WTO members discuss domestic support, public stockholding in agriculture

On 28 January, the WTO negotiating body for agriculture entered into what were described as “concrete” talks on domestic support, and also convened its first dedicated session on the issue of public food stocks.

by Kanaga Raja

GENEVA: The first informal open-ended meeting of the WTO Agriculture Committee in Special Session for this year took up, amongst others, a new paper submitted by several members on domestic support, and also held a more general discussion on the market access pillar of the Doha Round agriculture negotiations.

On the afternoon of the same day, 28 January, the Special Session held its first dedicated session on the issue of public stockholding for food security purposes.

Domestic support paper

The discussion on domestic support was triggered by a paper presented by Canada on behalf of Australia, Canada, Chile, Colombia, Costa Rica, Guatemala, Malaysia, Pakistan, Paraguay, Thailand, Uruguay and Vietnam.

According to trade officials, the paper examines what six members – the United States, the European Union, Japan, China, India and Brazil – would have to do if the cuts on domestic support proposed under the Rev.4 draft agriculture modalities text of December 2008 are applied. It presents an analysis of current domestic support levels against some of the proposed disciplines of Rev.4.

The paper looks at the implications of the formula for reducing domestic support in the Rev.4 text in the context of the overall trade-distorting domestic support (OTDS) – the Amber Box (or AMS), the Blue Box and de minimis – and concludes that of the six members examined, only the US would have to cut its support from its latest notified amounts, trade officials added.

The paper notes that an important new discipline on domestic support proposed in Rev.4 is on OTDS, to impose an absolute limit on the sum of all forms of trade-distorting domestic support. It compares some members’ proposed bound OTDS under Rev.4 to the sum of their current total AMS, Blue Box support and de minimis support in the most recent year for which data is available.

For the US, the proposed bound OTDS under Rev.4 will be $14.5 billion, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is $12.1 billion, and its OTDS overhang is thus $2.4 billion.

For the EU, the proposed bound OTDS under Rev.4 will be 24.2 billion, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is €11.0 billion, and its OTDS overhang is €13.2 billion.

For China, the proposed bound OTDS under Rev.4 will be 584.4 billion yuan, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is 96.0 billion yuan, and its OTDS overhang is 488.4 billion yuan.

For India, the proposed bound OTDS under Rev.4 will be 1,151 billion rupees, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is 104.0 billion rupees, and its OTDS overhang is 1,047.0 billion rupees.

For Brazil, the proposed bound OTDS under Rev.4 will be $8.8 billion, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is $3.0 billion, and its OTDS overhang is $5.8 billion.

And for Japan, the proposed bound OTDS under Rev.4 will be 1,371.0 billion yen, while its current total AMS, Blue Box support and de minimis support in the most recent year for which data is available is 984.0 billion yen, and its OTDS overhang is 387.0 billion yen.

According to the paper, with the exception of the US, the so-called “binding overhang” is very large. This means that from a policy perspective these members have enough space to comply with the proposed disciplines on OTDS in Rev.4.

The paper further said that Rev.4 would require all developed countries and many developing countries with Final Bound AMS to undertake cuts to de minimis.

It found that with the exception of the US, the proposed reductions in de minimis would not have immediate impacts on reported levels of Current Total AMS or members’ ability to comply with reduction commitments proposed in Rev.4.

In the case of the US, a de minimis reduction from 5% to 2.5% of the value of production would result in a $4.377 billion increase in Current Total AMS.

Rev.4 also includes proposed reductions to Final Bound Total AMS according to a tiered harmonizing formula.

The paper compared members’ proposed Final Bound AMS under Rev.4 to their Current Total AMS in the most recent year for which data is available.

For the EU, Brazil and Japan, the binding overhang is very large, but for the US, the binding overhang is proportionately much smaller.

According to the paper, if the additional $4.377 billion in AMS that would result from the de minimis cut is carried over, the US’ Current Total AMS would rise to $11.240 billion, which exceeds the proposed Rev.4 Final Bound Total AMS by a considerable margin ($3.599 billion above the new limit).

According to trade officials, Canada, Australia and Paraguay said that they hope the US will be able to make the adjustment, adding that they recognize that there will be a “price” to pay in return, in the form of some other concessions in the negotiations.

The US said the figures show that the 2008 draft modalities text is unbalanced and that domestic support in developing countries distorts trade as much as it does in developed countries. It further said that it is willing to “wade into” domestic support but only if that reflects current realities.

There is a need to return to the original objective of substantial reforms in all three pillars of the agriculture negotiations, but what is on the table in Rev.4 falls short of that, the US said.

According to trade officials, the US also said that its Farm Bill conforms with what the country is currently obliged to do and is not an impediment to reform.

Argentina said that the additional flexibilities for the US are already included in the 2008 draft modalities text.

According to trade officials, India said that it had notified its support in US dollars and thus the figures that are mentioned in the paper for India should be reflected in the same currency. It is good to see that some members would like to put their weight behind the Rev.4 text, it added.

There is also a differentiation between those that have an AMS limit and some countries only having de minimis. If members are trying to create a level playing field, then all bound AMS should be abolished, India said.

