NAIROBI, KENYA - The workshop “Positioning services reforms and negotiations for development” will bring together experts and policy makers from national governments, Regional Economic Communities (REC), the private sector and other non state actors throughout Sub-Sahara Africa (SSA) for a comprehensive overview of the various efforts to reform and integrate services for development in SSA.

The International Lawyers and Economists Against Poverty (ILEAP) and the International Center for Trade and Sustainable Development (ICTSD), with support - on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) - from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) will jointly host the meeting from 14 - 16 November, 2011 at the Hotel Intercontinental in Nairobi, Kenya.

This 3-day workshop is aimed at facilitating an enhanced understanding on the linkages between services reforms, negotiations, and sector development, while promoting greater coherence in the use of services negotiations and integration as a tool for service sector policy development.

Services matter for economic growth and development. For many SSA countries, the services sector represents the largest share of the economy and as countries develop services sector tends to increase. Services reforms are critical to generate the productivity and competitiveness needed in developing countries especially Least Developed Countries (LDC) to achieve development goals. However, services reforms have proven to be challenging in part because of concerns about the realization of regulatory reforms. For instance these reforms and negotiation processes run at different paces, use different legal structures and follow different patterns. They also often engage different stakeholders with seemingly divergent views and as a result, may even work at odds with one another.

LDCs are also actively engaged in the World Trade Organisation General Agreement on Trade in Services negotiations in the framework of the Doha Round, the services reform agenda under regional integration is moving ahead, with various RECs across the continent looking to better integrate their respective services markets via trade and common regulation.  Regional integration is also being pursued at higher levels, such as the COMESA-EAC-SADC Tripartite Agreement as well as the African Economic Community.  Another layer of negotiations are also taking place with third parties, such as the European Union in the context of Economic Partnership Agreements (EPAs) and the possible inclusion of services (and investment) in comprehensive EPAs.

In this context this workshop will provide an opportunity to exchange ideas on a number of related topics, including services negotiations and integration in SSA, services sector policy and regulation development, and aid for trade in services.

A specific session will focus on the role of service coalitions to engage private sector in services reform and will be followed by a round table featuring private sector representatives’ views on the subject. Another session will provide practical recommendations that may be used to conduct negotiations on services, including regulatory audits and competitiveness assessments.  Sector-specific breakout sessions of half hour (telecommunications, transport, and financial services) will allow participants to work on smaller groups and address in more concrete detail some the key themes presented during the workshop.

The meeting will also be attended by select stakeholders from the civil society, as well as researchers in academia, think tanks and regional research networks working on trade and regulatory policies.  A small number of non-African experts from international organisations, think tanks, NGOs, and donors and their implementing agencies will also be present.

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Note to editors:

The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building -seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/

Initiated and hosted by the Danish government, the gathering brought together government representatives, over 50 global corporate leaders, and leading civil society organisations.

The event was opened by the Prime Minister of Denmark and attended by the Prime Ministers of Ethiopia and Kenya, the Environment Ministers of Korea and Mexico, the Minister of Finance of Turkey, the UN Secretary General and heads of the Organisation for Economic Co-operation and Development (OECD), the United Nations Industrial Development Organization (UNIDO), the UN Environment Programme (UNEP), the United Nations Framework Convention on Climate Change (UNFCCC), as well as ministers for trade, development co-operation, climate, and business from the host country, among other personalities.

A Sustainable Energy Trade Agreement (SETA) aimed at enabling the rapid scale up in innovation, diffusion, and use of goods, services, and technologies in the non-fossil fuel energy sector, was proposed by three leading think tanks: the Global Green Growth Institute (3GI), the International Centre for Trade and Sustainable Development (ICTSD - the publisher of Bridges Weekly) and the Washington-based Peterson Institute for International Economics.

The initiative was launched as part of a package of other proposals on sustainable biofuels and civil aviation, global green public procurement, and energy efficiency, which are to be “progressed in international policy processes going forward, including those leading to the next Clean Energy Ministerial (CEM) in April 2012.”

“Denmark, Mexico and Korea will feed these initiatives into high-level intergovernmental processes, negotiations and forums. As upcoming EU president, Denmark will take recommendations from 3GF to Rio+20 and the EU’s green growth agenda. Korea and Mexico will help link outcomes to the G20. The Forum will present and promote key recommendations at the Climate Summit in Durban in late 2011,” a 3GF press release announced after the event.

Initiative draws support

At a panel chaired by Ricardo Meléndez-Ortiz, Chief Executive of ICTSD, support for the initiative was announced by Pia Olsen-Dyhr, Danish Minister of Trade and Investment. The initiative was also explicitly endorsed by South Africa’s Deputy Minister for Trade and Industry, Ms. Thandi Tobias-Pokolo, as a way forward “out of the mud” and “in response to the need to act on the imperatives of climate change and in face of stalemate in other processes.”

