Bridges Negotiation Briefing #3 | Agriculture: Small Steps Forward on Farm Trade?

28 November 2013

Despite lack of agreement among negotiators on the "small package" of measures for the WTO's Ninth Ministerial Conference in Bali, draft texts on farm trade are being sent on to ministers. Director-General Roberto Azevêdo, however, has clarified that these measures would not be presented as "agreed."

The current package had been put forward as a down-payment on a bigger set of issues under negotiation as part of the Doha Round of trade talks, which were declared at an impasse in 2011. Prospects of a deal on trade facilitation reinvigorated talks on agriculture this year, which developing countries in particular have argued must be part of any Doha "early harvest."

The G-20 group of developing countries that favour reform in developed country farm trade policies have tabled proposals on export subsidies and similar measures, and on easing administrative processes that affect their farm exports. At the same time, the G-33 coalition of developing countries - which are home to sizeable populations of small farmers - have rallied around a proposal from India on public food stockholding schemes.

A separate proposal from West African countries on cotton is being considered as part of a set of "development" issues, including those affecting least-developed countries.

Background

Agriculture talks under the Doha Round were meant to build on governments' commitment to move toward a "fair and market-oriented agricultural trading system." The overall aim was to achieve substantial reductions in trade-distorting domestic support for farm goods, substantial improvements in market access, and export subsidy reductions, with a view to phasing them out completely. Trade ministers also agreed that special and differential treatment for developing countries was to be an integral part of all elements of the negotiations.

Despite missing the original 2005 deadline for wrapping up the talks, negotiators made gradual progress in agreeing on a broad outline of a possible deal - prompting a bid in July 2008 to finalise a deal at a high-level meeting in Geneva. When talks broke down at the so-called Mini-Ministerial Conference, momentum was only sluggish until ministers acknowledged the round was at an "impasse" three years later. Farm trade issues have since been at the forefront of efforts to agree on small steps toward a bigger deal in the run-up to the Bali Ministerial.

What do countries want on farm trade?

Countries that are efficient farm exporters have traditionally pushed for agricultural trade liberalisation, with the Cairns Group uniting developed countries like Australia with developing countries such as Brazil and Argentina. In contrast, countries with heavily-protected farm sectors have argued against steep tariff and subsidy cuts: the G-10 group defending this stance again brings together developed countries, such as Japan and Switzerland, with those classing themselves as developing, such as South Korea.

The US and EU - both major farm trading powers - have sought to open markets for farm goods, while defending their current farm subsidy ceilings. The G-20 developing country group has been seeking to reform trade-distorting farm policies across the developed world since 2003, when China and India joined forces with farm-exporting nations such as Brazil. Finally, the G-33 developing country group has argued for special treatment for their smallholder farmers; this coalition brings together large countries such as China and India with far smaller ones such as Barbados and Saint Lucia.

"Peace clause" on food stockholding?

India has spearheaded a push by the G-33 coalition for WTO rules to be updated in order to grant developing countries greater flexibility for food purchased at administered prices when building public stocks for food security purposes. Under current rules, purchases made at market prices can be included without limits under the WTO's "green box," for farm subsidies that cause only minimal trade distortion. However, the group contends that price inflation has eroded countries' scope to make purchases at government-set prices since WTO members first agreed on a methodology for calculating farm subsidies - potentially curtailing India's scope to roll out an ambitious new food security scheme without being challenged under the global trade body's dispute procedure.

Developed countries and also some developing countries argue that allowing unlimited amounts of market price support to be included in the green box could distort trade, and even undermine food security elsewhere. As a possible compromise, countries have negotiated the outlines of a possible "peace clause" that would commit all countries to refraining from initiating legal action on these schemes under the WTO's agriculture agreement, in exchange for greater information and transparency on how they operate. Countries are expected to agree to work towards a permanent solution in the meantime.

Easing farm import quotas

The G-20 has argued that developed countries should make it easier for farm exporters to access their markets in cases where import quotas are persistently not filled. The US in particular has responded by insisting that large developing countries such as China should undertake similar commitments - which Beijing has long indicated would be hard for it to accept. Countries appear close to agreement on a consensus solution which would see the US, alone among developed countries, exempted from post-2019 rules on market access in this area.

Japan, which had also warned it would find it hard to accept similar conditions, recently indicated it would refrain from joining the US on a list of countries that plan to opt out from proposed future disciplines, so long as countries could agree on ambitious outcomes in other areas of the Bali talks. G-20 members welcomed the move, as well as similar indications from the EU, Norway, and Switzerland.

Ending export subsidies and similar measures

G-20 countries had also called for WTO members to recognise that trade ministers had agreed eight years ago to end all export subsidies and similar measures in 2013. Although the US and EU have insisted that this deal was conditional on progress on the broader Doha package, the G-20 have still argued that concrete steps are needed to show that WTO members remain serious about achieving their goal, even if the specific target is missed.

A draft text on the issue - which negotiators had expected would take the form of a draft declaration - would commit countries to maintaining progress towards eliminating export subsidies and other measures with equivalent effects, and to keep these "significantly below" the level of current commitments. However, farm exporting countries such as Argentina remain disappointed that the proposed accord is still far weaker than they had hoped.

G-33 exception

Of the various elements put forward for a Bali deal, one of the least controversial has been a proposal from the G-33 for WTO members to recognise that a set of farm subsidy schemes should be exempt from ceilings at the global trade body, on the basis that they cause only minimal trade distortion. These include various "general services" programmes related to land reform and rural livelihood security, such as those for land rehabilitation, soil conservation, drought and flood management, rural employment, issuing property titles, and farmer settlement.

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