There are other imbalances that need to be tackled but these figures are a good starting point, said India.

China noted that the figures are from different members with different levels of development. Some use domestic support for gaining export markets or for commercial purposes whereas developing countries use it to help resource-poor farmers, it said.

Brazil said that some countries have reformed their agriculture over the past 20 years and will not have to adjust under a Doha Round agreement, while others have gone in the “wrong direction”.

According to trade officials, the Chair of the Special Session of the Agriculture Committee, Ambassador John Adank of New Zealand, said that he was encouraged by the new paper and subsequent discussion that explored concrete situations rather than focusing on generalities.

“This is really new territory for us to venture into, but it’s necessary that we start this exploration,” he said. “It does remind us that we have to get very, very concrete about both what our individual situations are in terms of our policy settings, and what that actually means to what we can contribute to the discussion.”

Market access

In the discussion on market access at the Special Session, members remained divided on the two proposals on the table, and on how to deal with market access issues in general.

The two proposals are from the G-33 grouping and deal with Special Products (SP) and the Special Safeguard Mechanism (SSM).

Indonesia, on behalf of the G-33, stressed that developing countries need the proposed protection for food and livelihood security and rural development.

Others expressed concern that the proposals in this form would undermine the agreed objective of substantial improvements in market access, and the transparency and predictability that the main draft formula provides.

Some argued that these provisions should only be applied to a more limited number of products, that allowing tariffs to go above present ceilings would reduce market access opportunities, and that the SSM should only be available for products that have steep tariff cuts.

According to trade officials, those presenting these views included Thailand, Paraguay, Colombia, Canada, Brazil, Australia, Chile, New Zealand, Uruguay, the US and Costa Rica.

Those that supported the G-33 included the Dominican Republic, Ecuador, Cuba, Chinese Taipei and Korea.

With respect to market access in general, trade officials said that some countries said the formula in the 2008 draft text meets the objectives of higher cuts on higher tariffs, transparency and predictability. But they also said that they are willing to consider alternatives.

A number of countries said that they would like to see what the simplified approach (suggested by the EU) would be.

Argentina suggested using offers and requests by individual members instead of a tariff-reduction formula. It said that this could be done in a way that would be transparent and predictable and without any secret deals, which would allay the concerns of some countries.

The Chair concluded that the discussion on domestic support was a useful start but the one on market access was basically generalities that members have made repeatedly, and he called for more concrete proposals.

The Chair said: “My really strong advice to you all as we leave this meeting is please get more concrete with each other, because if we stay in this sea of generalities we’re probably not going to get that far.”

He said that he will hold consultations and come back to the meetings of the full membership when appropriate.

Public stockholding

The first dedicated session on public stockholding for food security purposes was held on 28 January afternoon.

Under the General Council decision of 27 November 2014, negotiations on a permanent solution on the issue of public stockholding for food security purposes are to be held in the Committee on Agriculture in Special Session, in dedicated sessions and in an accelerated time frame, distinct from the agriculture negotiations under the Doha Development Agenda. Members are to engage constructively to negotiate and make all concerted efforts to agree and adopt a permanent solution by 31 December 2015.

According to trade officials, the only proposal on the table is the G-33’s paper from July 2014 (which reverts to the G-33’s 2012 version) which would move into the Green Box (and therefore allow without limit) the support given when governments purchase food at non-market prices for public stockholding purposes.

In presenting the document at the meeting, the G-33 reiterated that this is necessary for food security in developing countries.

According to trade officials, a number of countries voiced their concerns. Some said that disciplines would be needed to avoid “unintended consequences” such as the stocks’ release affecting export markets and hurting other countries’ food security.

Some also said that they could not accept a proposal that would put price support into the Green Box because this would alter the structure of the Agriculture Agreement’s provisions on domestic support.

According to trade officials, Pakistan and the US argued that the discussion should also look at food security more broadly and the range of policy options used in practice.

According to trade officials, countries that raised concerns about “unintended consequences”, distortion and changing the Green Box, or advocating a broader discussion of food security, included Australia, Pakistan, the US, Brazil, the EU, Japan, Paraguay, Argentina and Canada.

 According to trade officials, India said that the G-33 proposal has been on the table and was never rejected. The other side never engaged on it, it added.

In reference to some countries that had called for looking at the broader issue of food security as well, India said that there was no mandate for these meetings to discuss broader food security issues. The  mandate  is to find a permanent solution for public stockholding.

The US referred to its own paper from last year that looked at its own experiences in providing food security as well as policies for dealing with food security. According to trade officials, it said that members cannot create a loophole in disciplines especially when it undermines the disciplines. To do this without looking at other ways of achieving food security or dealing with distortion effects is not credible, it added.

It was disappointed that the G-33 had resubmitted a proposal that had already been rejected.

In response, India denied that the proposal had been rejected, said trade officials.

Those that supported the G-33 proposal included Morocco, Turkey, India and China.

The Chair said that the Bali interim decision had been adopted because members could not agree on the 2012 proposal. He urged members to discuss their concerns with each other. (SUNS7952)                                         

Third World Economics, Issue No. 585, 16-31 Jan 2015, pp7-9