India assails Brazil, EU over export competition proposal

by D. Ravi Kanth

GENEVA: India took Brazil, the European Union and other sponsors to task at the WTO on 18 November over their controversial proposal to placate the United States in relation to the difficulties the latter faces in implementing the 2008 revised draft modalities on the export competition pillar for agriculture products, several trade envoys told the South-North Development Monitor (SUNS).

At an informal open-ended meeting of the Doha agriculture negotiating body, Brazil and the EU, hitherto rivals in the agriculture negotiations but now solid partners, presented their proposal which was specially carved out to enable the US not to undertake any fresh commitments, according to trade envoys familiar with the meeting.

The proposal called for major changes in the 2008 revised draft modalities (Rev.4) on export subsidies, export credits, food aid and state trading enterprises. The then chair of the Doha agriculture negotiations, Ambassador Crawford Falconer of New Zealand, had suggested the disciplines in these four areas of the export competition pillar after marathon negotiations in 2006 and December 2008.

Significantly, the Rev.4 disciplines in the export competition pillar were based on balance with reduction commitments in the other two pillars of the agriculture negotiations – market access and domestic support.

Barring the US, which opposed the Falconer text, a large majority of countries under the leadership of Brazil, which led the G-20 group of developing countries, had accepted the provisions as the final landing zone for outcomes in agriculture.

Brazil’s then trade envoy Ambassador Roberto Azevedo, who is now the WTO’s Director-General, had said in 2011 that the Rev.4 text is the basis for concluding the Doha agriculture package: “The December 2008 draft modalities are the basis for negotiations and represent the end-game 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.”

But, in an inexplicable move, Brazil has now chosen to join ranks with the EU to craft a proposal that would bring about “major adjustments” in the export competition pillar without discussing it with its key allies in the G-20 group, a trade envoy told SUNS. “Until the joint proposal was shared privately by some members, we did not know what it contained,” the envoy said.

The Brazil-EU joint proposal, which was co-sponsored by Argentina, New Zealand, Paraguay, Peru and Uruguay, suggested some Rev.4-plus commitments such as reducing the implementation period to eliminate export subsidies to three years. More pointedly, however, it contained wholesale changes to the Rev.4 provisions on export credits and food aid to ensure that the US can implement them without any change to its farm bill enacted last year, according to agriculture negotiators.

Significantly, Brazil maintained that it is “politically impossible” to accept the proposal on a special safeguard mechanism (SSM) tabled by the G-33 group of countries led by Indonesia on 13 November. At the same time, it wanted other countries to consider a proposal on export competition that contained many imbalances, said an Asian agricultural negotiator.

Concerns on joint proposal

On 18 November, Brazil, the EU and other co-sponsors introduced the proposal at the informal meeting of the Doha agriculture negotiating body. The EU ruled out any debate on the provisions because of the paucity of time. “We don’t want to enter into debate on the Rev.4-plus provisions on export subsidies,” the EU’s trade envoy Ambassador Marc Vanheukelen told the participants, according to trade envoys present at the meeting.

In response to the proposal, several countries expressed technical concerns. Mexico voiced surprise at the coming together of Brazil and the EU to table a joint proposal on export competition. “I don’t know whether it is positive or negative,” a Mexican official told the meeting, arguing that his capital is currently examining the changes proposed by Brazil and the EU.

India raised detailed technical questions on the joint proposal and sought replies in a written format. India largely targeted the proposed disciplines on export credits and food aid in the joint proposal. India’s questions included:

i)     The proponents have differing repayment periods for export credits. Brazil, for example, has a repayment period of six months while New Zealand provides for 90 days and less a year. Peru has 180 days while the EU is discouraging its member states from providing export credits for more than short durations. Against this backdrop, why are the proponents seeking to dilute the provisions for export credits in Rev.4?

ii)    The proponents must clarify as to what and whose concerns they are trying to address.

iii)   The proposal on export credits provides flexibility to adopt OECD disciplines on the interest rate premium. India is not a member of the OECD and can’t reference an OECD discipline in a WTO dispute. India said it understands the OECD discipline was agreed in the US-Brazil cotton dispute. Therefore, are the proponents trying to multilateralize a bilateral agreement reached between two members outside the WTO?

iv)   The joint proposal by Brazil and its co-sponsors has called for a new monitoring mechanism for overseeing the implementation of the disciplines in the export competition pillar. The provisions in the monitoring mechanism go well beyond the Rev.4 disciplines. On the one hand, the proponents are calling for weaker disciplines on export credits and food aid and, on the other, they are proposing stronger monitoring and transparency requirements which are extremely burdensome to WTO members. Can the proponents provide the underlying rationale for these provisions?

v)    As regards food aid, the EU provides food aid in the form of cash contributions to international agencies and no in-kind food aid outside emergencies. New Zealand provides food aid but does not permit re-export. When proponents do not have an issue on monetization, then why have they proposed a safe box where in-kind monetization is made possible?

vi)   Are the proponents not concerned that this monetization will lead to trade distortions and that there is no check on the prices at which the food aid is sold?

vii)  India said the provisions in the joint proposal on food aid are far more trade-distorting, since there are disciplines on governments but no checks on private actors.

viii)  India said that it is not a supporter of recalibration. However, if there is recalibration, then it must be across all the pillars, i.e., market access, domestic support and export competition.

ix)   On disciplines for state trading enterprises, India sought to know why a longer time period is provided to continue agriculture state trading enterprise monopolies.

India said it cannot accept a discipline where there is selective lowering of the ambition and in turn raising the ambition elsewhere. India urged the proponents to provide written responses on the issues it raised.

India’s technical questions drew an unusual degree of opposition and ire from Brazil’s trade envoy Ambassador Marcos Galvao. The Brazilian envoy told the Indian agriculture official that “members must not take high moral ground by raising the technical issues,” according to participants familiar with the meeting.

The Indian official said he is not taking the high moral ground but asked technical questions as is the practice in the WTO trade negotiations, according to participants present at the meeting.

Further, India said it is not showing disrespect to members but merely seeking clarifications on a proposal that is aimed at helping the US, according to the participants.

In short, Brazil has pushed itself into an embarrassing position by aligning with the EU and by singlehandedly dismissing the G-33 proposal on the SSM, which was hailed by the US at the last informal meeting. Brazil’s joint paper on export competition has destroyed its credibility permanently, said a trade envoy who asked not to be quoted. (SUNS8139)                                         

Third World Economics, Issue No. 603, 16-31 October 2015, pp6-7