Azevedo’s new efforts on agri-subsidies to conclude Doha Round

In a bid to achieve agreement at the Doha Round trade talks on the divisive issue of domestic farm subsidies, WTO Director-General Roberto Azevedo has reportedly floated a proposal in this area that departs markedly from the reform framework thrashed out in negotiations over the years.

by D. Ravi Kanth and Chakravarthi Raghavan

GENEVA: The World Trade Organization Director-General (DG), Roberto Azevedo, in his current drive to conclude the Doha Development Round at the WTO’s Nairobi Ministerial Conference in December, appears to have floated a concept on domestic agriculture support which upends all the collective efforts hitherto on further reforms in agriculture mandated by the Agreement on Agriculture of the Marrakesh treaty of 1994.

Azevedo discussed with the trade envoys of seven major developed and developing countries on 11 June a new concept entailing common reduction commitments on domestic support, as opposed to the tiered formula cuts under the 2008 revised draft modalities on agriculture, sources familiar with the meeting told the South-North Development Monitor (SUNS).

On 10 June, Azevedo had asserted at the Geneva Press Club that he was “working with [a] scenario where we are going to come to a conclusion on what needs to be done to finalize the Doha [Development Agenda trade negotiations]”.

At his 11 June meeting with the seven trade envoys, Azevedo reportedly unveiled the scenario he had in mind on the domestic support pillar of the agriculture negotiations.

The seven envoys who took part in the discussion included Ambassador Michael Punke of the United States, Ambassador Angelos Pangratis of the European Union, Ambassador Yu Jianhua of China, Ambassador Anjali Prasad of India, Ambassador Hamish McCormick of Australia, and Ambassador Yoichi Otabe of Japan.

Also present at the meeting were the chair of the WTO General Council Ambassador Fernando de Mateo of Mexico, the chair of the Doha Round agriculture negotiations Ambassador John Adank of New Zealand, and the chair of the Doha Round market access negotiations in industrial goods Ambassador Remigi Winzap of Switzerland.

Unravelling mandates

The DG’s approach towards a “common” framework in which all the seven countries would undertake almost the same commitments regardless of their current and historical subsidy outlays and commitments, particularly the trade-distorting domestic support payments, would be tantamount to unravelling all the agreed Doha Round mandates such as the Doha Ministerial Declaration of 2001, the July 2004 framework agreement, and the 2005 Hong Kong Ministerial Declaration.

These three mandates were adequately reflected in the unsettled 2008 revised draft modalities (Rev. 4 text) which  clearly  showed the landing zones.

Azevedo, when he was the trade envoy of Brazil, had said in 2011: “The December 2008 draft modalities are the basis for negotiations and represent the endgame in terms of the landing zones of ambition. Any marginal adjustments in the level of ambition of those texts may be assessed only in the context of the overall balance of trade-offs, bearing in mind that agriculture is the engine of the Round...

“The draft modalities embody a delicate balance achieved after 10 years of negotiations. This equilibrium cannot be ignored or upset, or we will need readjustments of the entire package with horizontal repercussions. Such adjustments cannot entail additional unilateral concessions from developing countries.”

At the Geneva Press Club on 10 June, Azevedo said that “I don’t feel the sense that we are coming to an agreement, even conceptually.”

Clearly, this statement from the DG is factually misleading. The architecture for domestic support reduction commitments had evolved after the collapse of the fourth WTO Ministerial Conference in Cancun in 2003.

On the eve of that meeting, when the US and the EU sought to reach a modus vivendi among themselves that they wanted to force on the others, a developing-country farm coalition came into being – the G20, led by Brazil, India, China and South Africa among others – and this group stood together at Cancun in opposition to the US-EU front on agriculture.

The 2004 July framework, evolved at the WTO General Council after the spectacular collapse of the Cancun conference, provided the foundational architecture for the domestic support reduction commitments.

The framework says, “… The Doha Ministerial Declaration calls for ‘substantial reductions in trade-distorting domestic support.’ With a view to achieving these substantial reductions, the negotiations in this pillar will ensure the following:

l Special and differential treatment remains an integral component of domestic support. Modalities to be developed will include longer implementation periods and lower reduction coefficients for all types of trade-distorting domestic support and continued access to the provisions under Article 6.2 [of the Agreement on Agriculture].

l There will be a strong element of harmonization in the reductions made by developed Members. Specifically, higher levels of permitted trade-distorting domestic support will be subject to deeper cuts.

l Each such Member will make a substantial reduction in the overall level of its trade-distorting support from bound levels.

l As well as this overall commitment, Final Bound Total AMS and permitted de minimis levels will be subject to substantial reductions and, in the case of the Blue Box, will be capped as specified in paragraph 15 in order to ensure results that are coherent with the long-term reform objective. Any clarification or development of rules and conditions to govern trade-distorting support will take this into account….