Ditlev Engel, President and CEO of Danish wind turbine producer Vestas, “fully endorsed” the undertaking. Meanwhile, Gary Hufbauer of the Peterson Institute made the case for a plurilateral approach “that may be started by a few and follow the path of WTO’s successful Information Technologies Agreement (ITA) or stand alone.” Several event participants also highlighted the pressing need to ensure that policy frameworks on trade support the enormous scale up in renewable energies.

SETA evolved out of an initiative led by Michael Liebreich, Chief Executive of Bloomberg New Energy Finance, and the Renewable Energy Global Agenda Council of the World Economic Forum’s (WEF) Global Redesign Initiative in October 2009. It was then taken as a recommendation by the Forum to the Korea G-20 Summit in 2010.

Since then, ICTSD - in co-operation with several partners - has developed the analytical case for it, with consultations being held with governments and other stakeholders in settings including the WTO, UNFCCC, and WEF.

Greenhouse gas emissions context

Globally, as the Intergovernmental Panel on Climate Change (IPCC) has noted, energy supply is the largest single source of greenhouse gas emissions. The challenge to de-carbonise production and economic activity comes at a time of rapid expansion in energy demand, and in a context in which half of the world’s population currently has no access to modern forms of energy.

Energy supply and use is responsible for 75 percent of global greenhouse gas emissions (GHG); estimates from the International Energy Agency (IEA) placed such emissions at a record high of 30.6 Gigatonnes (Gt.) in 2010 alone, making the targets set by the international community to limit climate temperature rise to a maximum of 2 percent extremely difficult to meet.

Indeed, for the “pathway to be achieved, global energy-related emissions in 2020 must not be greater than 32 Gt. This means that over the next ten years, emissions must rise less in total than they did between 2009 and 2010,” the IEA notes.

Non-clean energy sources - i.e. fossil fuels - currently account for about 80 percent of emissions worldwide, and existing infrastructure and projects in construction are estimated to already lock-in to 2020 approximately 20 percent of those emissions.

The geographical distribution of GHG emissions is highly heterogeneous, as is energy consumption. While they only host a fifth of the world’s population, 40 percent of emissions continue to be generated in OECD countries, and 40 percent of energy demand is located there.

Meanwhile, 75 percent of the growth in emissions in 2010 came from an energy-deficient developing world that is experiencing long-term economic growth trends. In this context, as stated by UN Secretary General Ban Ki-moon at the World Energy Summit in January 2011, “Our challenge is transformation. We need a global clean energy revolution - a revolution that makes energy available and affordable for all.”

UN push for energy efficiency, sustainable energy access

The UN has declared 2012 as the International Year of Sustainable Energy for All, and its Advisory Group on Energy and Climate Change - composed of major energy companies and UN agencies - has recommended universal access and a 40 percent increase in energy efficiency in the next 20 years. If these recommendations are implemented, this could reduce global energy intensity by 2.5 per cent per year, approximately double the historical rate.

Cutting energy-related emissions in half by 2050 would require deep de-carbonisation of the power sector. This reduction in fossil fuel use would need to be offset by sustainable energy; the largest increase, according to the World Bank’s 2010 World Development Report, would have to come from renewables.

To increase the share of low-carbon energy from 13 percent as of present to 30-40 percent by 2050 would imply an effort of enormous magnitude, the World Bank report shows. Over the next 40 years, it would imply deploying annually an additional 17,000 wind-turbines (producing 4 megawatts [MW]each), 215 million square meters of solar photovoltaic panels, 80 concentrated solar power plants (producing 250 MW each), and 32 nuclear plants (producing 1000 MW each).

ICTSD studies estimate that even though most countries in the world, developed and developing, are significantly engaged one way or another in innovation and the manufacturing and/or assembly of components needed for renewable energy, these markets are heavily distorted by tariff and non-tariff trade barriers.

A number of other trade-related policies, including subsidies, can be supportive or perverse in constructing the robust and efficient markets needed for such a rapid scale up in renewable energies. Green technologies generate significant local jobs both in the installation phase and during the long-term lifetime (20 years for some technologies such as wind power) service and maintenance phase.  Local manufacturing also benefits, as the backward linkages in these production chains use components from local sources, including the services and transportation sectors.

Experts see investments in renewables as a primary way for non-fossil fuel producing countries to increase foreign direct investment and savings in foreign exchange. Renewable technologies by definition make use of free sources such as solar, wind or geothermal.

A determined effort, specific to the clean energy sector, is necessary to address barriers to scale, and to equip the world with the governance and policy mechanisms it urgently requires in the transition to a low-carbon economy, proponents of the initiative argue.

