China-India renew battle to end US-EU agri-support policies
Published in SUNS #8713 dated 3 July 2018

Geneva, 2 Jul (D. Ravi Kanth) - China and India have renewed their negotiating battle at the World Trade Organization for eliminating the most trade-distorting domestic support offered by the developed countries, particularly the US and the European Union, even as the US is in the process of enacting a new farm bill with an aggressive subsidy-driven farm program, trade envoys told SUNS.

Last week, the US Congress gave final touches to a new farm bill of 2018 that would commence next year.

Indications are that it would be modelled on the lines of the current farm bill that was passed in 2014 with some major changes.

"Now, the [US] industry has a similar suggestion for the 2018 Bill: Replacing STAX (Stacked Income Protection Plan) with a new income support program for "seed cotton"," according to a report filed on 31 January by Sara Gustafson of the International Food Policy Research Institute (IFPRI).

Joe Glauber, the former US chief agriculture negotiator during 2008 and who now works at IFPRI, said the proposed changes in the 2018 farm bill "would not only represent a substantial expenditure for the US government" but "could also once again insulate US cotton producers from global market signals."

"This could result in detrimental impacts on developing country producers and open the US to further WTO disputes," he said, according to the report on the IFPRI website.

Against this backdrop, the chair for Doha agriculture negotiations, Ambassador John Ronald Dipchandra (Deep) Ford from Guyana, has convened an informal meeting on 16 July to discuss the way forward in the agriculture negotiations.

In a fax sent to members on 11 June, the chair posed several questions on all three pillars of agriculture support - trade-distorting domestic support, market access, and export competition - of the Doha agriculture work program for facilitating the discussion on the way forward.

The list of questions, according to the chair, is aimed at "facilitating a shared understanding of the negotiating objectives and the starting points for continued negotiations on each topic."

Despite the substantive work done in the Doha agriculture negotiations, particularly the 2008 revised draft negotiating modalities or Rev 4 text, the chair wants members to suggest how to go about in all areas of the agriculture negotiations.

The current WTO director-general Roberto Azevedo, when he was Brazil's ambassador, said in 2011: "The December 2008 draft modalities are the basis for negotiations and represent the end-game in terms of the landing zones of ambition."

After becoming the WTO director-general, Azevedo said the 2008 draft modalities are not cast in stone.

"He criticized the developing countries who were clinging to those modalities and went on to successfully destroy the 2008 modalities to please the US," said a trade envoy who asked not to be quoted.

Nevertheless, the chair Ambassador Ford wants members to suggest how to go about in domestic support, cotton, market access, export competition, export prohibitions and restrictions.

The chair wants to hear how members would want to proceed on the permanent solution for public stockholding programs for food security, and the special safeguard mechanism for developing countries.

On domestic support, Ambassador Ford said "many ideas and proposals were put forward before MC11 (WTO's eleventh ministerial meeting in Buenos Aires last year) regarding how to address trade-distorting domestic support."

"While Members broadly agree on the need to limit trade-distorting support, their views on how to do it differed significantly," the chair said.

Several members - the European Union and Brazil along with several other countries, China and India supported by the African Group and the ACP (African, Caribbean, and Pacific) countries, the Cairns Group of farm exporting countries led by Australia, and the Least Developed Countries - had circulated proposals.

But progress on trade-distorting domestic support was blocked by the US at the Buenos Aires meeting after it vehemently refused to agree to any agenda on agriculture.

Against this backdrop, the chair has now asked members: "In your view, which proposals and ideas are the most promising to help to move forward in this area? Is there a way to reconcile (or combine) different ideas and positions so as to allow the negotiations on Domestic Support to move forward?"

On Cotton, the chair sought to know "what approaches should be explored to attain the objective of reducing trade-distorting support for cotton?"

The 2005 Hong Kong Ministerial Declaration had called on members (to adopt) ambitious, expeditious, and specific cuts in cotton subsidies. The 2008 draft modalities had also suggested deep cuts in cotton subsidies.

On market access which has remained on a backburner for some time now, the chair asked members "what would be the best way to restart the negotiations “by "prioritizing" discussions on some selected areas.

Recently, the US, which does not want to address trade-distorting domestic support any longer, had suggested in its proposal on "WTO agriculture negotiations reset" that members must focus on "reducing market access barriers, reducing policy inefficiencies and distortions, and removing unfair non-tariff barriers."

Given the inadequate work done on export competition and export prohibition s and restrictions, the chair asked members to suggest "which areas should the negotiations focus on."

