Harvesting Outcomes or Planting Seeds for the Future?

30 November 2017

Agriculture has long been central to trade talks at the WTO, despite only small steps forward in the 23 years since members first endorsed global rules on farm trade. Cutting trade-distorting farm subsidies and improving access to markets were key elements of the Doha Round negotiations, which ministers launched in 2001. Agricultural trade issues were part of broader packages agreed at the last two ministerial conferences – leaving many to argue that Buenos Aires should help build on this legacy.

While most members favour an outcome on farm trade issues in Buenos Aires, some are reluctant to agree on new rules at this stage. For example, the US has lately said that it is “sceptical” that major negotiating outcomes can be reached in Buenos Aires. Persistent disagreements at both political and technical levels among the membership over how to address long-standing concerns on domestic agricultural support and public food stockholding for food security purposes have also repeatedly re-emerged in the preparations for this year’s conference.

Ongoing talks aimed at a “fair and market-oriented” agricultural trading system are built into the WTO’s existing Agreement on Agriculture. Furthermore, UN member states endorsed a series of commitments made under the Sustainable Development Goals (SDGs) which includes a target under SDG 17 on “promot[ing] a universal, rules based, open, non-discriminatory, and equitable multilateral trading system under the World Trade Organization, including through the conclusion of negotiations under its Doha Development Agenda.”

That SDG also calls for action on trade restrictions and distortions in agriculture as one means to achieving the goal of ending hunger and malnutrition by 2030, as captured under SDG 2. In this view, an outcome at the WTO on farm subsidies and other unresolved issues is a necessary but insufficient requirement for progress on the global goals.

The success of negotiated WTO outcomes in supporting these sustainable development objectives will also hinge on their implementation, as recent ministerials have shown. The above mentioned SDG 2 did mention the elimination of agricultural export subsidies and “export measures with equivalent effect,” and trade ministers agreed in Nairobi two years ago to eliminate that type of state aid. Progress on putting that in place has, however, moved slowly, with only the European Union and Australia submitting revised schedules to the WTO reflecting this change.

What’s on the table?

Many countries have argued that the ministerial should be an opportunity to cap and cut trade-distorting agricultural domestic support, which is one of the major unresolved Doha issues that all countries have agreed should be addressed.

At the same time, a set of developing countries have renewed calls for a “permanent solution” to difficulties they say they face under existing WTO rules when buying food at subsidised prices as part of their public stockholding programmes for food security purposes. Cotton subsidies are also on the agenda, another long-standing farm trade issue which is critical for many of the world’s poorest countries. Finally, there is another proposal on the table for improving transparency on agricultural export restrictions, and an exemption on their application to humanitarian food aid.

However, if satisfactory solutions cannot be found at the upcoming ministerial, in whole or in part, these topics could be addressed 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 least developed country (LDC) producers from sudden surges in import volumes or price depressions; and “export competition” issues, such as rules on agricultural state trading enterprises, which were left unresolved at the last ministerial conference in Nairobi, Kenya, two years ago.

Domestic support

Members have tabled numerous proposals for capping trade-distorting agricultural domestic support in recent months. While some focus on rectifying past imbalances in the WTO rulebook, others seek to establish a fairer basis for future trade. Major differences between countries complicate the task of agreeing on an outcome in this area.

In particular, gaps have emerged between the stance of large developing countries, such as China and India, and members that have long provided trade-distorting farm subsidies, such as the US and EU. While China and India 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 argues could still distort markets. Meanwhile, G10 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 mostly 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 set in place the 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 G33 negotiating coalition of countries with large populations of smallholder farmers 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 G10, and smaller developing countries. Least developed countries would be exempt from any support ceiling.

As Mexico argues that the proposal would impose a heavy burden on those developing countries which have high existing ceilings on trade- distorting support, it has tabled an alternative approach based on cuts to current entitlements.

Most recently, Argentina has tabled a proposal aimed at galvanising “convergence,” in its role as conference host rather than as a representation of its national position. The text draws on elements from proposals tabled by other countries, and would include caps on overall trade-distorting support as well as on subsidies classified as amber box.

Public stockholding

Some ideas have also 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 could risk breaching existing WTO rules on farm subsidy levels.

Ministers struck a temporary deal 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; countries later agreed this deal would apply until a permanent solution had been found. While China, India, and other G33 countries favour an exemption for these support payments under WTO rules, agricultural exporting countries such as Paraguay and Russia prefer an outcome that builds on the Bali deal.

Members have also debated whether to expand the scope of the current “interim solution” in product coverage or in related requirements regarding its use when crafting a final solution, with no clear outcome heading into the ministerial.

While members agreed in Bali four year ago to craft a permanent solution by the 2017 ministerial, that deadline has since been turned into a non-binding one, with the current “interim solution,” or peace clause, in place until whatever date that a permanent version is agreed.

Cotton, export restrictions

Members agreed over a decade ago that they would address the issue of cotton “ambitiously, expeditiously, and specifically,” though efforts to advance those trade talks have struggled in practice. Most recently, some commitments were endorsed in Nairobi two years ago, aimed at improving market access for LDCs, as well as some provisions on export competition.

The C4 group of West African cotton-producing LDCs tabled a proposal on cotton in October, sponsored by group members Benin, Burkina Faso, Chad, and Mali. The new paper calls for capping 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.

Separately, 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.

Beyond Buenos Aires

Heading into the ministerial, what level of outcome might garner support from members remains unclear. Given this situation, as well as the fact that some farm trade issues have featured little in recent talks in Geneva, what might be included in a future-oriented work programme is likely to play a key role in the Buenos Aires talks. What structure and approach this might take will depend on discussions in the Argentine capital.

Recent efforts to agree on crafting new work programmes – such as the plans for putting together a post-Bali work programme, which never came to fruition – have seen mixed results, meaning that the design for this new one and the political will to implement it will be crucial elements for its success.

Argentina and four other exporting countries have proposed talks on agricultural market access, while Canada, Chile, and Switzerland have called for members to negotiate enhanced disciplines on export competition. With no clear agreement among members on negotiating mandates, a new consensus on the work that needs to be done could help members take steps forward on shared objectives, such as those set out under the Sustainable Development Goals.

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