Towards new rules for agricultural markets?

10 December 2015

As WTO members prepare for the global trade body’s tenth ministerial conference in Nairobi, Kenya, agricultural trade issues are – once again – central to negotiators’ concerns. With rules on farm trade remaining essentially untouched now for over two decades, many countries would like to see much faster progress towards the “fair and market-oriented agricultural trading system” that countries agreed they would try to establish when the Uruguay Round of multilateral trade negotiations ended in 1994. At the same time, changing markets and policies have further complicated the task of negotiators.

Many governments also remain strongly attached to the negotiating mandates on agriculture that were agreed at the Doha ministerial conference in 2001: to achieve “substantial improvements” in market access; “substantial reductions” in trade-distorting domestic support; and “reductions of, with a view to phasing out, all forms of export subsidies.” However, countries have disagreed over how to act on another key part of the mandate: how best to ensure that special and differential treatment for developing countries is “an integral part” of all areas of the talks.

In 2008, trade ministers were close to reaching agreement on a draft text that would have set new ceilings on countries’ trade-distorting agricultural domestic support, laid out rules for how much countries should expand market access for farm goods, and set down disciplines that would eliminate the use of export subsidies and similar measures. However, disagreement between major developed and developing country trading powers meant the draft deal was never finalised.

Bali boost

After a lengthy hiatus – including a 2011 ministerial conference declaring Doha to be at an “impasse”   –   WTO   members   managed   to   take   small   steps   forward   at   the   Bali conference in 2013. New momentum around negotiations for a Trade Facilitation Agreement  meant   that   some  agriculture  elements  could   be   included   in   a  small package  of  measures  that were ultimately opted by ministers. Members also agreed  to make progress towards a “clearly defined work programme” for the remaining Doha issues.

Talks since then have seen members slate a raft of proposals for salvaging the Doha agenda and adapting to new realities in global markets for food and agriculture. Members proposed new approaches to market access, such as a “request and offer” process, and also on domestic support, but failed to reach consensus on these “core” farm trade issues ahead of an extended end-July deadline this year. In September, WTO Director-General Roberto Azevêdo told members that agricultural export competition seemed more likely to yield an outcome than other agriculture topics, as part of a package that could include development and LDC issues, along with progress on improving transparency. Several negotiating groups have nonetheless tabled proposals since then which address a broader set of trade concerns, including proposed new domestic support and market access disciplines.

Agricultural export competition

WTO members agreed a decade ago at the Hong Kong ministerial conference that agricultural export subsidies would be eliminated by 2013,  and that disciplines would be established on all export measures with equivalent effect. The EU – the main user of export subsidies at the time – was keen that similar US measures such as export credits would also be covered by the deal, along with exporting state trading enterprises in countries such as Australia and New Zealand. WTO talks on food aid had also sought to allow countries to respond effectively to emergencies, while ensuring that in-kind aid in non-emergency situations did not effectively serve as a disguised export subsidy.

In November this year, Brazil and the EU joined forces with Argentina, New Zealand, Paraguay, Peru, and Uruguay to table a proposal on all of these “export competition” issues, which was closely based on the draft Doha text from 2008 - dubbed “Rev.4” by negotiators. The proposal would add five years to the export subsidy elimination deadlines set out in the draft text, meaning developed countries would have to do so by 2018, and developing countries would have to end most types of export subsidies by 2021. (A revised submission later also included Moldova and Montenegro as co-sponsors.)

However, a clause  would  still allow developing countries to  provide  export  subsidies for marketing and transport until 2026 - which Australia has complained would allow India  legal cover  for  its  export subsidies for sugar. A separate  proposal  from  Tunisia would remove any phase-out deadline for this type of payments for net food-importing developing countries. Meanwhile, another communication from the group of least developed countries would have developed countries phase out all kinds of export subsidies in three years, and have developing countries do so in six years. The chair of the WTO agriculture talks had previously proposed adding seven years to the deadlines in Rev.4.

Australia and Chile have also proposed that all WTO members ensure that they do not provide export subsidies to farm goods that they send to least developed countries or small, vulnerable economies, from January 2016 onwards. The two agricultural exporting countries have also joined with Colombia and Ukraine to propose establishing additional limits on the use of export subsidies during any implementation period that members agree to: these include tighter disciplines on countries which are major exporters of a particular product, and benchmarking subsidies against historical levels that countries have reported to the WTO.

In a bid to respond to US concerns over proposed disciplines on export credits, a clause in the Brazil-EU proposal would allow WTO members to provide export financing for up to nine months instead of the six months previously included in the 2008 draft, so long as risk-based fees charged to loan recipients are benchmarked against the Organisation for Economic Co-operation and Development (OECD) minimum premium rates. The US had previously accepted a similar arrangement as part of the settlement of its WTO dispute with Brazil over cotton subsidies.

