No convergence on PSH or domestic support reduction
Published in SUNS #8564 dated 31 October 2017

Geneva, 30 Oct (D. Ravi Kanth) - Two closed-door meetings held last week by WTO Director-General Roberto Azevedo - one with proponents of permanent solution for public stockholding (PSH) programs for food security in developing countries and the second on agriculture domestic support reduction commitments - have failed to bring about any convergence, trade envoys told SUNS.

Azevedo held the two closed-door meetings, one on 25 October with the proponents of the permanent solution for public stockholding programs for food security in developing countries, and the second on 27 October with proponents for domestic support reduction commitments.

But the two meetings failed to bring about any convergence among participants either on the permanent solution for public stockholding programs, or the reduction on domestic support, according to trade envoys who attended the two meetings.

Azevedo, who was formerly the chief trade negotiator for Brazil during the crucial meetings in the run-up to the 2008 revised draft modalities, assumed the role of negotiator at last week's meetings, in the absence of the current chair of the Doha agriculture negotiations Ambassador Stephen Karau of Kenya who is busy with elections back home in Nairobi.

At both the meetings, the United States remained conspicuously absent.

The DG was apparently interested at this juncture only in talking with the proponents rather than opponents of the two proposals, said a trade envoy from South America who asked not to be quoted.

The US has made its position clear that there cannot be any negotiated outcomes or a ministerial declaration at the WTO's eleventh ministerial conference (MC11) in Buenos Aires beginning on 10 December.

"The DG is aware of all the intricacies and the linkages in both these issues, unlike the current Doha agriculture talks chair who is clueless about the likely outcomes at Buenos Aires," the South American trade envoy said, adding that Azevedo is in a position to nudge the proponents to come to a common understanding.

The meeting on the permanent solution for public stockholding (PSH) programs which took place on 25 October was attended by trade envoys of the European Union, Brazil, Norway, Russia, Indonesia which coordinates the G33 Group, India, Turkey, Korea, Dominican Republic, Kenya, and Egypt among others.

During the brief meeting, Indonesia, India, Korea, Turkey, Kenya, and Egypt - all members of the G33 coalition of developing countries - made an emphatic case about the need to have a credible and effective permanent solution at Buenos Aires so as to enable developing countries to assist hundreds of millions of poor farmers without any legal hurdles.

Indonesia, which is the coordinator of the G33 farm coalition, delivered the strongest message during the meeting. It made clear that the G33 members along with a large majority of developing countries will reject any attempt to link the PSH permanent solution with the domestic support reduction issue.

Indonesia said the two issues stood on their own merit without any linkage, and any attempt to force a linkage now will not only have serious ramifications but will derail the meeting in Buenos Aires, said another trade envoy who asked not to be quoted.

In response, Azevedo intervened to say that the linkage issue is not the main one suggesting that the participants must focus on other elements of the permanent solution, the envoy said.

India raised fundamental concerns on the interim decision on PSH programs reached at the WTO's ninth ministerial meeting in Bali.

India said the coverage of products in the Bali decision which include "food" products must be replaced by the current Annex I list of products in the WTO's Agreement on Agriculture (AoA).

India said by suggesting food products only in the Bali decision, it has created confusion, said an African trade official.

Azevedo maintained that the inclusion of food products in the Bali agreement was agreed among ministers instead of inserting language on "few products".

He said that if India insists on any change on the issue of coverage of products, then it would have to agree to tightening the safeguards or other issues in the permanent solution, the South American envoy said.

India then raised several issues on the safeguards as well as transparency provisions for the proposed mandated permanent solution.

The Bali agreement, India said, contained the most intrusive and unworkable transparency provisions that none of the developed countries, except New Zealand, would be able to implement in reality.

Instead of working to develop an effective permanent solution, India said that some proponents are making the permanent solution for PSH programs impossible to use, the South American envoy said.

Turkey demanded an easy and effective permanent solution, a view which was also shared by other members such as Korea, Kenya, and Egypt.