Media Contact

Andrew Aziz, Tel: +41 (0)22 917 8925, aaziz@ictsd.ch.

Notes to editors:

• The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building - seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/

Press Contact: Jonathan Hepburn
T: +41 22 917 87 56; jhepburn@ictsd.ch

Geneva, 11 Oct 2011

New ‘greening’ measures in the EU’s proposed €418-billion post-2013 farm policy could lower the bloc’s agricultural production potential by raising farm input costs by €5 billion, or around 2 percent, a new study reveals.

The draft paper, written by Prof. Alan Matthews for the International Centre for Trade and Sustainable Development, finds that EU production capacity could fall slightly if governments go ahead with plans that would encourage farmers to adopt greener agricultural practices, and that would also redistribute direct payments to more marginal areas. The European Commission is due to make public the proposals this Wednesday - although early drafts have circulated unofficially.

“Greater emphasis on encouraging farmers to adopt environmentally-friendly farming practices will lower the EU’s production potential, compared to a status quo scenario”, says Matthews.

The new proposals would require farmers to respect three new environmental conditions for receiving payments: maintaining permanent pastures, diversifying crop production and protecting ecological ‘focus areas’. Arable producers would be particularly affected, the study finds – although higher feed prices will also reduce EU pig and poultry production, and constrain any expansion in milk production.

EU cotton output could fall, as ‘coupled’ cotton payments that are linked to production levels will be reduced slightly, Matthews says.

“The remaining support continues to unbalance the playing field for developing country exporters, particularly in West Africa”, Matthews says.

Plans to eliminate sugar quotas could lead to a substantial increase in EU production, the study suggests. The bloc will import less sugar from suppliers that benefit from preferential market access – particularly the least developed countries and exporters in the African, Caribbean and Pacific regions, whose exports to the EU could even be eliminated if world sugar prices remain high.

In contrast, plans to abolish milk quotas will not affect world markets significantly, Matthews finds.

EU beef and sheep production will probably be higher than would otherwise be the case, partly as these sectors are likely to continue receiving the production-linked payments that they have been given in the past, and partly because direct payments are likely to be redistributed to parts of Europe where beef and sheep farming is more important.

“A more ambitious CAP reform, in which the targeting of direct payments was pursued more insistently and coupled payments were phased out, would have a greater impact in removing the remaining distortions caused by the CAP to world markets”, Matthews says.

Over the years, the EU’s trade-distorting farm subsidies have been highly controversial with the bloc’s trading partners at the World Trade Organisation, and especially with developing countries. Along with domestic concerns about waste, inefficiency and the environment, these criticisms have helped prompt a series of domestic policy reforms aimed at delinking support from production.

“Rather than attempting to maintain and increase production through distortionary public supports, the more appropriate way to increase the EU’s production potential is through greater innovation leading to higher productivity”, added Matthews.

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Notes to editors:

1. The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building -seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/

2. On 12 October 2011 the European Commission is due to release legislative proposals for the EU’s Common Agricultural Policy in the post-2013 period. The draft study by Prof. Alan Matthews has been prepared on the basis of early drafts of these proposals. The actual proposals to be released this Wednesday may differ. The final version of the paper will be updated to reflect these proposals.

3. Professor Alan Matthews is Emeritus Professor of European Agricultural Policy at Trinity College Dublin, Ireland. In preparing the paper he wrote for ICTSD, the author drew on research he had undertaken for the German Marshall Fund of the United States on Europe’s Common Agricultural Policy and Developing Countries. The author is grateful to the German Marshall Fund for its support, and wishes to clarify that any opinions expressed in the paper are entirely his own.

Press Release

For immediate release, 20 July 2011

Geneva, Switzerland – Buy-local requirements in green energy promotion with a double aim to tackle carbon emissions and stimulate local manufacturing and job creation could run afoul of WTO rules, a new study by ICTSD finds. The first ever climate change-related WTO dispute started today in full, with the organization establishing a panel to hear a case over renewable energy generation.

“The dispute is part of a much larger debate,” ICTSD Chief Executive Ricardo Meléndez-Ortiz said in a statement. “WTO rules were originally crafted mindful of environmental concerns. But they may not necessarily support popular policies on moving towards a low-carbon energy mix if those initiatives come coupled with domestic or local economic-activity-boosting measures that discriminate against foreign producers.”

The WTO’s Dispute Settlement Body today established a panel in a dispute between Japan and Canada over the Canadian province of Ontario’s Feed in Tariff (FIT) mechanism. The controversial programme guarantees green energy suppliers the purchase and transmission of their energy for a fixed price above market standard. The average going wholesale price of electricity in Ontario in 2010 was 3.79 cents/kWh, while FIT contracts are offered at up to 80 cents/kWh.