Another clause in the same proposal would allow a to-be-determined percentage of food aid in both emergency and non-emergency situations to be “monetised” – or sold to raise donor funds. In contrast, a separate US food aid proposal would impose no firm restrictions on donors’ ability to sell in-kind aid. A proposal from the African Group calls for new disciplines to be based on the 2008 draft, as did a communication from the Philippines that called for the Rev.4 text to be maintained in several of the areas where other members had suggested making changes.

A US proposal on agricultural state trading enterprises would allow least developed countries to maintain these bodies, but establish deadlines by which developed and developing countries would need to phase them out. Like the EU-Brazil proposal, the US submission would exempt enterprises that are only responsible for less than 0.25 percent of world trade during a base period. A separate proposal from Chile criticises the clause, which trade officials say would allow New Zealand to maintain a firm with a monopoly in kiwi fruit exports.

Special safeguard mechanism

China, India, Indonesia, and other smaller countries in the G-33 coalition have called for the Nairobi ministerial to adopt a draft decision on a proposed new “special safeguard mechanism,” which would allow them to raise tariffs temporarily in the event of a sudden import surge or price depression.

The safeguard proponents have long argued that most developing countries are unable to take advantage of a separate mechanism that was included at the end of the Uruguay Round for countries that converted other kinds of border measures into tariffs at that time.

However, many agricultural exporting countries have said that any new safeguard should be negotiated as part of a broader deal to cut tariffs and other market access barriers. Developing countries such as Brazil, Pakistan, and Paraguay have taken this stance, along with developed countries such as Australia, the EU, and the US.

Controversy over the extent to which developing countries should be allowed to use the safeguard to exceed their WTO tariff ceilings was an important factor that contributed to the breakdown of WTO talks in 2008. The G-33’s latest submission proposes that countries should negotiate the conditions under which this should be possible.

Public stockholding

The G-33 have also argued that the Nairobi ministerial should result in an agreement on a “permanent solution” to some of the problems that developing countries say they face in operating public food stockholding programmes under WTO farm subsidy rules.

The Bali ministerial saw countries agree not to challenge these schemes under the WTO’s dispute settlement process, so long as developing countries provided more information about the types of programmes they are operating. The trade body’s General Council then agreed one year ago that this arrangement would apply until a permanent solution could be found, and set an end-2015 deadline for doing so.

Currently, if developing countries buy food at government-set prices when operating these schemes, they are required to count these purchases towards their overall ceiling on trade- distorting support at the WTO. While there is no cap on how much food governments can buy for public stocks at market prices, or on the amount of domestic food aid that can be provided to poor citizens, the G-33 have said that price inflation has eroded their ability to buy food at administered prices under existing rules.

A new proposal from the G-33 would remove the requirement to count purchases made under these programmes towards developing countries’ ceiling on trade-distorting support. However, agricultural exporting countries remain concerned that doing so could allow countries to distort global markets for food and agriculture: another proposal from Australia, Paraguay and Canada calls for countries to use the Bali ministerial decision as a basis for negotiating a permanent solution. Meanwhile, a separate submission from least developed countries has called for their own purchases at administered prices under these programmes to be exempt from WTO ceilings on trade-distorting support.

Cotton

African countries have seen only slow progress in WTO negotiations since ministers agreed a decade ago to address cotton “ambitiously, expeditiously and specifically” at the trade body’s Hong Kong ministerial conference, despite evolutions in policy in key countries such as the US and China, and a successful legal challenge to Washington’s programmes by Brazil.

A draft decision tabled by the C-4 West African cotton producers – Benin, Burkina Faso, Chad, and Mali – seeks to build on talks to date, by proposing trade commitments on market access, domestic support, and export competition, as well as complementary actions on development assistance.

The proposal calls for developed countries to grant, from 1  January 2016,  duty-free, quota-free market access to cotton exports from least developed countries. Developing countries in a position to do so would undertake the same commitment.

Developed countries would cut their most trade-distorting “amber box” domestic support for cotton in three tranches, with a view to phasing out completely by the beginning of 2018. Half of the support would be cut from the start of 2016.  Developed countries’ production-limiting payments in the WTO’s “blue box” would also be reduced over the same period.

Developing countries would have until the end of 2021 to cut both amber and blue box payments, the C-4 have said, with successive cuts of 20 percent from January 2017 onwards.

The decision would confirm that cotton export subsidies are prohibited for developed countries, but allow developing countries until January 2018 to comply with the prohibition. Other export competition disciplines affecting cotton, such as on export credits, would apply to developed countries from the start of 2016 and to developing countries from 2018.

The US has linked progress on cotton to the agriculture negotiations as a whole, as well as to the extent to which large developing countries such as China would also be required to undertake new commitments.

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10 December 2015
As trade delegates gear up for the WTO’s Tenth Ministerial Conference in Nairobi, Kenya – the first such meeting to ever be held in Africa – expectations are high that the conference will, at least,...
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10 December 2015
Within a matter of days, trade ministers will gather together in the Kenyan capital city of Nairobi for the WTO’s Tenth Ministerial Conference, marking the first time that the global trade body’s...
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