WTO Talks on Agriculture: What Can LDCs Expect from Buenos Aires?

8 November 2017

Agriculture is again set to be a central negotiating issue in talks at the WTO’s Eleventh Ministerial Conference. Trade-distorting subsidies, including for key LDC exports such as cotton, are on the negotiating table, along with other topics. What can LDCs expect?
 

New estimates from the UN Food and Agriculture Organisation indicate that around a quarter of people in LDCs are undernourished – or 232 million people. With world leaders pledging two years ago to end hunger and malnutrition by 2030 as part of the Sustainable Development Goals (SDGs), can WTO talks on agriculture contribute to this goal ahead of the ministerial conference in Buenos Aires this December?

The zero hunger goal, SDG2, commits governments to “correct and prevent trade restrictions and distortions in world agriculture markets” as a means to achieving the objectives that governments have set in this area.[1] It should be seen as part of a far broader agenda which also has far-reaching implications for the global food system, trade included: overcoming poverty and inequality, tackling climate change, safeguarding the marine environment[2], and promoting sustainable production and consumption patterns, among other things. While the WTO’s Nairobi ministerial conference two years ago took a step forward by agreeing to end agricultural export subsidies – a target mentioned explicitly under SDG2 – it remains unclear whether countries will be able to build on this by agreeing to further action on agricultural trade at Buenos Aires.

While negotiators from LDCs and other groups are having to contend with a new scepticism about multilateralism in some quarters, they are also struggling to navigate deep-seated differences over how best to update global rules on farm trade – disciplines which today are over two decades old. Some of these differences burst into the open at the Nairobi conference, when ministers agreed to disagree over whether to reaffirm the Doha Round negotiating mandates from 2001 – even as they asserted that all WTO members sought to make progress on outstanding Doha issues.

Two years later, countries have tabled a spate of new negotiating proposals on agriculture, with many focusing on the thorny question of farm subsidies – a topic which LDCs have repeatedly said needs urgent attention. This issue is high on the agenda for the meeting in Argentina, along with how WTO farm subsidy rules affect the ability of developing countries to buy food at subsidised prices as part of their public stockholding programmes for food security purposes, and the long-standing issue of cotton, which West African countries have highlighted in particular. Improved transparency on agricultural export restrictions, and an exemption on their application to humanitarian food aid, could also be part of an eventual Buenos Aires package.

However, if satisfactory solutions cannot be found at the upcoming ministerial, they may be included under a work programme to be pursued after the conference – along with other non-agricultural areas. Trade officials say this could also include negotiations on agricultural market access; a “special safeguard mechanism” to protect developing country and LDC producers from sudden surges in import volumes or price depressions; and “export competition” issues, such as rules on agricultural state trading enterprises, that were left unresolved in Nairobi.
 

Domestic support

LDCs tabled a detailed proposal on agricultural domestic support in January, calling for a cap on overall trade-distorting support to be agreed by the ministerial, covering highly trade-distorting “amber box” and “de minimis” support as well as production-limiting “blue box” payments. [3] Caps on support to products of interest to the group should also be agreed by the ministerial, the submission says, and in particular on support to cotton. ICTSD research suggests that establishing product-specific support limits of this sort could be particularly important for key products in LDCs such as cotton, sugar, and poultry – all of which are highly distorted on global markets – as well as for certain kinds of fruit, vegetables, and nuts.

The LDCs’ proposals share both commonalities and differences with those put forward by major trading powers in the talks. These have seen gaps emerge between the stance of large developing countries, such as China and India, and countries that have long provided trade-distorting farm subsidies, such as the US and EU. While the former have called for the elimination of trade-distorting “amber box” support, they also favour maintaining current flexibilities for developing countries to provide “de minimis” support – which the US in particular fears could still distort markets. Meanwhile, G-10 countries with highly-protected farm sectors such as Japan, Norway, and Switzerland have argued that China and India’s stance makes unrealistic demands of them, while those in the African, Caribbean and Pacific (ACP) group have backed up the large developing countries’ stance.

A June proposal from the EU, Brazil and three other agricultural exporting countries sought to advance a different approach. The paper called for new ceilings to be established on overall trade-distorting support, to be set as a share of farm output, and seeks to incentivise countries to report more current and accurate data to the WTO. Developing countries would be able to provide more support than developed countries, or introduce new ceilings at a later date, while there would be no constraints on support provided by LDCs. Crucially, the proposal sought to link new rules on farm subsidies with the issue of the procurement of subsidised food under developing countries’ public stockholding programmes for food security purposes – a move which China, India, and other countries in the G-33 negotiating group said was unacceptable.

