Farm Exporting Countries Outline Agriculture Negotiating Ideas for WTO Ministerial

29 May 2017

The Cairns Group of agricultural exporting countries has called for action on farm trade issues for the WTO’s upcoming ministerial conference in Buenos Aires, Argentina, this December, tabling an informal paper that notes “overwhelming” support for an outcome on agricultural domestic support.

The new paper is the first joint statement of the Cairns Group’s stance after separate papers were tabled by sub-sets of its members last year. The coalition includes nearly 20 countries from both the developed and developing world, including different world regions. (See Bridges Weekly, 18 November 2016)

The group’s paper calls for action on three areas addressed under current WTO rules on agricultural trade: domestic support, market access, and export competition. The last of these covers export subsidies and similar measures.

Cairns Group members will continue to “engage constructively” in negotiations on two other farm trade areas cited by ministers at the WTO’s Nairobi conference in 2015. These include finding a permanent solution to problems under global trade rules facing some developing countries when buying food at government-set prices for public stocks, as well as a new safeguard mechanism to protect developing countries from sudden import surges and price depressions.

The paper has been circulated by the sponsors ahead of informal meetings convened by the chair of the WTO’s farm trade talks, which are due to take place early next month.

Concentration of support “must be addressed”

The group argues that WTO members must agree to address the concentration of domestic support on specific agricultural products in some countries.

“Excessive concentrations of product-specific support continue to impact world market prices for a range of goods, many of which are of great importance to developing and least developed countries,” the paper says.

The Cairns Group singles out rice, sugar, dairy, wheat, soybeans, beef, and cotton as examples of markets which are especially affected by the phenomenon.

The group’s new submission also backed a separate proposal from the group of Least Developed Countries (LDCs) for action on cotton. (See Bridges Weekly, 2 February 2017)

“Negotiations must lead to a significant reduction, with a view to total elimination, of all types of domestic support that have distorting effects on the cotton market,” the Cairns Group paper says.

New limits on trade-distorting support

Negotiations should lead to new limits that should “meaningfully reduce” the entitlements that WTO members have today, the group has said, claiming that for just nine members these amount to over US$625 billion in trade-distorting domestic support The assessment is based on permitted support levels in Australia, Brazil, Canada, China, the EU, India, Indonesia, Japan, and the US.

In practice, “applied” levels of support reported to the WTO are nonetheless far lower, as most countries do not provide anywhere near the maximum permitted support that is allowed under existing rules.

The group also argues that “greater scrutiny” is needed for all forms of production and trade-distorting domestic support. Trade sources told Bridges that the group’s members had different views on what this would encompass in practice, with some favouring closer attention to a clause under WTO rules that allows developing countries to provide input and investment subsidies to low-income, resource-poor producers.

This type of aid is dubbed Article 6.2 support in trade circles, after the relevant provision under the WTO’s Agreement on Agriculture.

Farm tariffs higher than industrial goods

Talks on market access also need to bring tariffs on farm goods down to the levels applied on industrial goods, the group said.

Average tariff levels for agricultural products are more than eight times higher than for manufactured products, the Cairns Group paper claims, with some farm products protected by tariffs set at over 300 percent.

Talks in this area should aim at “incremental, yet substantive steps” for the Buenos Aires conference, with a view to launching substantive market access negotiations for future ministerial meetings.

Stronger disciplines on agricultural export competition are also needed to build on outcomes from the 2015 ministerial conference in Nairobi, which agreed to eliminate export subsidies, the paper says. (See Bridges Weekly, 19 December 2015)

The group suggests that tighter WTO rules on export credits could build on the Nairobi outcome, and called for the current negotiations and review process in this area to continue.

Overall trade-distorting support: “analysis paper” reviews scenarios

A separate “analysis paper,” sponsored by a sub-set of eight Cairns Group members, explores the possible implications of a cap on overall trade-distorting support by looking at various options for implementing proposals put forward by other negotiating groups at the WTO.

In particular, the co-sponsors examine how proposed trade-distorting support levels could be affected by limits suggested by the group of Least Developed Countries  and the African, Caribbean and Pacific (ACP) group. (See Bridges Weekly, 2 February 2017 and 24 November 2016)

The analysis paper looks at three options for capping support based on a “floating” reference period tied to the value of agricultural production in a given year, as well as a fourth which examines the possibility of a “fixed” cap defined as a share of farm output in a pre-determined historical reference period. While some Cairns Group members are believed to favour the former approach, others reportedly favour the latter.

The group looks at three options for capping trade-distorting support on the basis of a floating limit on overall support While the first option would establish the fewest constraints on WTO members, the second would establish slightly greater restrictions on their flexibility, while the third would be the most limiting of these.

One scenario would cap this support based on existing limits, defined as the sum of trade-distorting “amber box” support as well as “de minimis” payments – essentially amber box payments that countries are allowed to make so long as they fall below a previously agreed share of farm output.

Another scenario would cut countries’ existing amber box allowance in half, while maintaining existing de minimis ceilings. A third scenario limits support to de minimis spending only.

Finally, the fourth scenario, based on a “fixed” historical reference period, would mean that countries’ scope to subsidise agriculture would not continue to increase as the value of their farm output grows. Most countries have seen a trend towards an increase in the value of agricultural production in successive recent years.

However, trade sources told Bridges that the most significant aspect of the analysis paper might be its two appendices. The first appendix models the implications of gradual cuts in the ceiling on overall trade-distorting support over time. The second looks at the implications of including in these cuts input and investment subsidies which developing countries are currently allowed to provide to low-income, resource-poor producers – the above-mentioned Article 6.2 support.

While China would be likely to oppose the former, India and many other developing countries would be expected to oppose the latter, sources said. The ACP and LDC groups have explicitly opposed new disciplines on Article 6.2 support, which they consider to be important for supporting low-income, resource-poor producers.

Negotiators to meet in early June

Trade sources told Bridges that the chair of the WTO agriculture talks, Kenyan ambassador Stephen Karau, was due to convene informal meetings open to all the organisation’s members on 1 and 2 June.

The timing of the meeting allows around eight weeks more for negotiators to advance preparations for the ministerial ahead of the WTO’s traditional break in business for the month of August.

The meetings would allow the chair to report back on his consultations with the coordinators of different country groups and coalitions since he took over the role on 7 April. (See Bridges Weekly, 13 April 2017)

The chair was expected to review progress on outstanding agriculture negotiating topics, as well as holding dedicated sessions on the issues of public stockholding and the “special safeguard mechanism” for developing countries.

The meetings would be “a good opportunity to see where everyone is,” one trade official told Bridges.

ICTSD reporting. This article first appeared in Bridges Weekly, 24 May 2017.

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