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TWN Info Service on WTO and Trade Issues (Jul19/25)
22 July 2019
Third World Network


Agriculture: US not ready to negotiate domestic support issues

Published in SUNS #8950 dated 19 July 2019

Geneva, 18 Jul (Kanaga Raja) – The informal Special Session of the WTO Committee on Agriculture held discussions on 15 July on a number of issues including on domestic support with new proposals being tabled on this issue.

The new proposals on domestic support were tabled by Chad on behalf of the Least Developed Countries (LDCs), and by the Cairns Group of agricultural exporters.

According to trade officials, several new proposals were tabled by members at the informal meeting aimed at moving towards a real negotiation mode and into a “solution-finding” phase after the summer break.

While there was general willingness on the part of many members to deal with the issue of domestic support, the US, however, said that it was not ready for negotiations on this issue.

Apart from the issue of domestic support, discussions were also held on market access, export competition, export prohibition/restriction and cotton. A dedicated session on public stockholding for food security was also held.

In the discussions, Benin, on behalf of the Cotton-4, outlined a plan to cut down the most trade-distorting subsidies, or Aggregate Measurement of Support (AMS), to cotton in incremental steps from 1 January 2021 to 30 December 2025.

On domestic support, a proposal (JOB/AG/159) was presented by Chad on behalf of the Least Developed Countries (LDCs) highlighting some essential principles and parameters in the negotiations on domestic support, public stockholding and the Special Safeguard Mechanism (SSM).

In the proposal, Chad said that agriculture remains a critical sector for the development of LDCs. It accounts for 30% to 60% of the LDCs’ GDP and employs up to 70% or more of the population.

It also represents a major source of exports and contributes directly to rural livelihood, poverty reduction, and food security.

The vast majority of LDC farmers are small or semi-subsistence farmers faced with several challenges affecting their productivity in spite of a large under-utilized production potential in agriculture. As a result, most LDCs are extremely vulnerable to price fluctuations and import surges.

Domestic support also continues to distort international prices and displace LDC producers on global markets while creating conditions of unfair competition on domestic and regional markets. Such policies directly hamper the development and food security prospects of LDCs.

On domestic support including cotton, Chad said that overall, negotiations should result in substantial cuts in trade-distorting domestic support and reduce existing asymmetries in domestic support by gradually eliminating AMS entitlements.

In order to avoid excessive product concentration, negotiations should establish a product-specific limit to domestic support.

With regard to cotton, Chad said negotiations should result in substantive cuts with a view to eliminating all forms of trade-distorting domestic support affecting cotton markets.

It will be an important achievement in this dossier if Members commit by MC12 to something for LDCs on eliminating trade-distorting domestic support affecting their cotton exports.

“Special and differential treatment (S&DT), taking into account the development and food security needs of LDCs, should result in LDCs being exempted from any reduction commitments consistent with all of our mandates originating under the Agreement on Agriculture Article 20 and Article 15.2 and Article XI.2 of the Agreement Establishing the WTO.”

There is need to agree on criteria and disciplines in order to enhance the transparency and to allow a limitation of the possible distorting effects of so-called blue and green domestic support measures on trade in agricultural products.

In the end, said Chad, all the negotiated disciplines on domestic support (AMS, de minimis, Blue box, Green box, etc.) and the effective implementation of the reform commitments in the agricultural sector by the WTO Members should contribute to correct in a concrete and significant manner the distorting effects on the trade of the different agricultural products, especially those whose production, processing and export are vital for the least developed countries.

On the issue of public stockholding for food security purposes, Chad said the LDC Group would like Members to reach an agreement which allows the development of public stockholding programmes for food security purposes that do not yet exist.

Should any permanent solution be reached, this dimension is essential for the LDC Group, which needs to be able to provide food for its rural and vulnerable populations.

With regards to concerns expressed by some Members on possible market disruption, the LDC Group called on these Members to take into consideration the proposal that was originally made by the G33 on transparency measures which do not constitute an increase in the administrative burden.

On the issue of the SSM, Chad said the establishment of a special safeguard mechanism to offset the negative impact of price volatility and import surges on resource poor farmers is an important aspect for the LDC Group.

The LDC Group called on Members “to achieve a rapid solution on this issue as well, in line with the mandate given by our Ministers in Nairobi.”

