“Will not pay for mandated permanent solution for PSH,” insist G33

The developing-country G33 grouping, which is seeking an agreement on public food stocks at the WTO ministerial meeting, has opposed attempts to link this issue with outcomes on domestic agricultural support at Buenos Aires.

by D. Ravi Kanth

GENEVA: Indonesia, India, China and other members of the G33 group made clear categorically on 15 September that they will not pay for the mandated permanent solution for public stockholding (PSH) programmes for food security in the developing countries at the upcoming WTO Ministerial Conference in Buenos Aires, several trade envoys told the South-North Development Monitor (SUNS).

The G33 group along with a large majority of developing and poorest countries made it clear to the European Union, Brazil, Argentina, Australia, Paraguay, Pakistan and Thailand, among others, that there is no linkage between the mandated permanent solution for PSH programmes and the proposed outcomes in the domestic support programmes, said trade envoys who asked not to be cited.

In a joint proposal, the EU, Brazil, Peru, Colombia and Uruguay have included the mandated permanent solution along with their demand for an agreement on overall trade-distorting domestic support (OTDS). The EU and its partners, however, suggested that public stockholding programmes for food security be exempt from the OTDS.

Significantly, Norway raised several concerns over the proposal to exempt public stockholding programmes from the OTDS, said a trade envoy who asked not to be quoted.

Norway is one of the major beneficiaries of the current trade-distorting domestic support programmes and remains opposed to any comprehensive reform of domestic subsidies or the elimination of the Aggregate Measurement of Support (AMS).

During an informal open-ended meeting of the Doha agriculture negotiating body on 15 September, Norway along with Argentina, Australia, Paraguay and Pakistan severely questioned the EU’s proposal, arguing that it will create a new exemption outside the current rules.

Norway said the EU’s proposal posed problems from a “systemic” point of view. In its own proposal, Norway raised the following questions:

1. Article 1(a) of the WTO Agreement on Agriculture (AoA) defines the AMS as support other than that exempted through Annex 2 to the AoA. In other words, the AMS and Annex 2 make up a categorization of support that is exhaustive.

2. The EU joint proposal, however, appears to create a new unaccounted-for category of support in addition to this exhaustive definition. Could the proponents (the EU, Brazil, Peru, Colombia and Uruguay) confirm or clarify the intention and consequence of the provision that stipulates that relevant market price support does not have to be accounted for in “the AMS”, “including de minimis”?

3. How would market price support to staples in the public stockholding programmes under the proposal for a ministerial decision be accounted for in the domestic support notifications? Is there a need for a new annex to the AoA?

4. What are the legal implications of the proposal for footnote 5 of Annex 2 in the AoA? Is there a conflict between the proposal for a ministerial decision and footnote 5 of the AoA?

5. According to the proposal, for existing programmes as of the date of the Bali ministerial decision, they do not need to be accounted for in “the AMS” or in the new OTDS. Is the total entitlement for trade-distorting support corrected downwards with the value of production of staples covered by PSH programmes or is the total value of production maintained, thus eventually in the future leaving more room to subsidize other agricultural products?

6. If a member for instance has 30% of domestic wheat production covered by public stockholding, is all of domestic wheat production exempt from “the AMS” and OTDS or only the 30%?

7. For new programmes, there is a new 10% de minimis in percentage of value of production. Does this mean that in addition to providing this de minimis support without accounting for it in the AMS and the new OTDS, members may still provide a market price support up to 10% of value of production for the crop in question according to the AoA?

Argentina, Australia, Paraguay and Pakistan among others joined Norway to challenge the EU for proposing a new carve-out for PSH programmes.

Argentina, which is going to host the Ministerial Conference, had raised several legal issues on the EU’s proposal, including the Korea beef case. It, however, suggested that it can consider an outcome on PSH programmes with considerable safeguards along with an outcome on domestic support programmes for food security, said trade envoys who took part in the 15 September meeting.

The EU said that it proposed “a compromise approach which could provide the way forward for this difficult and important issue”, suggesting that such outcomes were reached in the past. It said that it took into account all the concerns raised by both the demandeurs and the opponents to the permanent solution for PSH programmes.

Brazil suggested that its joint proposal with the EU, Peru, Colombia and Uruguay will make the 2013 interim solution permanent under clear rules with enhanced transparency and safeguards. It said the proposal would allow developing countries to pursue PSH programmes subject to specific conditions.

