New Farm Trade Proposals Reveal WTO Divide over Nairobi Ministerial

26 November 2015

A slate of new agriculture proposals has revealed that WTO members have significantly different priorities for the organisation’s ministerial conference in Nairobi, Kenya, which is scheduled to begin in just under three weeks.

The G-33 group of developing countries, including Indonesia, China, and India, have submitted draft decisions on a new agricultural safeguard and on public food stockholding in developing countries.

However, a number of other WTO members have focused their efforts on negotiating an outcome on agricultural export subsidies and similar measures, as part of a push to conclude an agreement on export competition in the Kenyan capital city.

The US has submitted new proposals on agricultural exporting state trading enterprises and on food aid, in the wake of a submission ten days ago by the EU, Brazil, and five other countries. (See Bridges Weekly, 19 November 2015)

Special safeguard mechanism

The chair of the agriculture negotiations, New Zealand Ambassador Vangelis Vitalis, convened small group discussions on Tuesday and Wednesday this week to discuss the new submissions from the G-33.

However, at the Tuesday discussion on the special safeguard mechanism, the US was reportedly among those members that rejected the issue for the Nairobi conference, along with Australia, the EU, and Brazil.

“Exporting countries keep trying to kill it in small-group meetings, but it’s clear it’s not going to go away,” one developed country negotiator told Bridges.

However, one African trade official said he felt it was unlikely that the safeguard proposal would be adopted at the ministerial.

“That one will be very, very impossible,” the source told Bridges.

“In its current form it’s just too unacceptable to a lot of members,” another official said.

The G-33 proposal sets out the conditions under which developing countries would be able to respond to a sudden surge in the volume of imports or price depression by raising tariffs on farm goods temporarily.

According to the proposal, some developing countries would be able to introduce safeguards when smaller import surges or price depressions occur and would also be able to increase duties more than their counterparts.

Least developed countries (LDCs) would be granted the most flexibility. Small, vulnerable economies which account for a minimal share of world trade would be accorded slightly less flexibility than the LDCs. Finally, if developing countries had already agreed to establish an average ceiling on their tariffs at the WTO of less than forty percent, they would be granted slightly less flexibility than the small economies.

Trade sources familiar with the proposal told Bridges that China and many other countries that have joined the WTO in recent years had agreed to a low ceiling on their tariffs as part of their accession negotiations.

Other developing countries with tariffs above forty percent, such as India, the Philippines or South Korea, would have slightly less flexibility than the groups described above.

The proposal includes a new clause that would also grant more flexible treatment to the ten countries that are most vulnerable to climate change, as determined in the United Nations.

Breaching WTO ceilings

Sources told Bridges that the proposal would allow countries to raise tariffs from their current applied rates, even if this would mean breaching the “bound” tariff or ceiling agreed at the WTO. However, another clause in the proposed decision would also set limits on their ability to exceed these current tariff bindings.

The proposal anticipates that WTO members will negotiate the extent to which different categories of countries would be allowed to exceed these existing ceilings.

One trade source told Bridges that the proposal may need further fine-tuning and that a revised version could be issued in the next few days.

However, agricultural exporting countries remained adamant that the issue would not be on the table for Nairobi.

“I think we’re at the stage where drafting quirks don’t really matter,” one negotiator said.

Public stockholding

The G-33 yesterday also tabled a draft decision on public stockholding for food security purposes, which would allow developing countries to exclude food purchases at government-set prices from their calculation of trade-distorting farm subsidies at the WTO.

In the run-up to the Bali ministerial conference in 2013, India spearheaded a G-33 push to provide greater flexibility for developing countries to be able to procure food at minimum prices as part of these schemes – leading eventually to a temporary deal that would allow developing countries to do so without being challenged under WTO rules. (See Bridges Daily Update, 7 December 2013)

Subsequently, the G-33 sought an agreement for this “peace clause” to apply indefinitely while members negotiated a permanent solution to the issues that had been raised in the talks. At that time, members agreed to have such a permanent solution ready for end-December 2015. (See Bridges Weekly, 27 November 2014)

Many farm exporting countries remain wary of removing limits on the ability of developing countries to procure food at minimum prices, fearing that this could open the door for some of the larger developing economies to intervene in markets in ways that create significant trade distortions.

US proposals on food aid...

The US has tabled a new proposal on food aid which would remove the distinction in previous negotiating texts between emergency and non-emergency situations, as well as a general prohibition on the “monetisation” of food aid - in other words, the sale of aid as part of fundraising activities.

Previous WTO talks in this area have sought to maintain a “safe box” for food aid in humanitarian emergencies, while introducing new disciplines that would ensure that government provision of aid in non-emergency situations does not harm local producers or distort markets.

Selling in-kind food in aid-recipient countries to raise funds has long been criticised as one type of intervention that can harm local farmers and traders – as well as being a relatively inefficient way of delivering aid.

The US proposal, a copy of which has been seen by Bridges, includes “best endeavour” language that would be less legally constraining than text tabled ten days previously by the Brazil and the EU, and which was co-sponsored by Argentina, New Zealand, Paraguay, Peru, and Uruguay. (See Bridges Weekly, 19 November 2015)

“We are of the view that there shouldn’t [be a] percentage of monetisation both inside or outside safe-box”, one African delegate told Bridges.

Gawain Kripke, Oxfam America’s Director for Policy and Research, told Bridges that although Washington had undertaken some reforms in its food aid provision, “the core programme is still effectively unreformed.”

"It's the monetisation in particular that needs disciplining," Kripke added.

… and on exporting state trading enterprises

In contrast, the US proposal on agricultural exports of state trading enterprises would establish firm commitments that WTO members would need to respect.

“No Member shall create or maintain a state trading enterprise having export monopoly powers with respect to one or more agricultural products after [20XX],” the proposal states.

Negotiators would need to agree on the year for doing so – as well as a separate deadline for developing countries.

A special exemption would cover products representing less than 0.25 percent of total world trade, under certain conditions.

Another new proposal from Chile also focuses on state trading enterprises, which trade sources told Bridges relates to concerns over Zespri, a New Zealand state-owned company that exports kiwi fruit.

Chile’s submission states that the government is “strongly concerned” about the possibility of including a footnote with the exemption for products representing less than 0.25 percent of total world trade, which was included in both the new US proposal and the Brazil-EU proposal tabled ten days ago.

The US proposal also anticipates that least developed countries would be allowed to use export monopoly powers “with respect to one or more agricultural products,” again under certain conditions.

Another negotiator expressed concern that there was still no clarity on what the US could accept on export credits – which several countries have said they think should be a key issue at the ministerial.

Other WTO members, such as the EU, are keen to see that different types of measures with similar effects to export subsidies are disciplined in parallel with moves to eliminate export subsidies.

“Everything is up for grabs”

Negotiators told Bridges that the talks were still very much in flux.

“Everything is up for grabs,” one source told Bridges, who added that in his view the SSM proposal was about “creating the space for the G-33 and its allies to manoeuvre”.

Developing countries have expressed concern that the US and other developed countries have said they would not join a consensus on a Nairobi declaration that reaffirms the Doha declaration or subsequent ministerial communiques that mention the ongoing Doha Round of talks.

However, trade sources said that Washington has indicated it would be willing to identify issues on which it would support future work – including agriculture, special and differential treatment, and “less than full reciprocity” for developing countries.

Other sources were more downbeat about the prospects for progress in the talks.

“It strikes me that people are hardening their positions instead of softening them,” one official said.

“Real negotiations have not yet begun,” said another.

ICTSD reporting.

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