“It’s not the FIT policy itself that landed at the WTO, but a controversial clause that favours domestic goods and services,” says Marie Wilke, author of the study. “What has foreign competitors worked up is the ‘made-in Ontario’ provision, which forces participating homeowners and businesses to source up to 60% of their input from the province.”

Favouring domestic products over foreign manufactured goods, at the face seems to violate international trading rules which mandate non-discriminatory treatment. “But it remains disputed whether ‘buy-national clauses’ if implemented to ensure adequate technology production needed to increase green energy facilities could not be justified on climate change grounds,” the study finds.

WTO rules provide for sensitive exceptions when it comes to environmental protection. But whether they apply to green energy support programmes including premium-granting FIT policies can depend on the individual design and implementation of each measure.

“At the end of the day, WTO law might treat each FIT differently – focusing more on design and the role of the government, rather than economic effects,” Wilke concludes. “The current dispute could set an important precedent. But eventually it will be up to WTO members, not the lawyers, to decide whether current rules are sufficient to deal with the interface of climate protection and trade.”

“Governments need to promptly engage in a policy discussion to decide whether this is a matter of policy design, addressing market failures and distortions or of rather updating existing frameworks to cater to new priorities and challenges,” Meléndez-Ortiz says.

“Selling ‘green’ as a stimulus measure is often seen as a means of reconciling consumer fears over increased energy prices with the need to increasing the share of renewable energy. It was this move that effectively eased much of the public opposition and allowed Ontario’s government to implement the programme”, the study outlines.

Since the FIT policy was introduced, electricity prices have risen by 9.7% which has fueled opposition within the Canadian province. “Experts, however, can show that recent increases are the consequence of new gas-fired generators rather than the FIT programme,” the study notes. “The FIT price impact is unlikely to show until the FIT system is implemented in larger volumes”.

With governments in developed and developing countries struggling to create options to the use carbon-intensive fossil fuel sources that fail to internalize environmental costs, the clean energy sector is expected to show continued rapid growth. Ensuring that policies to confront these challenges are indeed effective and, in turn, supported by the multilateral trade system will see the WTO increasingly involved in the climate-energy debate.  

A summary of the study can be accessed here.

A preliminary version of the full study can be accessed here. Comments are welcome.

Media  Contact

Andrew Aziz, Tel: +41 22 917 89 25, aaziz@ictsd.ch.

Notes to editors:

• The press release concerns the WTO dispute DS412, Canada - Certain Measures Affecting the Renewable Energy Generation Sector (DS412). On 13 September 2010 Japan requested consultations with Canada. On 24 and 27 September respective, the US and the EU requested to join the consultations. On 1 June 2011 Japan requested the establishment of a panel to hear the case. After the establishment had been deferred by the Dispute Settlement Body on 17 June 2011 (standard practice) the panel was finally established on 20 July 2011.n The official case summary is available here.
• The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building - seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/
• Marie Wilke is responsible for ICTSD’s Programme on Dispute Settlement and Legal Aspects of International Law.

Press Contact:
Jonathan Hepburn
Tel: +41 22 917 87 56
jhepburn@ictsd.ch

Geneva, 22 June 2011

US ethanol subsidies inflating maize prices by 17% in 2011 - study

With record food prices and volatile markets topping the agenda for the 22-23 June summit of G-20 agriculture ministers, a new study finds that US ethanol subsidies may have artificially inflated maize prices by as much as 17 percent in 2011.

The study, written by Professor Bruce Babcock for the International Centre for Trade and Sustainable Development, suggests that high gasoline prices this year may have intensified demand for ethanol, creating a tighter market for maize than in previous years.

“Under these tight conditions, the added demand incentive from the blender tax credit can have a significant impact on maize prices”, says Babcock, a professor of economics at Iowa State University.

“Additional flexibility in US policy could be introduced by relaxing blending mandates when feedstock supplies are low”, the author argues. One option could be to allow fuel blenders greater flexibility to bank or borrow blending credits when meeting their blending obligations, Babcock proposes.

A series of modeling exercises suggest that biofuel policies may also have sparked higher maize prices in past years, although to a much lesser extent. A simulation of prices for the 2005-09 marketing years finds that US biofuel policies may have boosted maize prices by around 7 percent in the 2007 marketing year, and that smaller price effects may also have occurred on other products.

“This is a modest impact because the average maize price in 2007 was more than $2.00 per bushel higher than the average price in 2004 or 2005”, notes Babcock.

During the 2005-09 period, the effect of US ethanol subsidies on the price of wheat, rice and soybeans was much less than its impact on maize, the study says, with support policies inflating the price of soybeans by around 2.8 percent in 2008.