According to trade officials, a proposal was tabled by the Cairns Group of agricultural exporters summarising all the negotiation options on domestic support since the eleventh ministerial conference (MC11) in Buenos Aires in December 2017.

The paper on domestic support options (JOB/AG/160) was circulated on behalf of the following Cairns Group members: Argentina, Australia, Brazil, Canada, Chile, Costa Rica, Peru, New Zealand, Thailand and Uruguay.

According to the Cairns Group, the paper reviews the different themes identified and discussed by Members on domestic support and consolidates the various reform options for consideration in this pillar.

Looking to MC12 (to be held in Nur-Sultan in June 2020) for a possible outcome, Australia said: “this is not for members to check whether their position or their hated positions are on the list… It is to lay the groundwork for members to discuss what is doable and what is not doable (in September).”

Australia said the paper, which focuses on domestic support, is in line with the overall spirit of the Cairn Group Senior Official Statement made in Geneva during the WTO agriculture week of negotiations on 26 June, which reaffirmed the Group’s commitment to agricultural trade reform and to continue to be a driving force in WTO agriculture negotiations in order to achieve further meaningful reforms, with possible MC12 outcomes high on its agenda.

Canada introduced the structure of the paper, outlining the various options on domestic support in three themes: (1) developing new disciplines through limits and reductions in domestic support; (2) by clarifying existing rules on domestic support; and (3) enhancing transparency.

Canada said that the proponents are open to include new options and the intention of the paper is to facilitate discussions towards pragmatic ways forward in negotiations on domestic support.

Brazil said the reason for not including cotton in the paper is because cotton has always been on a separate track.

According to trade officials, the Cairns Group members said: “The options outlined in the paper are not proposals, nor should they be interpreted to preference or prioritize any one particular option. Rather, this paper should be viewed as a non-exhaustive list of options to be further discussed (after summer)”.

According to trade officials, New Zealand, the EU and Pakistan stressed the urgency of entering into negotiations as soon as possible.

However, the US, while welcoming the Cairns Group paper as a “timely dedication to the Committee”, said that the Committee is still in the phase of continuing technical discussions and thus was not ready for negotiation.

The US called on members to continue “examining the challenges farmers are facing and address them before entering negotiations”.

On the LDC Group’s position on public stockholding, the US asked members to change their long-standing positions or “it will be difficult to achieve results in MC12”.

China expressed concerns over the Cairns Group paper for not being clear on the priority for the negotiations, and despite the long list of options, China only saw AMS entitlement beyond de minimis as the top priority.

According to trade officials, both China and India reminded members of their joint paper on the incremental steps to eliminate AMS.

India, Jamaica (for African, Caribbean and Pacific Group) and Colombia underlined that developing members and LDCs should be exempted from any additional commitments and there is need to preserve Article 6.2 of the Agreement on Agriculture on special and differential (S&DT) treatment in any new agreement.

Paraguay spoke against cherry-picking and suggested that all trade-distorting subsidies should be evaluated.

Switzerland, on behalf of G10, said it does not support the idea that all members should contribute proportionally according to how much they distorted trade.

According to trade officials, Switzerland, Japan and Panama argued for keeping policy space for subsidies to address non-trade considerations, such as food security and political sensitivities.

Ecuador said a balanced package of results would be ideal while the EU supported focused negotiation to address overall trade-distorting support.

In his assessment, the Chair, Ambassador John Deep Ford of Guyana, said that the key objective that members seem to agree on is to address trade-distorting domestic support, but there are differences on how that objective might be achieved.

The Chair noted that numerous developing members have called for a level playing field and correcting what they perceive as existing imbalances in the Agreement on Agriculture.

These ideas have evolved around existing limits and entitlements, new limits and disciplines, such as overall limits or product-specific disciplines, or taking into account more disaggregated information such as support by farmer or by hectare; by type of beneficiary (e.g. poor farmers vs. commercial farmers); by “destination” (e.g. domestic consumption or export); and by the type of support provider (e.g. net food importer or net food exporter).

The Chair also noted an increasingly strong call for proportionality in making contributions to the reform efforts relative to the role of the support in causing trade distortions.

On the issue of cotton, Benin, on behalf of the Cotton-4 group, tabled the group’s first proposal since MC11, whereby it introduced a three-tier plan to cut down the most trade-distorting AMS on cotton in incremental steps from 1 January 2021 to 30 December 2025.

