No credible outcomes likely at MC11 on domestic support
A report by the chair of the WTO agriculture negotiations suggests a dimming outlook for a meaningful outcome at the WTO’s upcoming Ministerial Conference in terms of curbing domestic subsidies which distort global farm trade.
by D. Ravi Kanth
GENEVA: The South countries are unlikely to secure any credible outcome for reforming global trade-distorting farm subsidies based on the 2008 revised draft Doha agriculture modalities at the World Trade Organization’s eleventh Ministerial Conference (MC11) in Buenos Aires this December.
The chair of the Doha agriculture negotiations, Ambassador Stephen Karau of Kenya, has suggested that “several members are of the view that only a limited outcome on Domestic Support may be attainable at MC11.”
“To that end,” he said, “they [members are not named] would like to see discussions on the Domestic Support pillar continue after MC11.”
The unidentified members put ideas such as the inclusion of Blue Box support in the overall limit to trade-distorting domestic support at a later stage, while some other unidentified members “have proposed a roadmap as a fall-back alternative, should there not be any concrete outcome at MC11”, the chair suggested.
In an ambiguously worded document on the “state of play in the agriculture negotiations”, issued on 5 September, the chair has merely included all the proposals tabled by members until now, without providing his assessment on what is possible at the Buenos Aires meeting starting on 10 December.
The chair’s report did not even mention what is set out on domestic support in the Doha Work Programme of 2001, the mandate under which he is currently operating as chair of the Doha agriculture negotiations.
The chair has nearly buried all the hard work done in the Doha agriculture negotiations, including the most credible 2008 revised draft modalities issued by the former chair of the negotiations, Ambassador Crawford Falconer of New Zealand, said several trade envoys who asked not to be quoted.
The 2008 revised draft modalities suggested what the developed countries are required to do to cut their most trade-distorting domestic support in the Aggregate Measurement of Support (AMS), de minimis, Blue Box, product-specific subsidies and other vital issues.
At the failed 2008 ministerial meeting, the US had agreed to an overall AMS of up to $15 billion, but later withdrew the proposal and walked away from the agriculture negotiations, said a trade envoy who is familiar with the meeting.
Subsequently, the then Brazilian ambassador to the WTO, Roberto Azevedo, who is now the WTO’s Director-General, said in 2011: “The December 2008 draft modalities are the basis for negotiations and represent the endgame in terms of landing zones of ambition. Any marginal adjustments in the level of ambition of those texts may be assessed only in the context of the overall balance of trade-offs, bearing in mind that agriculture is the engine of the [Doha] Round.
“The draft modalities embody a delicate balance achieved after ten years of negotiations. This equilibrium cannot be ignored or upset, or we will need readjustments of the entire package with horizontal repercussions. Such adjustments cannot entail additional unilateral concessions from developing countries.”
Shockingly, the same Azevedo, as Director-General and chair of the WTO Trade Negotiations Committee, has not only altered the dynamic in the Doha agriculture negotiations as per the needs of the US, particularly its February 2014 farm bill, but is now trying hard to postpone all the issues on domestic support to the twelfth Ministerial Conference because Washington is now preparing its new farm bill, said another trade envoy who asked not to be quoted.
Already, the 2014 US farm bill had provided for increased outlays for domestic farm subsidies well beyond what was suggested in the 2008 revised draft modalities; and now the US is in no mood to allow any negotiation to reduce trade-distorting domestic subsidies.
The US has repeatedly shifted the goalposts by insisting that the major developing countries – China, India, Indonesia and South Africa, among others – undertake commensurate commitments along with the developed countries and also agree to the elimination of input and production subsidies allowed for developing countries under Article 6.2 of the WTO Agreement on Agriculture.
Against this backdrop, the agriculture chair’s “state of play” document on domestic support is aimed at pushing the negotiations beyond 2017 until there is clarity on what the US is going to do in its new farm bill, said a trade envoy who asked not to be quoted.
Effectively, this means the likes of the Cotton Four countries – Benin, Burkina Faso, Mali and Chad – cannot secure any credible outcome on domestic support at the Buenos Aires meeting.
To start with, the chair’s repeated use of terms like “some”, “several”, “many” and “a number of” members in the report to indicate the depth of support for various proposals has raised considerable doubts about the integrity of the overall assessment, said a trade envoy who asked not to be quoted.
The chair, for example, said “overall limit on trade-distorting domestic support has been suggested in several submissions and has been a focus of our discussions for a while.”