US biofuel policies played a role in magnifying maize price increases, the study suggests – although market-driven ethanol expansion has been primarily responsible for pushing prices higher in recent years. If US ethanol production had not expanded beyond 2004 levels, then maize prices in 2009 would have been about 21 percent lower than they actually were. Wheat and soybean prices would have been about 9 and 5 percent lower, respectively.

Under current market conditions, US biodiesel production from soybean oil only occurs because US consumption of biodiesel is mandated. “The cost of producing biodiesel from soybean oil would otherwise be prohibitive”, Babcock says.

Arguing that “there is no rationale for the blender tax credit”, the author says his study’s findings indicate the need for a more flexible US biofuel policy. The blender tax credit only helps the biofuel industry in years when high gasoline prices stimulate demand beyond mandated levels – in which case it does so at great cost to the livestock sector, which has to absorb the inflated cost of maize that is used to feed animals.

The study is available at the link below:
http://ictsd.org/i/publications/108947/

The following studies may also be of interest:

Policy Solutions to Agricultural Market Volatility: A Synthesis
http://ictsd.org/i/publications/108969/

Risk Management in Agriculture and the Future of the EU’s Common Agricultural Policy
http://ictsd.org/i/publications/108961/
Notes to editors:
1. The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building - seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/
2. Agriculture ministers from the G-20 group of major economies are meeting on 22-23 June in Paris. The French government has indicated that agricultural price volatility and food security will be one of the priorities of its presidency of the group in 2011. The G-20 includes Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, Italy, India, Indonesia, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States of America.

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The analysis, conducted by Professor Alan Matthews for the International Centre for Trade and Sustainable Development, shows that new proposals from the European Commission for post-2013 farm spending could be a step forward for producers in developing countries. But the size of the EU farm budget, and whether payments will distort production and trade, will be key in determining how poor farmers are affected.

EU farm spending has been criticised for being “unfocused, untargeted and hard to justify on any rational criteria”, notes Matthews, a professor of agriculture policy at Trinity College Dublin. Linking payments to clear goals - such as environmental protection - could reduce the extent to which subsidies affect production and trade.

Subsidies and tariff barriers meant that in 2006-08 EU farmers could sell produce at 15 percent above world market prices. While these subsidies still give European producers a competitive advantage over their counterparts in the developing world, a succession of reforms has meant the price gap has narrowed dramatically from two decades previously, when it stood at 76 percent.

Many developing countries have raised concerns that the sheer scale of subsidy payments, including decoupled income support payments, could cause more than minimal trade distortion - which would mean that the subsidies would have to be reclassified and subject to an overall ceiling under World Trade Organisation rules. “EU figures show that the share of direct payments and total subsidies in agricultural factor income is 28% and 40% respectively for the EU-27”, Matthews says, “suggesting that much EU agricultural production would not be economically sustainable with current farm structures in the absence of this support”.

The new proposals would not reverse the move to greater market orientation in EU agriculture, says Matthews, even though they would maintain the current architecture of market management tools. But the European Commission does suggest that the bloc could need to maintain production capacity to achieve food security goals, “even though on any objective basis this is not a cause for anxiety as far as the EU itself is concerned”, says Matthews.

The Commission proposal also makes no mention of whether the EU plans to continue using export subsidies to send goods such as dairy products and pigmeat overseas at artificially low prices, thereby undercutting poor farmers in the developing world. “The failure to make a commitment to ending the use of export subsidies after 2013 is a disappointment”, Matthews says.

The new proposals state that the future farm policy will have to respect EU commitments to ‘Policy Coherence for Development’. This means that “there is an explicit mandate to explore the impact on developing countries”, notes Matthews.

The paper is online at: http://ictsd.org/i/publications/97803/
Notes to editors:

1. The International Centre for Trade and Sustainable Development (ICTSD) is a nonpartisan think tank, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building -seeks to influence the international trade system such that it advances the goal of sustainable development. http://www.ictsd.org/

1. The European Commission circulated on 18 November a “Communication” to the European Parliament, European Council and other EU institutions, setting out proposals for the objectives and policy tools for the EU’s Common Agricultural Policy (CAP) in the 2013-2020 budgetary cycle. The communication is online at: http://ec.europa.eu/agriculture/cap-post-2013/communication/com2010-672_en.pdf

1. Professor Alan Matthews is Emeritus Professor of European Agricultural Policy at Trinity College Dublin, Ireland. In preparing the paper he wrote for ICTSD, the author drew on research funded by Irish Aid under its Policy Coherence for Development grant to the Institute for International Integration Studies (IIIS) at Trinity College Dublin as well as on a research project funded in the IIIS by the German Marshall Fund of the United States on Europe’s Common Agricultural Policy and Developing Countries. The authors is grateful both to Irish Aid and the German Marshall Fund for their support, but neither body is responsible for the opinions expressed which are entirely his own responsibility.