The chair sought to know the "way forward" for arriving at the permanent solution for public stockholding programs for food security.

On the special safeguard mechanism (SSM) for developing countries, the chair said "notwithstanding the linkages that have been made to market access, how could technical discussions progress on issues related to an SSM."

Several members such as the EU, Brazil and several other countries had suggested that the negotiations in agriculture should aim for "incremental progress."

"Incorporating in your interventions your reflections on how this might be translated into practice would be helpful to our process," the chair said.

Ahead of the Chair's questions, China and India had circulated a two-page Job document on 21 June proposing a four-step approach for eliminating the aggregate measurement of support (AMS) or the most trade-distorting domestic support in developed countries and some developing countries that had taken commitments in the previous Uruguay Round.

China and India floated their proposal for eliminating the most trade-distorting domestic support or the Amber Box programs that are primarily provided by developed countries and a few developing countries.

The two developing countries said "most of the developing Members cannot provide product-specific Amber Box support exceeding de minimis limit."

"On the other hand, developed Members and some developing Members are not constrained by the de minimis limit," which has provided "significant flexibilities" to developed and some developing countries.

The Amber Box support programs of developed countries, which would amount to "significant flexibilities", distorted "production and trade through the following: providing significantly high amount of subsidies compared to the value of production of the products concerned; concentrating the subsidies on a few products; and shifting the products in which the subsidies are concentrated ."

Therefore, China and India argued that "any meaningful attempt at reforms in agriculture subsidies must address the asymmetry between the developed Members on the one hand and most of the developing Members on the other hand in their respective entitlements to AMS beyond de minimis and the flexibility to provide high product-specific support."

China and India said "eliminating the AMS beyond de minimis entitlements of WTO Members must remain a long-term objective and a pre-requisite for consideration of other reforms in domestic support negotiations."

"In the interim," China and India "demanded a ceiling and reduction of AMS beyond de minimis as product- specific support would be the most important and incremental first step in the reform process for establishing a fair and market-oriented agricultural trading system."

To achieve this objective of reducing the distortions in agriculture trade and asymmetries in the Agreement on Agriculture, China and India proposed a four-step program of incremental steps for reducing the product-specific AMS beyond de minimis with the aim of eventual elimination.

The steps include:

Step 1: A base level of product-specific AMS beyond de minimis expressed as a percentage of the value of production of the product in question will be established for each of the agriculture products of the developed Members, based on the average of the product-specific AMS that remained beyond de minimis in the domestic support notifications of the most recent three years filed til l December 2018. Product-specific AMS which are below de minimis in base period, shall not exceed de minimis level for the products concerned, starting from the first day of 2019.

Step 2: Developed Members shall reduce the product-specific AMS beyond de minimis of the concerned agricultural products with more than 10% product-specific AMS by half of the difference between the base level and 10% in 202x, starting the reduction on the first day of 2019, with equal annual steps.

Step 3: Developed Members shall reduce the product-specific AMS beyond de minimis of the concerned agricultural product with more than 10% product-specific AMS to 10% on the first day of 202y, with equal annual steps.

Step 4: Developed Members shall reduce the product-specific AMS beyond de minimis of the concerned agricultural product with more than 5% product-specific AMS to 5% on the first day of 202z, with equal annual steps.

For developing Members with product-specific AMS beyond de minimis of the concerned agricultural products, discipline should be established by WTO Members with special and differential treatment. Each WTO Member with AMS entitlements beyond de minimis shall annually notify the Committee on Agriculture the product-specific AMS beyond de minimis and the value of production of the concerned agricultural product in sufficient detail to monitor the compliance with its obligations on product-specific AMS.

After making progress through these four steps members can agree to a work program for starting negotiations on further disciplines on domestic support, China and India said.

It remains to be seen whether the US and the EU will allow the proposal for interim steps on reducing product- specific support which is highly unlikely in the current context in which US President Donald Trump wants to pull out his country from the WTO.

[While the report that President Trump wants to pull out of the WTO has been called "highly exaggerated" by US Treasury Secretary Mnuchin, the US website Axios has reported on a "draft" being prepared for the Trump administration for Congress to grant authority to the President, among others, on ignoring WTO rulings, WTO-GATT provisions on bound tariffs and the Most-Favoured-Nation principle (which predates the GATT by nearly a century), and enable the President to impose reciprocal tariffs. Beyond remarking that the draft published by Axios is just a draft, and has not even been considered by the principals, there has been no denial by the White House of the existence of the draft. SUNS]