“A key question is whether this limit should be fixed or floating. In the proposal JOB/AG/99 (Brazil, the European Union, Peru, Colombia, and Uruguay), proponents put forward the idea of a floating limit, expressed as a percentage of the VoP (Value of Production).”
“However,” he said, “several Members have expressed a strong preference for a fixed limit (Australia, Canada, New Zealand, and Paraguay).”
“It has been suggested that it could be based on existing entitlements (i.e. AMS and de minimis), be set in accordance with the latest draft modalities for developed countries or according to a methodology to be defined,” the chair said.
But the chair has not clarified what “latest draft modalities” he is referring to, and has not explained why he has shied away from mentioning the 2008 revised draft modalities, said a trade envoy who asked not to be quoted.
“Other Members [who are not specified],” the chair said, “have expressed the view that an overall limit should not be introduced or should be left to a later stage.”
Karau said “the other issue that has been discussed is what type of support such a limit should apply to. It is suggested in the proposal JOB/AG/99 that it should apply to the sum of AMS and de minimis support, at least initially.”
“Many Members [the members are not specified, nor is any numerical figure given for “many”], however, prefer a wider coverage that would also include the Blue Box and/or Article 6.2 support,” the chair said.
The chair goes on to say “some Members [without specifying who they are] have expressed strong reservations against the potential inclusion of the Blue Box, de minimis and/or Article 6.2.”
The EU and Brazil also suggested that “Special treatment in the form of a longer implementation period has also been suggested for Members with trade-distorting domestic support above a certain level.”
On the AMS or the most trade-distorting domestic support provided by the major industrialized countries, particularly the US, the document maintained that “a number of Members are of the view that priority should be given to further reducing AMS entitlements.”
“For some of them,” the chair said, “this should take the form of a complete elimination for developed Members.”
China and India have called for the complete elimination of the AMS, and this is supported by a large majority of developing and poorest countries (see the article “South must join China-India to rectify AoA asymmetries before MC11” in this issue).
But the chair’s document gives a twist (to the high level of support for the elimination of the AMS) because it is not beneficial for the US, the EU and other industrialized countries, said a trade envoy who asked not to be quoted.
The G10 farm defensive countries led by Switzerland want “the current AMS entitlements [to] remain unchanged.”
On de minimis support, which is the only entitlement that a large majority of developing countries have from the Uruguay Round, the chair said “many Members have indicated that de minimis is a very sensitive issue for them.”
The EU, Brazil, Peru, Colombia and Uruguay which are “seeking reduction in trade-distorting domestic support have been considering the idea of an overall limit that would further discipline the use of trade-distorting domestic support in general, rather than seeking a reduction in de minimis entitlement per se.”
“The views and ideas put forward also include exclusion of de minimis entitlement from any additional limitation; exclusion of LDCs [least developed countries], Net Food Importing Developing Countries (NFIDCs), and developing country Members in general from any additional commitment; and curtailing the de minimis entitlement notably for the world’s largest producers and exporters,” the chair said.
As regards the Blue Box, again a major trade-distorting farm subsidy programme availed of by industrialized countries, the chair said “a number of Members [neither the number nor identification of the Members is provided] consider the Blue Box as a sensitive issue for them.”
“It is the view of some Members [without specifying who they are] that while the Blue Box is trade-distorting, it is less trade-distorting than the Amber Box” and “they argue that maintaining it is necessary to facilitate reforms aimed at moving away from Amber (Box) support,” the chair said.
But, “several Members consider that given its trade-distortive nature, it should be further disciplined”, the chair said.
Among the disciplines suggested for the Blue Box are “a fixed overall limit; product-specific limits; and its inclusion in an overall Trade-Distorting Domestic Support coverage – immediately or at a later stage.”
On product-specific disciplines, it is well known that the US, the EU and Canada, among others, provide huge subsidies for a range of products.
“Many Members consider product-specific limits or disciplines as a necessary element to limit trade-distorting domestic support”, but “doubts have been cast by several Members about the feasibility of an outcome at MC11”, the chair said.
Here again it is obvious that the chair and the WTO Director-General do not want to pursue this issue at a time when the US is going to continue with its product-specific subsidies in its new farm bill.
The views and ideas put forward on product-specific support, according to the chair, “include product-specific numerical limits; product-specific AMS limits; overall limit on product-specific AMS, particularly for products of interest to the LDCs; product-specific Blue Box limits; product-specific limits to trade-distorting domestic support; and linking trade-distorting support and exports.”
