Dumping the sequencing or agri-reform process in the Doha Round?

Is the WTO Director-General seeking to shift the focus of the Doha Round talks away from agriculture, specifically the trade-distorting farm subsidies doled out by the US?

by Chakravarthi Raghavan

GENEVA: WTO Director-General Roberto Azevedo appears to have attempted on 5 May to tweak the Doha Round trade talks by dumping the “sequencing” framework, thus enabling the US to avoid answering tough questions on domestic support in agriculture for concluding the negotiations and ensuring a successful WTO Ministerial Conference in Nairobi this December.

Since the launch of the Uruguay Round negotiations in 1986 in Punta del Este, and their conclusion in 1994 in Marrakesh – which entailed, among others, placing the agriculture sector and trade in agricultural products within the ambit of the multilateral trading system and its disciplines – reducing agricultural trade barriers at the border and cutting domestic support in agriculture have been seen as two sides of the same coin, as with GATT disciplines in the industrial sector.

At Marrakesh, in return for this commitment to undertake reforms in agricultural trade, albeit over a longer time frame, developing countries agreed to more obligations and commitments in the areas of trade in industrial goods, services and global protection for intellectual property.

It was in pursuance of the Marrakesh commitments to continue with the reform process in agriculture after the initial set of reforms and disciplines (covering reduction of domestic support, increasing market access by cutting tariffs, and gradual elimination of export subsidies) that the Doha Round was launched with agriculture as the major focus, but also adding non-agricultural market access (NAMA) and further services liberalization.

These last two areas were included so as to provide the major developed countries, in particular the US, the EU and Japan, with domestic political cover: in return for undertaking further reforms in cutting agricultural domestic support and border tariffs, they could point to trade-offs in the form of gains in trade in NAMA and services.

Hence from the beginning, agriculture was seen as the yardstick for any concessions by developing countries in NAMA or services, with the entire exercise carried out as a single undertaking.

As a corollary, since the launch of the Doha Round in 2001, in so far as the agriculture sector is concerned, reduction of protection on the three pillars of domestic support, market access and export subsidies was viewed as one, rather than (as has happened now) maintaining or increasing protection and domestic support by developed countries through box-shifting.

These two main elements lie behind the “sequencing” followed since 2001 in the talks.

Reversal of course

At Doha the US was fully behind further reforms in agricultural trade, in particular reducing barriers to trade in Europe and Japan, by aiming at both border controls and domestic support. However, it began reversing course soon after, now reaching a stage where it is no longer willing to reduce its own domestic support or even talk about it, given the nature of its farm law and the power of its farm lobby.

The suggestion of Director-General Azevedo at the WTO General Council on 5 May for moving away from the sequencing framework and focusing on market access issues in agriculture, NAMA and services, thus dumping any talk of cutting domestic support in agriculture, has raised doubts whether all this is not a manoeuvre to enable the US to avoid answering tough questions on this, several trade envoys told the South-North Development Monitor (SUNS) after the General Council meeting.

Hitherto, in the “sequencing”-based negotiations, agriculture issues, especially  issues of  trade-distorting  domestic support, got primacy over other  areas  of  the  Doha  Round talks in drawing up a post-Bali work programme.

At the General Council meeting, Azevedo said [in his capacity as Chair of the Trade Negotiations Committee (TNC)] “we have to be aware of the damaging consequences that any kind of de facto sequencing may have”. He acknowledged that “there are ‘gateway’ issues that we need to tackle very quickly.”

Earlier, at the formal TNC meeting on 27 April, while he had promoted a “recalibration” strategy for the post-Bali work programme, the large majority of developing countries negatived such an approach. They insisted that agriculture is the locomotive of the Doha Round and that the revised modalities texts evolved over years of patient talks should provide the basis for further progress. (See the following article for a report on the 27 April TNC meeting.)

In his remarks at the General Council on 5 May, without suggesting what new approach would replace the sequencing strategy, the Director-General said the work programme must fulfil three criteria.

First, “it must be substantive and meaningful,” implying that it ought to cover all areas in a balanced manner. Second, “it must provide clear guidance on how to conclude the [Doha Round] negotiations”. Third, “it must be a springboard to a successful [Ministerial Conference in Nairobi],” he maintained.

To pave the way for accomplishing “an overall balance” in the “substantive” work programme, Azevedo is to begin a discussion “on the horizontal trade-offs, including the wider Room W consultations [where all members can take part in the proceedings].”

“And the importance of this horizontal process underlines how vital it is that we make substantive movement in all areas to facilitate these trade-offs,” Azevedo emphasized.