In response to India's position, the European Union, Brazil, and Norway maintained that the permanent solution must remain as close as possible to the Bali interim decision. The three countries stuck to that position with varying nuances, and maintained that the permanent solution must remain anchored on the Bali agreement, trade envoys said.

The EU said it is in favour of a permanent solution for PSH programs but insisted on transparency and safeguard measures.

Brazil said that it is expanding the scope for a balanced outcome on the permanent solution by including it with domestic support, and suggested that the unresolved issues in the two areas can be taken up later after the Buenos Aires meeting.

Brazil said the permanent solution must reflect the Bali decision and any changes must be minimal. It argued that if India wants to add any substantive changes then they must be discussed after Buenos Aires given the paucity of time.

Norway said the permanent solution must be close to the interim solution that was agreed in Bali in December 2013.

Russia circulated a proposal on PSH programs on 27 October in which it argued that while it is willing to agree to lesser transparency provisions in the permanent solution, it will need enhanced safeguard provisions, according to a person familiar with the proposal.

In effect, Russia, a major wheat exporter, raised the bar on safeguard provisions in the permanent solution so as to ensure that China and India do not export wheat, the person said.

The director-general - who did not call for the consultations the other key opponents to the permanent solution for PSH such as the United States, Australia, Canada, Pakistan, and Paraguay - said that any attempt to open up the elements in the Bali decision could lead to reciprocal demands from other members, according to people familiar with the development.

The US has repeatedly said that the permanent solution cannot undermine the Bali interim decision, a position that was reflected in the consultations by Norway.

During the green room meeting on domestic support on 27 October, the director-general pleaded with the proponents that they must make every effort for a beginning on domestic support at Buenos Aires, failing which they will be sending a wrong signal to the people who are watching from outside, said a trade envoy who asked not be quoted.

"If you don't do anything on domestic support, then, it will not send a good message, therefore be prepared to discuss something among yourselves," the DG said, according to the envoy.

The European Union, Brazil, Australia, New Zealand, Japan, Switzerland on behalf of the G10 countries, Mexico, China, India, and Guyana on behalf of the ACP (Africa, Caribbean, and Pacific) coalition and Paraguay took part in the meeting.

India and China referred to their own proposal which called for eliminating the most trade-distorting domestic support or the Aggregate Measurement of Support (AMS). The two countries maintained that the AMS in the industrialized countries is the biggest issue at this juncture.

India made a forceful case that because of the AMS some members are able to support some products up to 200% and 300% of the value of the production, while developing countries only have de minimis that cannot be breached beyond 10%, said a participant from South America.

India and China said there are huge divergences among members on the domestic support, arguing that they are not sure whether they will be able to proceed further.

China said the ultimate goal for members must center around the elimination of AMS, suggesting that the two countries are suggesting a process that eventually leads to the elimination of AMS.

The EU and Brazil maintained that their proposal is basically a middle ground solution for kick-starting the negotiating process on domestic support.

Australia and New Zealand referred to their proposal saying that it offers a credible route to all members to address domestic support with a small beginning.

But Mexico, Japan, and Switzerland said they cannot accept the EU-Brazil and Australia-New Zealand proposals.

The two proposals, they said, target some countries while leaving others untouched.

Japan acknowledged the need to cut "water" but maintained that it should not be at others' cost. Japan asked for a price for cutting water in the AMS suggesting that it is engaged in its own reform.

Switzerland also said that while they have not carried out as big a reform, they also have the same concerns with the EU-Brazil, and Australia-New Zealand proposals.

In short, the divergences on the domestic support remained unbridgeable, said a participant who asked not to be quoted.

The participants remained sharply divided even on the future program on domestic support with Switzerland suggesting that Article 20 in the AoA will remain the basis for future work.

With less than six weeks left for the Buenos Aires meeting, the developing and least developed countries are facing an ugly situation, as the entire Doha edifice on agriculture and other issues is being reduced to rubble even before they reach Buenos Aires.