The chair said “there is also a suggestion to focus on those products which benefit most from Article 6 of the Agreement on Agriculture (AoA) and which are of specific interest to developing country Members, including LDCs, NFIDCs and Small and Vulnerable Economies (SVEs).”
“However, many Members have expressed their opposition to product-specific disciplines, whether in general or for developing country Members,” Karau maintained.
He said that “regarding the nature of the potential limits, the ideas include numerical limits; limits expressed in terms of a percentage of the overall trade-distorting domestic support, in terms of the VoP of the products in question, or in per capita terms.”
“It has also been suggested to make a link to the importance of the exports of the supported product in the international market,” the chair added.
On Article 6.2 special and differential flexibilities for developing countries to support their resource-poor rural farming community, the chair said that “almost all developing country Members consider support under Article 6.2 as a sensitive issue” and “several of them have indicated that they do not have flexibility to accommodate the demands of other Members.”
Some other members, notably the US, consider, however, that at least certain types of support under Article 6.2 (such as input subsidies) need to be disciplined and/or its use constrained by an overall limit to trade-distorting domestic support.
As regards the hundreds of billions of dollars of Green Box programmes which are found to be trade-distorting, the chair said ambiguously: “While there is the recognition that Green Box support is non- or minimally trade-distorting, several Members would like it to be disciplined at some point owing to its increasing size and doubts whether certain programmes meet the prescribed criteria.”
“In addition, many developing country Members have expressed the view that Green Box disciplines should be better adapted to their needs,” the chair said.
But, “many Members [these are not specified] remain opposed to any change in the current disciplines”, the chair said.
In reality, only a handful of countries – the US, the EU, Brazil and Australia, among others – remain opposed to granting Green Box support to developing countries, said a trade envoy who asked not to be quoted.
On transparency and notifications, which is another major demand of the US, the chair said “many Members would like to see an enhancement of the relevant disciplines and/or stricter enforcement.”
“Many developing country Members have, however, cautioned against onerous requirements, especially considering the difficulties that have been encountered by some of them in fulfilling the current requirements,” the chair noted.
“The ideas put forward to enhance the transparency provisions include additional data to be provided annually based on a questionnaire; annual dedicated discussions in the CoA [WTO Committee on Agriculture]; and punitive penalties for Members not fulfilling their transparency obligations, particularly large producers or large exporters of particular products,” the chair mentioned.
Towards the end of his assessment, the chair mentioned that “the importance of special and differential treatment (SDT) for developing country Members is recognized by all Members [and] there appears to be a general understanding that no further commitment would be required from LDCs.”
In mentioning it, the chair somewhat ambiguously introduced the issue of differentiation in availing of SDT benefits when he said: “While there is a recognition that SDT should be provided to all developing country Members, there are divergences as to the nature of flexibilities to be granted.”
Karau said “the views and ideas put forward include higher overall limit (expressed as higher percentage) for developing country Members and longer implementation periods or same limit (expressed in percentage terms) as developed Members but longer implementation period for them; exemption of developing country Members or SVEs and NFIDCs from binding reduction commitments; and technical assistance and capacity building to help the implementation of disciplines.”
In conclusion, the chair said, “several Members are of the view that only a limited outcome on Domestic Support may be attainable at MC11.”
“To that end, they would like to see discussions on the Domestic Support pillar continue after MC11. The ideas put forward for MC11 include an agreement to have as an objective the inclusion of Blue Box support in the overall limit to trade-distorting domestic support at a later stage,” the chair maintained.
“Some Members have proposed a roadmap as a fall-back alternative, should there not be any concrete outcome at MC11. In addition, it has been suggested to include an agreement on the timeline for implementing decisions adopted at MC11.”
On cotton, “most Members support a meaningful and specific outcome on Cotton Domestic Support, but a couple of delegations have cast doubts about the possibility of achieving an outcome at MC11, taking into account the overall negotiating environment”, the chair said.
“More generally, several Members highlight the existence of a de facto link between the overall negotiation on Domestic Support and the negotiation on Cotton Domestic Support,” the chair maintained.
“As regards post-MC11, some Members have expressed the view that the negotiations should ultimately aim at eliminating all types of domestic support that have distorting effects on the cotton market, while others have suggested the phasing out of trade-distorting domestic support provided only for cotton,” the chair said.
In short, the prospects for credible outcomes on domestic support are nearly atrophied for the upcoming ministerial meeting in Buenos Aires because the US does not want any decision in the vital area of global trade-distorting domestic subsidies, said several trade envoys who asked not to be quoted. (SUNS8529)
Third World Economics, Issue No. 645, 16-31 July 2017, pp2-4