US launches assault on resource-poor farmers of South
Published in SUNS #8095 dated 18 September 2015

Geneva, 17 Sep (D. Ravi Kanth) -- The United States has signalled its intention to dismantle the special and differential treatment (S&DT) accorded to resource-poor farmers of the developing countries in the Agreement on Agriculture (AoA) ahead of the World Trade Organization's tenth ministerial conference in Nairobi, several authoritative people told the SUNS.

At a closed door meeting of capital-based senior trade officials from seven major developed and developing countries held at the Australian mission on September 15, the US circulated a non-paper called "proposal on domestic support" in which it has proposed a decision to be taken at the Nairobi ministerial meeting.

Senior trade officials from the US, the European Union, China, India, Brazil, Australia, and Japan, along with the WTO director-general Roberto Azevedo discussed the possible package of decisions that would be taken at the Nairobi ministerial meeting commencing on December 15.

Over one-and-half days of intense discussions, including a dinner meeting on Tuesday, the seven plus the DG spent considerable time on the most contentious area of agriculture and the fate of all unresolved issues in the Doha Development Agenda by the tenth ministerial meeting.

After having failed to arrive at a post-Bali work program, clearly mandated in the ministerial declaration at the ninth Ministerial Conference at Bali, Indonesia, in December 2013, the seven countries and the DG have sought to prepare for possible outcomes that they can agree in the next 90 days.

During the meeting on Tuesday, there was a fierce standoff on agriculture, particularly in the domestic support pillar, in which the US is required to suggest what Washington is going to do given the limit of US$14.5 billion that was proposed in the 2008 revised draft modalities.

The three major developing country participants - China, India, and Brazil - strongly demanded "credible" outcomes based on the 2008 revised draft modalities. The modalities of the revised fourth version of draft text proposed clear reduction commitments of subsidies in the domestic and export competition pillars, and market access for developing and the developed countries.

It also proposed special flexibilities for small and vulnerable economies and least-developed countries. More importantly, the 2008 revised draft was based on the previous ministerial decisions since the launch of the Doha negotiations in 2001.

However, at the meeting, the US chose to wage an unprecedented assault on the S&DT provisions as set out in the Uruguay Round Agreement on Agriculture.

Without suggesting what it is prepared to agree upon for reducing its amber box, de minimis, and new blue box farm payments, the US tabled a two-page non-paper targeting the market price support (MPS) programs and the input subsidies that developing countries are allowed to provide to their resource-poor farmers under the S&DT provisions in the Agreement on Agriculture.

The US paper has called for "standstill" commitments in MPS and input subsidies despite Article 6.2 of the AoA which was concluded in the Uruguay Round Agreement.

This provision in the AoA says: "In accordance with the Mid-Term Review Agreement that government measures of assistance, whether direct or indirect, to encourage agricultural and rural development are an integral part of the development programmes of developing countries, investment subsidies which are generally available to agriculture in developing country Members and agricultural input subsidies generally available to low-income or resource-poor producers in developing country Members shall be exempt from domestic support reduction commitments that would otherwise be applicable to such measures, as shall domestic support to producers in developing country Members to encourage diversification from growing illicit narcotic crops. Domestic support meeting the criteria of this paragraph shall not be required to be included in a Member's calculation of its Current Total AMS."

Despite this provision in the AoA, the US non-paper explicitly says, "Without prejudice to Members' rights and obligations under the WTO Agreement on Agriculture, including Article 6.2, each Member should avoid using market price support and input subsidies for agricultural products."

The US said that "each member undertakes the commitments in Annex A (of the non-paper)."

The Annex A, as proposed by the US, says categorically: "Each Member shall, with respect to agricultural products, undertake each commitment set forth in its schedule to this Annex, which shall include: a) not increasing either the applied administered price for any agricultural product receiving market price support or the number of agricultural products to which the Member provides market price support; or b) not increasing its budgetary outlays for, or the scope of, product-specific input subsidies for agricultural products above the level in effect as on the date of this Ministerial decision".

Washington specifically provided examples in its paper as to what each member is required to do.

They include:

"[Member X - Member X shall not provide support for any agricultural product for which market price support is not authorized under its domestic law as of the date of this Ministerial Decision.]

[Member X - For any agricultural product for which market price support is authorized under the domestic law of Member X as of the date of this Ministerial Decision, Member X shall not maintain an applied administered price higher than the applied administered price as of the date of this Ministerial Decision.]

[Member X - Member shall not provide any product-specific input subsidy for any agricultural product not eligible under its domestic law to receive a product-specific input subsidy as of the date of this Ministerial Decision.]

