TWN Info Service on WTO and Trade Issues (Nov17/08)
8 November 2017
Third World Network
Argentina's desperate effort to avert failure of MC11
Published in SUNS #8569 dated 7 November 2017

Geneva, 6 Nov (D. Ravi Kanth) - In a desperate attempt to save its "South American" face, and despite a categorical NO from the United States to any outcome on domestic support at the upcoming World Trade Organization ministerial meeting in Buenos Aires (MC11), Argentina on Thursday (2 November) issued a draft ministerial decision for further consideration, trade envoys told SUNS.

During closed-door meetings on domestic support and the permanent solution for public stockholding programs respectively on 1 November, convened by the chair for Doha agriculture negotiations, Ambassador Stephen Karau of Kenya, it became crystal clear that an outcome on domestic support at Buenos Aires based on the proposals on the table are close to zero, several trade envoys said.

On the permanent solution for public stockholding programs (PSH) in developing countries, the overall tone and tenor of the discussions clearly revealed that Russia, Australia, Pakistan, the European Union, and even the United States are demanding extraneous and burdensome conditions on safeguards based on the Russian proposal.

These conditions amount to a demand for "payment".

Incidentally, no such conditions were attached to more than US$150 billion in green box measures which have been found in WTO rulings to be as trade-distorting as blue box and AMS (Aggregate Measurement of Support) payments.

Last week's meeting on the domestic support was attended by more than a dozen countries such as the US, the European Union, China, India, Brazil, Japan, Australia, Pakistan, and New Zealand among others.

There were heated exchanges at the meeting on the lack of convergence as well as on attempts to stall the negotiations, said a trade envoy who asked not to be quoted.

The US, which has kept mum all these weeks, took the floor to make three points. The US said their "threshold" of skepticism was growing by the hour, after witnessing the discussions.

It maintained that the chances of any outcome on domestic support are nil, and that the discussion "today" - i.e. on Wednesday, confirmed their assessment, according to another envoy from South America.

The second point made by the US was that any work program on domestic support must be simply drafted, and it must not have too many bullet points which would preempt future discussions.

Effectively, the US said that it doesn't want any "prescriptive" work program on domestic support.

And the third point, made by the US at the meeting, was that to make progress on domestic support it was imperative that members have information and data which was seriously lacking at this juncture.

Consequently, said the US, it was not going to engage on domestic support unless the data issue is resolved.

The US referred members to its proposal on transparency and notification requirements at the WTO in all covered agreements, including agriculture, the envoy suggested.

In separate interventions, India and China said the prerequisite for commencing work on the domestic support is the elimination of AMS (aggregate measurement of support) in the industrialized countries.

The two Asian countries repeatedly maintained that the AMS is the source of global farm trade distortions in agriculture.

The European Union and Brazil said their proposal along with Peru, Colombia, and Uruguay has a lot of support among members.

The EU and Brazil maintained that their proposal based on the floating reduction cuts in the overall trade distorting domestic support and even Australia's proposal on nominal cuts are not inherently opposed to each other and if anything, they can be reconciled, the envoy suggested.

In sharp response to the EU's claim, the three farm protectionist countries - Norway, Japan, and Switzerland - said they were gravely concerned with proposals in which domestic support commitments are based on the value of production.

The three countries suggested that they cannot accept proposals based on any value of production.

Switzerland said that it is important that there has to be proportionality in the commitments, emphasizing that all members must undertake commitments.

Japan argued that it was already undertaking substantial domestic reform, maintaining that there has to be a price for cutting down "water".

Argentina said they are preparing a compromise proposal that would incorporate ideas from the joint proposal by Australia, the joint proposal by the EU and Brazil, and the joint proposal of China and India on elimination of AMS.

"This is something that can be achieved in Buenos Aires," Argentina argued, according to the envoy.

Argentina said it is difficult to achieve a concrete outcome on domestic support at this juncture due to the paucity of time, emphasizing that a bare blueprint on domestic support is essential.

It argued that the joint proposal by the EU and Brazil as well as the one by Australia and New Zealand were supported by many members, according to the envoy.

India and China took exception to this Argentinean statement at the meeting, saying their proposal to eliminate AMS was supported by the majority (more than 100) of countries.

In a sharp pique at the Indian statement, the EU said "two members are willing to pull the plug and one major member is not engaging."

The two members, according to the EU, are the US and India while the third one who is not engaging is China.

The EU went on to say that the stand by the two countries will ensure that the outcome on domestic support will be zero.

And without an outcome on domestic support, the EU will be constrained not to do anything in other areas, thus hinting at the prospect of scuttling an outcome on the permanent solution for PSH programs, the trade envoy said.

The chair asked members, particularly the EU, not to be frustrated.

But the US made it known at the meeting that there will not be anything except one or two lines on domestic support, the envoy said.