Cancun, Mexico, 8 December 2010

“Trade issues have played a prominent role in climate change negotiations since Copenhagen. These issues will continue to influence decision-making as parties work through COP16 and beyond, making the Working Group’s efforts to constructively meld environment and trade policy objectives a timely contribution to the debate,” said Richard Samans, Managing Director at the World Economic Forum.

From Collision to Vision: Climate Change and World Trade underlines the link between climate change and trade. Economically, environmentally and politically, these two significant areas of global concern are inextricably linked. Given this, a way forward must be established that continues to lower barriers to trade while combating climate change. The international rules governing world trade and the measures being constructed to confront climate change are otherwise bound to collide.

The Working Group behind the study, composed of members of the World Economic Forum’s Global Agenda Councils, deconstructs this important question, provides an overview of the relevant legal landscape and makes practical suggestions that governments can undertake to pre-empt a conflict between environmental and trade objectives. The study sets forth solutions to help ensure that these two important agendas are mutually reinforcing.

“If we act now, a collision between trade and climate change can be avoided, and the rules and the experience of the WTO can be used affirmatively to help slow global warming while increasing trade and overall global prosperity,” said James Bacchus, two-term Chairman of the Appellate Body of the World Trade Organization and Chair of the World Economic Forum’s Working Group.

The study underlines that the best solution to avoiding a clash between trade and climate change is to conclude the Doha Round and agree on an effective and comprehensive global climate change treaty. In the absence of either, the Working Group highlights the following suggestions:

• Need for WTO members to negotiate “green space” to allow for enactment of national measures to combat climate change

• Eliminate tariffs on environmental goods and services

• Legalize environmental subsidies that encourage the development of green technologies and prohibit subsidies for fossil fuel

• Members of the WTO should begin immediately to negotiate agreements to resolve the issues likely to arise from the enactment of national measures on climate change rather than leave those issues to eventual resolution in WTO dispute settlement

• WTO rules should not be viewed solely as constraints on efforts to address climate change; these rules can and should be used affirmatively to help fight climate change

Exporting countries have repeatedly warned that the proposed ’special safeguard mechanism’ could block any growth in trade resulting from market opening under the WTO Doha Round of trade talks – with tension over the issue sparking a collapse in negotiations two years ago. Importing developing countries have argued that an effective and workable safeguard is critical to protecting their farmers.

The study, commissioned by the International Centre for Trade and Sustainable Development (ICTSD) and written by farm trade expert Raul Montemayor, finds that developing countries would be able to impose additional safeguard duties during one-third of the time when import volume surges occurred, under the draft deal currently under negotiation at the WTO - so long as countries’ safeguard duties are not prevented from exceeding the maximum ‘bound’ tariffs that are due to be agreed upon at the end of the Doha Round.

Additional rules currently under consideration, such as more stringent caps and other requirements, could further limit poor countries’ access to the mechanism to one-sixth of all import volume surges, the study finds.

Even when the draft rules allow countries to access the mechanism, additional safeguard duties would often fail to substantially narrow the price gap between domestic and import prices: the study shows that they would only do so one quarter of the time in which import volume surges occurred, so long as no caps on allowable duties were applied. Additional proposed caps on safeguard duties could further reduce the effectiveness of safeguard duties to one-tenth of all import surges.

During price depressions, the safeguard was essentially useless if the rules set out in the draft Doha deal were applied, unless countries were allowed to exceed their pre-Doha bound tariff rates. If this constraint was lifted, the price-based safeguard was still only available half as often as during volume surges.

“The special safeguard mechanism had limited effectiveness even under ideal conditions” noted study author Raul Montemayor, “indicating that imports would generally continue even if safeguard duties were imposed”.

“The price safeguard has not been tackled as intensively as its volume counterpart in the negotiations – despite its potential value in effectively and fairly addressing price depressions”, noted Montemayor.

The study is available online at: http://ictsd.org/i/publications/77761/

Notes:

1. The World Trade Organization (WTO) is an organisation based in Geneva, Switzerland, which is responsible for liberalising and regulating international trade in goods, services and other areas. It has 153 Members.

2. The WTO Doha Round of trade negotiations was launched in Doha, Qatar, in 2001. It seeks to reduce trade barriers to a variety of goods and services, but has been plagued by repeated missed deadlines and breakdowns. In agriculture, it aims at “substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade distorting domestic support.”