No to linkage

During the to-and-fro exchanges between the EU on the one side, and Norway and the farm-exporting countries on the other, the G33 members stated their opposition to the EU’s joint proposal on grounds that it is linked to commitments on domestic support.

On behalf of the G33 members, Indonesia expressed sharp concern over the EU proposal. “The G33 strongly opposes and will not accept the linkage between the issues of PSH and domestic support,” Indonesia said.

“The G33 would like to reiterate that the mandate on finding permanent solution on Public Stockholding for Food Security Purposes is distinct and on an independent track and G33 believes there should be no linkage between PSH with other issues,” Indonesia added.

Indonesia said that the G33 proposal on a permanent solution for PSH programmes called for amending the AoA by inserting a new Annex 6 to exempt programmes for the acquisition of foodstuffs that are going to be distributed at subsidized prices from any AMS reduction commitments.

The G33, said Indonesia, “firmly believes that the best solution for the PSH issues is the one that includes new and current programmes of all developing members who are facing food security challenges but are constrained by inequitable Uruguay Round disciplines.”

It argued that provisions on public stockholding for food security purposes under the current WTO rules will not be able to address the real need of developing countries to effectively support their low-income or resource-poor farmers, nor to fight hunger and rural poverty.

Indonesia explained that “the interim solution which was agreed in Bali and modified by the General Council decision of 2014, was meant as an interim solution and will not sufficiently address the real needs.”

Consequently, the G33 proposed an amendment of the AoA for a permanent solution, Indonesia said.

“In this regard, the Group specifically proposes the insertion of a new annex (as Annex 6) to the AoA, where programmes for public stockholding for food security purposes shall not be required to be accounted for in the Aggregate Measurement of Support (AMS),” Indonesia argued.

The G33, according to Indonesia, will agree to transparency elements in the permanent solution. The transparency elements include notifying the WTO Committee on Agriculture on an annual basis.

However, the G33 will not accept “onerous and cumbersome” transparency provisions which will defeat “the purpose for which the permanent solution is intended, namely, food security in developing countries. Too many onerous and cumbersome requirements or conditions precedent will come in the way of the use of this mechanism by developing countries. For example, the ex-ante transparency requirements as conditions for invoking the PSH would be onerous for developing countries.”

India said that it will not pay for the mandated solution for PSH program-mes, nor accept onerous transparency conditions as set out in the EU’s proposal.

China stressed that the permanent solution is essential to address food security problems in the developing countries.

A large majority of developing and poorest countries – Botswana on behalf of the Africa, Caribbean and Pacific (ACP) Group, Egypt on behalf of the African Group, South Africa, Kenya, Zimbabwe and Cameroon, among others – strongly supported the G33 proposal.

Special safeguard mechanism

The G33 also called for a decision at Buenos Aires on its proposal for a special safeguard mechanism (SSM) for developing countries for curbing unforeseen surges in the imports of farm products.

Indonesia, on behalf of the G33 members, said the “SSM has been denied for long, the debilitating effects of import surges and price depressions continue to wreak havoc on developing Members’ agriculture.”

It called for a legally binding amendment in the AoA to enable the developing countries to use volume-based and price-based SSM.

In its latest proposal on the SSM, the G33 had called for “a concrete and operational SSM” to be established at MC11 in Buenos Aires. It proposed a draft legal text as well as an annex for establishing the SSM. The G33 proposal contained “Annex A” for the volume-based SSM and “Annex B” for the price-based SSM.

“While the WTO ministerial mandate is for establishing both volume-based SSM and price-based SSM, the G33 is open to issuance of either of the mechanisms at MC11 in the interim period, provided that a decision agreement contains – at the minimum – a concrete and operational SSM for use by developing country Members that effectively addresses either import surges or price depressions from day one of the decision,” it said.

Since there is no proposal on the table yet on the SSM, the G33 said it “expects that the G33 newest submission shall be the basis of our discussions from now.”

A large majority of developing and least-developed countries supported the G33 proposal on the SSM.

But the opponents to the SSM such as the United States, Australia and other Cairns Group members remained conspicuously silent during the discussion, said trade envoys after the meeting.

With less than two-and-a-half months left before the Buenos Aires meeting, the developing and poorest countries face a herculean battle for securing a credible and effective permanent solution for PSH programmes and the SSM. Unless a large majority of them remain united at Buenos Aires, they could face an ugly outcome that will deny them forever these two instruments, trade envoys said. (SUNS8535)

Third World Economics, Issue No. 646, 1-15 August 2017, pp8-10