Despite the hopeless discussion on domestic support, Argentina circulated its compromise draft ministerial decision on Thursday (2 November).

In the restricted Job/Ag/120 document, Argentina called for a limit on overall trade-distorting domestic support (OTDS) which "taken in aggregate exceeds a monetary limit (hereafter "base cap"), in accordance with the following commitments."

It suggested the base cap for OTDS shall be no greater than the larger of:

Option A: Double the Member's de minimis percentage of its average value of total agricultural production in the period [2011-2015];

Option B: [110%] of the average Articles 6.3 and 6.4 support notified by the Member for [the most recent three notified years at the date of adoption]; or

Option C: For developing country Members, [US$2.0bn] or equivalent in local currency.

On AMS, Argentina proposed a tiered reduction formula. It said the final bound total AMS shall be reduced with the following tiered formula:

(a) where the Final Bound Total AMS is greater than US$40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [30]%;

(b) where the Final Bound Total AMS is greater than US$15 billion and less than or equal to US$40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [21]%;

(c) where the Final Bound Total AMS is less than or equal to US$15 billion, or the equivalent in the monetary terms in which the binding is expressed, the rate of reduction shall be [15]%.

Argentina said, "for developed country Members, reductions in Final Bound Total AMS shall be implemented in three equal instalments over two years, commencing on the first day of implementation."

On the permanent solution, the chair asked members to present their views on transparency and safeguards against the backdrop of the Russian proposal.

Russia said it has taken on board all the concerns raised by members on its proposal, suggesting that some ideas were incorporated from the EU-Brazil proposal.

Russia said it wants an outcome on the PSH and emphasizing largely on safeguards. Paraguay has co-sponsored the Russian proposal.

Indonesia, the coordinator for the G33, was not invited for the meeting by the chair!

However, Indonesia barged into the room, the South American envoy said.

In sharp response to the Russian proposal, India said that they are not asking for any relaxation of transparency provisions. India said it wants transparency provisions that are practical and implementable.

India said the language on safeguards was already negotiated in the interim Bali peace clause, maintaining that they will not accept any "additional" commitments.

India also demanded "legal certainty" in the permanent solution.

Australia said that it cannot accept any "Bali-minus" outcome, saying it fully endorsed the Russian proposal on safeguards.

The US said Bali is a good starting point, adding that their main concern is safeguards, as there are reports of some Indian officials who said some stocks procured for PSH are available for exports.

Such statements make our domestic stakeholders very nervous and it is a real issue, the US said, maintaining that the US wants export-related safeguards.

The US also said that some ideas in the Russian proposal on safeguards concerning tariffs is intriguing, the South American envoy said.

Pakistan maintained that it wants enhanced safeguards while suggesting that it can look into reducing transparency provisions on condition that safeguards are further strengthened.

Pakistan said that the share of exports in the international market of items procured for PSH must be taken into consideration.

Thailand also maintained almost the same position as Pakistan.

The Philippines changed its position saying it is a strong votary for safeguards while demanding an outcome on special safeguard mechanism for developing countries.

Singapore, which has proposed export restrictions, said it does not want "Bali minus" outcome but insisted that it was not correct to demand export-related commitments in the permanent solution.

The chair discussed cotton with select countries on Thursday (2 November) during which the US categorically opposed any outcome on cotton at Buenos Aires as proposed by the Cotton-four countries - Benin, Burkina Faso, Mali, and Chad.

The US said neither can it agree with the "preamble" language of the draft ministerial decision circulated by the C4 countries, nor the specific reduction commitments in trade-distorting domestic support or enhanced market access, according to people familiar with the meeting.

In a draft ministerial decision circulated on 11 October, the C4 countries demanded that "domestic support for cotton by some WTO members distorts prices and disrupts the international market, with severe consequences for the economy and social life in African cotton-producing countries, especially LDCs."

The four African countries which are infested with the problems of terrorism and under-development demanded substantive cuts in overall trade-distorting domestic support (OTDS) for cotton that include Aggregate Measurement of Support (AMS), Blue Box, and de minimis.

They also insisted that green box payments which are exempted from reduction commitments must not be provided for cotton.

During the short meeting, the C4 countries asked for a credible outcome at the Buenos Aires meeting on both domestic support and market access.

The four countries demanded outcomes in market access and export competition as per the previous Hong Kong ministerial declaration.

The US said they are not in a position to agree at this juncture on cotton, adding that they do not know yet the final shape of any outcome either on domestic support at Buenos Aires.

The US said that an outcome on cotton is related to other issues suggesting that it is futile to discuss cotton.

China said that it is discussing with its capital on the C4 proposal while India lent support to the four countries.

In short, issues concerning the domestic support as well as the permanent solution for PSH programs will go to the wire at Buenos Aires, and developing countries must remain prepared to oppose outcomes that are one-sided and lack integrity.