[Member X - Member X shall not increase, above levels for the last full year preceding the date of this Ministerial Decision, budgetary outlays for the subsidization of any agricultural product effectuated by means of product-specific input subsidies on the following inputs: fertilizer, seeds, electricity, or diesel fuel.]"

Incidentally, both the US and the EU do not have to undertake any commitments in MPS and input subsidies.

The US, for example, does not provide MPS except for sugar. Effectively, the two trade majors are exempt from undertaking any commitments on MPS and input subsidies.

But all developing countries, particularly countries that provide public distribution programs for which they procure from resource-poor farmers at market prices and offload at reduced prices for vulnerable sections of the society, are most affected by the American proposal to do away with S&DT flexibilities.

Senior officials from China, India, and Brazil dismissed the US non-paper, saying it is unacceptable under any circumstances. China and India said the aim of the US proposal is to kill S&DT provisions once and for all.

The three developing country participants asked whether the outcomes in the domestic support will be decided on the basis of the 2008 modalities.

The DG, who was present at the meeting, remained silent on the US proposal, said people familiar with the meeting.

"He did not take any positions this time around and navigated himself well," said a negotiator present at the meeting.

More importantly, the US paper did not mention any of the existing Doha mandates beginning with the 2001 Doha Ministerial Declaration, the July 2004 ministerial decision on the Framework Agreement, the 2005 Hong Kong Ministerial Declaration, and the unresolved 2008 revised draft modalities.

Like the infamous deal between the US and the EU on 20 August 2003 prior to the WTO's third ministerial conference in Cancun, Mexico, in which the two trade elephants neatly worked out an arrangement to protect their overlapping concerns in the domestic support and market access, the latest US non-paper also ensured that both Washington and Brussels need not undertake any commitments, said people familiar with the meeting.

[That pre-Cancun deal of the US and EU resulted in the formation of the G-20 coalition on agriculture, and ultimately wrecked the Cancun Ministerial Conference itself. SUNS]

A South American trade official said the US paper will never fly and it has zero chance of acceptability. At the meetings earlier this week, the three developing countries maintained that without credible outcomes in the domestic support pillar, there will be no progress at the Nairobi meeting.

However, the US has insisted that its non-paper has offered "a new idea" under which all subsidisers would be expected to make a contribution.

In an article titled "Farm Program Elections, Budget Costs, and the WTO," published in Choices Magazine in the US, the former US chief trade negotiator Joseph Glauber along with Patrick Westhoff, and Scott Gerit wrote that the latest US farm bill enacted last year goes beyond the proposed commitments in the 2008 modalities.

"Because of the shift to a much more extensive reliance on amber box [most trade distorting] subsidies and other less direct forms of income transfers to farmers, the 2014 farm bill has complicated trade negotiations by making compliance issues more problematic, especially in the context of the 2008 DDA proposal for substantially lower limits on farm subsidies," Westhoff, Gerit, and Glauber wrote in their article.

Despite continued disagreements, the four industrialized country participants - the US, the EU, Australia, and Japan - pushed hard at the meeting for a small package of outcomes at the Nairobi meeting. Their small package includes issues in the export competition pillar, the package of concessions for the least-developed countries, liberalized accession requirements for new members, and ratification of the Trade Facilitation Agreement.

Even in the export competition pillar, the US said it will not accept the disciplines for export credits and food aid as laid out in the 2008 revised draft modalities. The term of 180 days for export credits and monetization provisions in the revised modalities are not acceptable to the US.

On the LDC package, the four major industrialized countries maintained that they have already addressed most of the issues but did not clearly offer any assurance for binding outcomes at the Nairobi meeting, said people familiar with the meeting.

In sharp opposition, China, India, and Brazil called for credible outcomes at Nairobi while continuing the negotiations on all unresolved Doha issues after the tenth ministerial conference. The three developing countries also adopted a common stand for the end of the Doha Round.

During the meeting, the US said somewhat bluntly that Doha is like a "patient" which is dead but needs a doctor to certify the death. The EU maintained that the Doha negotiations cannot continue endlessly while Australia and Japan also agreed that Nairobi should be the last point, according to people familiar with the meeting.

China sharply disagreed with the US, maintaining that Beijing doesn't agree that Nairobi is the last point. China said all remaining issues which could not be addressed due to paucity of time must be taken up after the Nairobi meeting. India said the Doha negotiations shall continue until all issues on the table are addressed. Brazil said it doesn't believe that Doha is dead as all the issues in the DDA remain alive, according to people familiar with the meeting.

In short, the US along with the major developed countries has set the ground for taking the life out of the Doha negotiations at Nairobi. The US also launched a war-like campaign against S&DT provisions for the developing countries which could come into effect after the Nairobi meeting.

It remains to be seen how developing countries will come to terms with an outcome that has hollowed out the developmental goals set out in the DDA. +