According to its proposal, developed members with AMS above USD 2 billion should reduce 40% of their support in 5 years’ time, i.e. 8% per annum; if AMS support is between USD 1 and USD 2 billion, the reduction should be 35% in total, i.e. 7% per annum; if AMS support is equal or under USD 1 billion, the reduction should be 30% in total, i.e. 6% per annum.

The Cotton-4 also suggested to cap blue box subsidies at two-thirds of the total AMS.

To avoid box shifting and ensure the green box is indeed “green”, the Cotton-4 asked members to make notifications on green box subsidies and enhance transparency.

According to trade officials, the paper was commended by many members who provided some preliminary comments and said they will further study it over the summer break.

Argentina and the EU asked for more clarifications on how the Cotton-4 established the basis for such reduction rates.

China expressed its support for this “blueprint for discussions on cotton”.

Citing its own example, China reiterated the need to respect the subsistence subsidies provided by the developing members to sustain small farmers’ livelihood with no distorting effect in the global market.

According to trade officials, India shared the view and underlined that AMS is the most distorting element that needs to be addressed first.

Jamaica, for ACP Group, welcomed the move and encouraged the Cotton-4 to continue taking the lead on cotton.

Benin explained that the basis for the proposed reductions was established in the notifications made by members in the past and their projection of trends.

In his assessment, the Chair said that domestic support remains the central and the most controversial issue in the negotiations on cotton which is believed to be a “gateway issue” to make a breakthrough in cotton.

The chair also commended the work done in the Cotton Technical Quad Plus meetings, particularly on the progress made in cotton data compilation in support for well-informed negotiations.

Ambassador Ford asked members to use the summer break to study further the new Cotton-4 paper and get ready for a deeper discussion in September, bearing in mind the upcoming important day for the cotton community, namely, launch of the World Cotton Day, which is scheduled for 7 October 2019.

On the issue of public stockholding (PSH), Working Group Coordinator, Mr Alf Vederhus from Norway, provided an oral report summarizing the discussions in the last Working Group meeting on 23 May.

He stressed that the PSH issue is an issue with a mandate, noting that contrasting positions remained.

He said that the building block for the negotiation is how to deal with the new programmes that are not covered by the Bali interim decision.

He also highlighted some members’ suggestions to cap the PSH at 20% of the value of total production (VoP) to avoid trade-distorting effects.

According to trade officials, the ACP Group, the African Group, India and China expressed their support for the main demandeur, the G33, which repeatedly stated its stance on fulfilling the Bali and Nairobi mandates to reach a permanent solution to cover both existing and new public stockholding programmes, applicable to all developing countries, and to ensure no additional burden in notification for developing members.

Pakistan and Paraguay expressed concerns regarding the negative impact that PSH might have internationally, as overstocked food might be dumped on global markets at cheap prices and cause trade distortion.

In his assessment, the Chair noted the impasse in the discussions, and asked members to find a new and creative way to proceed.

“We will need to find a way to address the concerns of the non-proponents about the potential impact on trade flows and food security of other Members, while at the same time not imposing strict requirements that would make it de facto impossible to use the Permanent Solution. Appropriate safeguards acceptable to all seem to hold the key,” he said.

According to trade officials, there was no discussion on the issue of SSM as it was not listed on the agenda of the meeting.

The Chair offered his evaluation for the discussions conducted in 2019. He highlighted two main challenges: the first is to achieve the required degree of technical maturity in the SSM discussions, possibly supported by written contributions; and secondly, addressing in a constructive spirit the market access-related concerns of the exporting Members.

The Chair asked both sides to “invest their best efforts in this important file” of the negotiations.

NEXT STEPS

According to trade officials, the Chair indicated that his report will be circulated before the end of July for members to reflect on over the summer recess.

With “concrete” and “practical” as the key spirit of the document, the report will be structured in the form of questions for members to consider, he said.

He also called on members to reassess their positions in order to bridge the gaps and find convergence.

“[We need to find] what precisely on each topic will be realisable for an outcome”, he said.

Looking ahead, he further advised members to come prepared for a “more intense, proactive and results-oriented phase of negotiation” in September.

The reflection is over and “it is now time for actions and movement,” said Ambassador Ford.

Three meetings are scheduled for 26-27 September, 28-29 October and 28-29 November.

 


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