Another cluster of countries also has had difficulties with the EU-Brazil approach, but for different reasons. Australia, New Zealand and some other agricultural exporting countries have called for ceilings expressed as a fixed monetary value – rather than ones that tend to increase as the value of farm output grows. A proposal from these countries was tabled in October, offering a menu of different approaches to setting a ceiling, with options covering major countries, high-subsidising economies such as the G-10, and smaller developing countries – with LDCs exempt from any support ceiling. ICTSD analysis has explored how various approaches to capping trade-distorting agricultural domestic support could affect subsidy levels in key countries in the talks.
 

Public stockholding

Fewer new ideas have been put forward in a separate but related topic in the talks, the issue of public stockholding for food security purposes. Large developing countries had first raised this question ahead of the Bali ministerial conference in 2013, when rapid food price inflation meant they feared they could breach existing WTO rules on farm subsidy levels. A temporary deal was struck whereby other countries agreed not to bring disputes in this area at the WTO, in exchange for more detailed information on how these support schemes were operating and other conditions. WTO members later agreed that this deal would apply until a permanent solution had been found. While China, India, and other G-33 countries favour an exemption for these support payments under WTO rules, agricultural exporting countries favour an outcome that builds on the Bali deal.  With the WTO “de minimis” ceiling for developing country trade-distorting support set as high as 20 percent of farm output value, most LDCs are unlikely soon to breach current limits – though some still warn they may need greater flexibility in the future, and others emphasise the need to prevent subsidised stocks being inadvertently exported onto world markets.
 

Cotton

The C-4 group of West African cotton-producing LDCs tabled a proposal on cotton in October, sponsored by group members Benin, Burkina Faso, Chad, and Mali.[4] With exports in 2013 worth US$1.5 billion, the crop was the second most important agricultural export for the LDC group after coffee. The new paper calls for a cap on the overall level of trade-distorting support for cotton, as well as measures on “green box” support – which is required to be only minimally trade-distorting under WTO current rules. Countries that have committed to a ceiling on highly trade-distorting “amber box” support at the WTO would be subject to cuts on overall trade-distorting support for cotton, ranging from 70 to 90 percent depending on how high subsidies were in a historical reference period. Because the proposal would not require new commitments from developing countries such as China and India, developed countries such as the US have not seen the proposal as a good basis for further talks.
 

Export restrictions

With countries wary of making ambitious proposals in the talks, submissions on agricultural export restrictions have largely focused on small steps to improve existing rules. A Singapore paper proposing improved transparency in this area has for the most part been broadly welcomed by members. The submission also proposes exempting humanitarian food aid purchased by the World Food Programme from these restrictions. The LDC group previously proposed stronger rules on agricultural export restrictions as part of a comprehensive negotiating submission two years ago, in the wake of a series of food price spikes that were particularly hard to bear for consumers in poor food-importing countries.
 

Beyond Buenos Aires

Achieving the zero hunger ambition of SDG2 means that “business as usual” is not a feasible option. Governments will need to move beyond incremental steps forward, and instead embrace a paradigm shift in the governance of the global food system if they are to transform their commitments in this area into reality. When they meet in Buenos Aires, trade ministers from LDCs and other negotiating groups will have an opportunity to demonstrate that the WTO can help contribute towards the achievement of broader public policy goals, both by taking concrete steps forward to correct and prevent trade restrictions and distortions in world agriculture markets, and by agreeing on an agenda for future action in this area.
 

Author: Jonathan Hepburn, Senior Programme Manager, Agriculture at the International Centre for Trade and Sustainable Development (ICTSD)


[1] For a more detailed discussion of how policies affecting trade relate to food security in the 2030 Agenda, see Díaz-Bonilla, Eugenio, and Jonathan Hepburn. “Overcoming malnutrition: Why policies on trade and markets matter.” Bridges Africa 5, n°8 (October 2016). http://bit.ly/2y2XWkS

[2] See article by A. Tipping on fisheries subsidies in this edition.

[3] In developed countries, “de minimis” is capped at 5 percent of the value of production for product-specific support plus another 5 percent for non product-specific support. Developing countries are allowed twice this amount, although China accepted lower caps set at 8.5 percent of the value of production when it joined the WTO.

[4] The C-4 countries are among the top 9 LDC cotton exporters, alongside Mozambique, Tanzania, Zambia, Togo, and Sudan.

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