3. The International Centre for Trade and Sustainable Development (ICTSD) is a nongovernmental organization, based in Geneva, which – by empowering stakeholders in trade policy through information, networking, dialogue, well targeted research, and capacity building – seeks to influence the international trade system such that it advances the goal of sustainable development. www.ictsd.org

4. The special safeguard mechanism currently under negotiation at the WTO is intended to allow poor countries to impose additional safeguard duties to protect domestic producers from a sudden surge in import volumes, or a price depression. Controversy over the safeguard was a major factor in contributing to the collapse of a ministerial level meeting in Geneva in July 2008: talks have subsequently remained deadlocked over this and other issues.

5. The study by Raul Montemayor examines whether the draft WTO farm trade deal would provide developing countries with a safeguard that is accessible when they need it, and whether it is effective in addressing market emergencies by substantially narrowing the gaps between domestic and import prices. The study analyses proposed rules set out in the WTO’s latest draft agriculture accord from December 2008 (TN/AG/W/4/Rev.4), as well as additional rules suggested at the same time by the chair of the farm trade talks in an accompanying working document (TN/AG/W/7). Both documents are online at http://docsonline.wto.org. The study examines historical data on 27 products, from 6 different developing countries: China, Ecuador, Fiji, Indonesia, Philippines and Senegal. It does not examine the implications for exporting countries.

6. The views expressed in the study are those of the author and are not necessarily endorsed by ICTSD.

This seminar provided a timely debate on the issue of agricultural price volatility, an issue which came to the foreground of public policy and international development during the food crisis of 2007 - 08, and which has continued to stay in the headlines, with many concerned about price volatility increasing in the future.

The large increase in biofuel production and a widespread implementation of export restrictions were identified as important factors that built upon the longer term trend of increasing demand for food due to population and income growth coupled with a decline in agricultural investment. Panelists emphasized that price volatility in itself is not necessarily a problem, as it provides valuable market signals that provide necessary information to farmers about what and how much to produce. However, extreme price volatility can be devastating in terms of public policy goals, especially in developing countries.  Speakers also emphasized that prior to the recent food price spikes, prices had been undergoing a long term decline for several decades, which were particularly problematic for producers in developing countries.

“Demand and supply factors are bridged by changes in prices,” stated IPC Chairperson Carlo Trojan, “and as such send important signals to producers.  Sudden and drastic price changes, however, cause significant challenges, in particular to the world’s poorest who can spend up to 70% of their very low incomes on food.”

“Price volatility is a life-and-death issue for many people around the world” warned ICTSD Senior Fellow Sergio Marchi. “Trade policies need to incentivise investment in developing country agriculture, so that poor farmers can build resistance to future price shocks”.

Recommendations encompassed both longer term as well as more immediate policy responses to sharp volatility:

• A sustained, long term commitment to agricultural investment is required in order to ensure ongoing productivity growth and poverty alleviation – both important factors for achieving greater food security.
• Developing country governments, donors and international organizations must focus on improving social safety nets to protect the poor during price spikes.  Although such systems require scarce financial resources, they are in the long run less costly, more effective and targeted than emergency measures imposed during a price spike.
• The widespread resort to export restrictions and price controls during the 2007 - 08 food crisis created further panic in the international markets and sent the wrong signal to agricultural producers.  GATT/WTO rules on agricultural export restrictions need to be improved to offer greater supply assurances to net food importing countries.
• The international community should continue to seek ongoing reforms to the still heavily distorted agricultural trade system to improve the incentive structure for increased agricultural production in developing countries.  Regional and international trade also plays a stabilizing factor, helping with the management of steep price volatility.
• Low stocks clearly exacerbate price shocks.  Although stocks are difficult to manage and costly, and past attempts to have international reserves influence markets were not successful, participants agreed that reserves at the national and regional level for net food importers can smooth the impact of price shocks on the consumption side.  Moreover, the need for greater transparency on stock levels was emphasized.
• A growth in biofuel production triggered by ambitious mandates and subsidies and/or an increasing oil price risks more firmly linking the price of food to the price of energy.  Participants emphasized the need to ensure that agricultural feedstocks can be diverted away from biofuel production towards food and feed use.
• Developed country producers, are clearly also affected by steep price changes, in particular sharp price drops.  Agricultural policies in the EU as in other OECD countries, will continue to place emphasis on risk management, but must do so in a context of shrinking government budgets and be vigilant that such measures are non distorting.
• The financialization of commodity markets likely played a role in the recent price spikes, but potential reforms should be carefully considered so as not to jeopardize the crucial role played by futures markets in price discovery.

Sponsorship of this seminar was provided by the Catalan Department of Agriculture, Food and Rural Development, the Barcelona Chamber of Commerce, and the Barcelona City Council.
Additional information about the seminar, including the full agenda, background briefs, and panelist presentations, can be found at www.agritrade.org/events/2010Spring_Seminar_AgPriceVolatility.html.