“The overall base level of all trade-distorting domestic support, as measured by the Final Bound Total AMS plus permitted de minimis level and the level agreed in paragraph 8 below for Blue Box payments, will be reduced according to a tiered formula. Under this formula, Members having higher levels of trade-distorting domestic support will make greater overall reductions in order to achieve a harmonizing result. As the first instalment of the overall cut, in the first year and throughout the implementation period, the sum of all trade-distorting support will not exceed 80 per cent of the sum of Final Bound Total AMS plus permitted de minimis plus the Blue Box at the level determined in paragraph 15.

“The following parameters will guide the further negotiation of this tiered formula:

l  This commitment will apply as a minimum overall commitment. It will not be applied as a ceiling on reductions of overall trade-distorting domestic support, should the separate and complementary formulae to be developed for Total AMS, de minimis and Blue Box payments imply, when taken together, a deeper cut in overall trade-distorting domestic support for an individual Member.

l  The base for measuring the Blue Box component will be the higher of existing Blue Box payments during a recent representative period to be agreed and the cap established in paragraph 15 below….”

The 2005 Hong Kong Ministerial Declaration went a step further by declaring: “On domestic support, there will be three bands for reductions in Final Bound Total AMS and in the overall cut in trade-distorting domestic support, with higher linear cuts in higher bands. In both cases, the Member with the highest level of permitted support will be in the top band, the two Members with the second and third highest levels of support will be in the middle band and all other Members, including all developing country Members, will be in the bottom band. In addition, developed country Members in the lower bands with high relative levels of Final Bound Total AMS will make an additional effort in AMS reduction. We also note that there has been some convergence concerning the reductions in Final Bound Total AMS, the overall cut in trade-distorting domestic support and in both product-specific and non product-specific de minimis limits. Disciplines will be developed to achieve effective cuts in trade-distorting domestic support consistent with the Framework. The overall reduction in trade-distorting domestic support will still need to be made even if the sum of the reductions in Final Bound Total AMS, de minimis and Blue Box payments would otherwise be less than that overall reduction. Developing country Members with no AMS commitments will be exempt from reductions in de minimis and the overall cut in trade-distorting domestic support. Green Box criteria will be reviewed in line with paragraph 16 of the Framework, inter alia, to ensure that programmes of developing country Members that cause not more than minimal trade distortion are effectively covered.”

The unsettled 2008 revised draft modalities gave shape to these two foundational structures of the Doha Round negotiations in the agriculture domestic support reduction commitments. The author of the revised draft modalities, Ambassador Crawford Falconer of New Zealand, had provided figures for reduction commitments even though “certain things are manifestly not yet agreed.”

But it is known to Azevedo, who took part in each and every small and big meeting in the run-up to the 2008 revised draft modalities, that reduction commitments are clearly laid out in those revised modalities, and many of them including the commitments in de minimis were well stabilized.

But in his current zeal to satisfy the demands of one major developed country (the US) which today has specific problems with reduction commitments in domestic support because of its farm legislation, the DG is turning all the previous mandates upside down to propose a common reduction commitment even though the developing countries are not required to undertake such a commitment. Effectively, such a prescriptive approach goes diametrically opposite to the last 14 years of negotiations, which he wants to conclude by hook or by crook.

“Outrageous proposal”

The developing countries, at the consultations, rejected the latest Azevedo concept as it changed the entire architecture of the Doha Round mandates, including the unsettled Rev.4 modalities with specific reduction commitments and flexibilities.

“This is an outrageous proposal which will never fly,” said a former trade envoy of an industrialized country who is familiar with the negotiations that resulted in preparing the 2008 revised draft modalities. “It is amateurish on the part of the DG to suggest such a proposal.”

The developing countries, the envoy said, “will not accept such an approach because it not only changes the balance but ties them to an unacceptable framework.”

China and India understandably refused, at the 11 June consultations, to accept the DG’s approach, which stood the special and differential flexibilities and the less-than-full-reciprocity principles on their head.

Significantly, Brazil, which is the founder of the G20 developing-country farm coalition, seemed to be ready to work with any approach that brings progress in the negotiations regardless of what was decided in the past.

During a meeting of G20 heads of delegation a few days before the DG’s consultations, Brazil merely raised questions on what members were expecting in the domestic support, market access, and export competition pillars of the agriculture negotiations. Several member countries of the G20, particularly Venezuela, expressed sharp concern that instead of preparing position papers on domestic support, there was a silence on this issue, said a trade envoy who was present at the meeting.

China maintained at the G20 meeting that under no circumstances would it agree to any commitment to reduce its de minimis support from 8.5% as set out in its accession commitments. Peru asked probing questions at the meeting on what was being done in the name of “recalibration”.

In a nutshell, the coming few days and weeks are going to test the resolve of the developing countries, particularly China and India, in the face of Azevedo’s blatant attempts to create an “iniquitous” structure of agriculture commitments just to satisfy the interests of major developed countries, particularly the United States. (SUNS8041)                  

Third World Economics, Issue No. 595, 16-30 Jun 2015, pp2-4