are mostly centred on the vulnerability of the resource-poor farmers and the acquisition of foodstuffs at administered prices for food security purposes. Overall, the proposed changes to agriculture trade rules would enable developing countries, including African countries, to use agriculture as a development policy tool to achieve the core objectives of livelihood security, poverty alleviation and rural employment.

The use of a "peace clause" as a potential interim solution to the controversial G-33 proposal on public food stockholding and domestic food aid has continued to feature prominently in the agriculture negotiations, particularly with regards to transparency, as well as safeguards to minimize any possible trade distortions.

Cotton remains an important issue in the agriculture negotiations.  The Cotton-4 countries (Benin, Burkina Faso, Chad and Mali) have indicated that they would be submitting an updated proposal for the Ministerial Conference in Bali (1).

Although there is no proposal and no on-going discussions on issues related to technical standards and sanitary and phytosanitary measures in export markets for Bali, they present significant policy challenges to African countries' agriculture.  This is more so as it is increasingly difficult to meet not only the public standards, but also the private standards being demanded by retailers in developed country markets.

Finally, with respect to policy options, it is very important to recall that historical patterns of agricultural production and trade have clearly locked most African countries in primary commodity exports.  This situation has been exacerbated by critical challenges arising from infrastructural bottlenecks, inadequate public investment in agriculture, distortive import-substitution and food self-sufficiency policies, as well as shortages and over-dependence on imported inputs.

Consequently, there is a great need for domestic policy reforms to ensure an internationally competitive African agricultural sector by addressing challenges related to infrastructural facilities, pricing policies, promotion of regional trade and capacity building for African farmers.  Policy measures to enhance agricultural productivity in Africa should also pay special attention to the interlinkages between demographic growth projections and the requisite solutions to employment, livelihood security and self-sustenance for rural populations and communities.  There is also a need to address the dynamics related to climate change, including the associated secondary stress of increased competition for resources, biodiversity losses and spread of pests.

Conclusion

Although the Uruguay Round AoA generally marked an important step towards the progressive liberalisation of international trade in agriculture, the successful conclusion of the Doha Round agriculture negotiations, including a possible small package at the Bali Ministerial Conference, would serve as only a part of the desired solutions.  For African countries in particular, domestic policy reforms would be required to fully take advantage of reductions in trade-distorting subsidies and domestic support measures in other parts of the world.  It is critically important that such domestic policy reforms comply with both public and private standards on addressing the challenges related to agricultural productivity and competitiveness, rationalisation of agricultural trade and pricing practices, promotion of regional trade integration, and the building of technical capacities.

Author: Yonov Frederick Agah is a WTO Deputy Director-General, having assumed that role in October of this year. He previously served as Nigeria's Ambassador and Permanent Representative to the WTO from 2005 to September 2013.

DISCLAIMER: This article was originally submitted in June 2013, prior to his taking on the Deputy Director-General position. It exclusively reflects the author's views in his capacity as the then-Nigerian Ambassador.

[i] The C-4 proposal on cotton TN/AG/GEN/33 has not been tabled yet when this article was drafted.

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