Background Briefs written for the conference include:

• “FAO’s Long-term Outlook for Global Agriculture - Challenges, Trends and Drivers” by Josef Schmidhuber
• “Alternative Mechanisms to Reduce Food Price Volatility and Price Spikes” by Maximo Torero and Joachim von Braun
• “Recent Agricultural Price Volatility and the Role of Grain Stocks” by Brian Wright
• “Price Volatility and Border Measures” by Alberto Valdés
• “How Can Policy Underpin Farmers’ Risk Management Strategies” by Jesús Antón

About the Host Organizations:

The International Food & Agricultural Trade Policy Council promotes a more open and equitable global food system by pursuing pragmatic trade and development policies in food and agriculture to meet the world’s growing needs. IPC convenes influential policy makers, agribusiness executives, farm leaders, and academics from developed and developing countries to clarify complex issues, build consensus, and advocate policies to decision-makers. More information on the organization and its membership can be found on our website: www.agritrade.org.

The International Centre for Trade and Sustainable Development (ICTSD) is a non‐governmental organization, based in Geneva, which - by empowering stakeholders in trade policy through information, networking, dialogue, well‐targeted research, and capacity building - seeks to influence the international trade system such that it advances the goal of sustainable development. www.ictsd.org.

The study, commissioned by ICTSD and conducted by Mario Jales of Cornell
University, suggests that cotton prices would have risen over a
1998-2007 base period if the US had cut subsidies that were deemed
unlawful by a dispute panel at the World Trade Organisation (WTO),
following complaints by Brazil.

A recently-announced deal to resolve the dispute, on the eve of
punitive retaliatory trade measures that Brazil was due to impose on
the US, could leave African countries dependent on a negotiated
settlement at the WTO. Under the bilateral accord, the US will review
its export credit programme and provide USD 150 million in
compensation to Brazilian producers - leaving cuts to the
controversial ‘countercylical’ payments and marketing loan payment
programmes to be discussed in subsequent talks.

The paper also finds that farmers in poor countries could have gained
from an average 6 percent increase in world cotton prices over the
same base period, if the US had accepted proposals made by African
nations to slash the lavish subsidies enjoyed by rich country
producers.

Cotton production in the US could have declined by as much as 15
percent, the study suggests, if African proposals in the draft Doha
accord were applied to historical output levels over the ten-year
period examined by the study, and production in the EU could drop by
as much as 30 percent. However, production volumes could increase by
as much as 3-3.5 percent in Brazil, Central Asia and West Africa -
with production values growing by up to 13 percent.

Similarly, if African proposals that are included in the Doha draft
were applied to trade flows over the ten-year period that the study
examines, US export volumes would have fallen by 16 percent on
average. Average export volumes would have increased dramatically for
Brazil and India (12-14 percent), and by a lower but still
substantial amount in Uzbekistan, the ‘C-4′ West African cotton
producing countries (Benin, Burkina Faso, Chad and Mali), and
Australia (2-2.5 percent).

“There is an urgent need to rebalance existing trade rules that
permit developed countries to highly subsidize domestic production,
depress world prices, push farmers elsewhere out of production and
impair prospects for economic advancement in the developing world”,
Jales said.

“The adoption of ambitious domestic support reforms for cotton in the
Doha Round would be a significant step towards the establishment of a
fair and market-oriented trading system” added Jales.

The study is online at: http://ictsd.org/i/publications/73808/

Please click here - http://oi.vresp.com/?fid=6e85ba1ef9 to join the
ICTSD Agriculture Programme mailing list.

Notes to editors:

The World Trade Organization (WTO) is an organisation based in
Geneva, Switzerland, which is responsible for liberalising and
regulating international trade in goods, services and other areas. It
has 153 Members.

The WTO Doha Round of trade negotiations was launched in Doha, Qatar,
in 2001. It seeks to reduce trade barriers to a variety of goods and
services, but has been plagued by repeated missed deadlines and
breakdowns. In agriculture, it aims at “substantial improvements in
market access; reductions of, with a view to phasing out, all forms
of export subsidies; and substantial reductions in trade distorting
domestic support.”

The International Centre for Trade and Sustainable Development
(ICTSD) is a nongovernmental organization, based in Geneva, which -
by empowering stakeholders in trade policy through information,
networking, dialogue, well targeted research, and capacity building -
seeks to influence the international trade system such that it
advances the goal of sustainable development. http://www.ictsd.org/

The 2005 Hong Kong Ministerial Declaration of the WTO agreed that
cotton would be addressed “ambitiously, expeditiously, and
specifically”. However, the US has not yet tabled a formal proposal
on how cotton should be treated in the talks.

The model used by Mario Jales assumes perfect price transmission,
which is unrepresentative of reality in African countries.