As part of the trade-offs, market access in agriculture, industrial goods (i.e., NAMA), services and rules will be explored ahead of domestic support. Since there is no clarity yet on what a major industrialized country (the US) is ready to do at this juncture in the domestic support pillar of agriculture, only market access and rules will be taken up, said a trade envoy who took part in the General Council meeting.

Azevedo said “development and LDC [least developed country] issues must continue to remain central to our work”, while emphasizing the operationalization of the LDC services waiver in which some 25 members had indicated the preferential treatment they will provide for LDC services sectors and modes of supply. So far, only one member has followed through and submitted a notification, the Director-General added.

But on other LDC issues such as duty-free and quota-free market access, simplification of preferential rules of origin, and cotton, there is still no clarity as to whether they will be fully addressed in the work programme, said a trade envoy from an African LDC.

Agriculture agenda

Until now, a large number of developing countries, particularly Brazil on behalf of the G20 developing-country farm coalition, have consistently maintained that agriculture is the engine of the Doha Round negotiations.

Consequently, the developing countries and LDCs, particularly the Cotton-4 countries in West Africa (Benin, Burkina Faso, Mali and Chad), have demanded that trade-distorting domestic support and export subsidies and export credits need to be negotiated along with other issues in the Doha agriculture package as part of the sequencing strategy.

As part of this strategy, members would approach market access for industrial goods, services, rules, environmental goods and developmental issues concerning special and differential treatment after the difficult issues in the agriculture package, especially the growing trade-distorting domestic subsidies for rich farmers in industrialized countries, are sufficiently addressed.

Although the sequencing framework was not stated in the mandate, it was generally accepted as the framework to conclude the Doha Round negotiations.

Azevedo, when he was Brazil’s trade envoy, had aggressively promoted the sequencing strategy, saying that agriculture is the locomotive for the Doha Round negotiations, noted a South American trade envoy familiar with the negotiations.

But, in his current role as the Chair of the TNC, Azevedo informed members at the 5 May General Council meeting that “many delegations noted that we have to be aware of the damaging consequences that any kind of de facto sequencing may have.”

He said “the key potential trade-offs between the different areas are not clearly on the table as yet.” “This is why I announced at the TNC that I would increasingly look at ways to facilitate a discussion on the horizontal trade-offs, including though the wider Room W process.”

The Director-General, however, did not explain what the “damaging consequences” are, which member or members have called for abandoning the sequencing framework, and why those damaging consequences were not noticed when the Trade Facilitation Agreement was negotiated in 2013.

“For all we know, when he was making a pitch for the Trade Facilitation Agreement in 2013 and knowing fully well that it is a market access agreement, he did not get into any discussion on horizontal trade-offs,” said another envoy.

During the Trade Facilitation Agreement negotiations in 2013, the Director-General held meetings only on the trade facilitation issue without linking it to other issues in the Bali package such as agriculture, public stockholding programmes for food security and developmental demands, particularly those raised by the LDCs.

“Effectively, he held separate meetings on these issues without bringing any horizontal trade-offs,” the envoy said.

Domestic support difficulties

Over the last two months, the Director-General has held consultations with a former US chief agriculture negotiator, Joseph Glauber, to figure out what Washington can offer in the face of the US farm bill adopted last year.

It was found that because of the new farm bill, which would be in place for the next five years, the US will exceed the cap of $14.5 billion as negotiated at the time of the 2008 revised draft agriculture modalities.

Azevedo held a meeting with trade envoys from six countries – the US, the European Union, China, India, Brazil and Australia – at the Australian mission in April to discuss the difficult issues in domestic support.

During the discussion, there were reportedly sharp exchanges on the de minimis provision for China, and Article 6.2 of the WTO’s Agreement on Agriculture.

The US maintained that it would take a commensurate commitment in domestic support only after China agrees to reduce its de minimis and further tightening of Article 6.2 – a stand that is not consistent with the previous Doha Round mandates such as the Doha Ministerial Declaration of 2001, the July 2004 framework agreement, the 2005 Hong Kong Ministerial Declaration and the 2008 revised draft modalities, said sources in trade missions familiar with the meeting.

One trade envoy said that the Director-General has seen the writing on the wall that he cannot address the difficult issues in domestic support at this juncture.

According to a developing-country negotiator, the US wants the Director-General to remain silent on the issue of domestic support commitments until the Trade Promotion Authority bill is passed in the US Congress. The negotiator said any discussion on domestic support reduction commitments at this stage could vitiate the climate in Washington where the administration is facing hurdles in getting support from its Democratic party members in Congress for passing the TPA bill.

“Hence the change for moving away from the sequencing strategy based on agriculture first and the rest of the Doha agenda later,” the negotiator said. (SUNS8017)                       

This article was written with inputs from D. Ravi Kanth.

Third World Economics, Issue No. 592/593, 1-31 May 2015, pp2-4