TWN Info Service on WTO and Trade Issues (Jun13/01)
4 June 2013
Third World Network  

Agriculture: Chair reports on consultations on G-33 stockholding proposal
Published in SUNS #7593 dated 29 May 2013

Geneva, 28 May (Kanaga Raja) -- The chair of the agriculture negotiations at the World Trade Organisation (WTO), at an informal open-ended meeting of the Special Session of the Committee on Agriculture late last week, presented a detailed report on his recent series of consultations on the G-33 proposal on public stockholding for food security.
 
At the informal meeting on 23 May, the G-20 introduced a new submission on export competition. Amongst others, this proposes that developed country Members shall reschedule their export subsidy reduction commitments in their Schedule by the end of 2013 as follows: (a) budgetary outlay commitments shall be reduced by 50 per cent, and (b) export quantity commitments shall be reduced to the actual average of quantity levels in the 2003-2005 base period (see below).
 
In reporting on his consultations on the G-33 proposal, the Chair, Ambassador John Adank of New Zealand, said "it became increasingly clear that the proposal as it stands was not likely to obtain consensus in the time we have before Bali."
 
In order to explore other avenues, he noted, some other ideas were put forward such as a potential modification or clarification of any of the four variables that enter into the calculation of the market price support subject to the de minimis constraints. The four variables proposed by G-33 members are: de minimis level; external reference price; eligible production; and administered price.
 
"The discussions on all of these issues have been free and frank, and, at least when members have simply avoided going back over well-trodden ground, they have I believe also been constructive," said the Chair.
 
"But that should not be taken to suggest that we have happened upon any clear solutions at this stage, or that we are at serious risk of making a breakthrough - we clearly are still a long way from defining what might be the appropriate landing zone for this issue in Bali," he stressed.
 
The informal meeting was called by the Chair to update members on his recent consultations on the G-33 proposal, as well as to allow delegations an opportunity to exchange further views on this proposal or any other issues.
 
In his statement, Adank provided a detailed report on his consultations on the G-33 proposal. During April, the consultations were based directly on the proposal itself, drawing on the knowledge acquired from the technical sessions held earlier in the year that had been based around the factual information submitted by Members on their programmes in the public stockholding area.
 
According to the Chair, G-33 Members have continued to stress that their policy space has been eroding due to the price increases and hence a solution is required to help these countries to ensure the availability of food for their populations in need. It is asserted by them that there is no viable alternative solution to the public stockholding and hence some modification to the existing rules on market price support calculation would be required.
 
The arguments of other Members, Ambassador Adank added, have focused notably on "the systemic" impact of changing the current rules to such an extent outside of a wider negotiation, as well as potential trade-distorting consequences of any such change that would provide the degree of flexibility to move Amber Box support to Green Box envisaged in the proposal.
 
It has been asserted by these Members that given the very different situations of different developing Members, with most of them having no immediate risk of breaking their commitments, changing the existing rules would be both hasty and disproportionate to address the concerns raised, said the Chair.
 
Spelling out the four variables that were proposed by G-33 Members, the Chair further said that some potential additional constraints have also been suggested in the discussions, such as: (i) product specificity (i. e. limiting any new flexibility to certain staple products like wheat and rice); (ii) targeting; (iii) restricting or disciplining the disposal of stocks; (iv) capping the exemption; and (v) associating a transparency and surveillance mechanism.
 
In parallel, Members have also undertaken some technical discussions among themselves to deepen their knowledge of the inter-linkages between different variables.
 
"The discussions on all of these issues have been free and frank and, at least when members have simply avoided going back over well-trodden ground, they have I believe also been constructive. But that should not be taken to suggest that we have happened upon any clear solutions at this stage, or that we are at serious risk of making a breakthrough - we clearly are still a long way away from defining what might be the appropriate landing zone for this issue in Bali."
 
Ambassador Adank went on to elaborate that in order to further facilitate the search for convergence, his consultations in May had been based on four questions he had outlined at a Senior Officials' meeting on 30 April.
 
These were:
 
1. Are Members willing to consider that the Bali Declaration/decisions include recognition that, subject to the fundamental requirement of the Green Box relating to no or minimal trade or production distortion, the Green Box needs to be flexible enough to encompass a wide range of general services policies in developing countries along the lines indicated in the proposed paragraph (h) (which the G-33 proposal suggests be added to the Illustrative List of Green Box measures)?
 
[The proposed sub-paragraph (h) to the existing paragraph 2 of Annex 2 of the Agreement on Agriculture (AoA) states: "policies and services related to farmer settlement, land reform programmes, rural development and rural livelihood security in developing country Members, such as provision of infrastructural services, land rehabilitation, soil conservation and resource management, drought management and flood control, rural employment programmes, nutritional food security, issuance of property titles and settlement programmes, to promote rural development and poverty alleviation."]
 
2. Taking into account what the Ministerial Conference has said in the past
(including in the Implementation Decision of 2001), can we use Bali to send a convergent political message that recognises the role played by public stockholding and similar policies in some developing countries?
 
3. Are Members prepared in the lead up to Bali to agree on any amendment or interpretation of existing WTO AoA disciplines that might provide greater flexibility in this area of public stockholding than is currently the case? If so, what is this amendment or interpretation? If not, are Members prepared to consider further work on these issues in the post-Bali period, and how would this work be framed?
 
4. Are Members willing to consider a mechanism or process whereby any Member with specific concerns that their public stockholding policies aimed at addressing food security objectives were at risk of breaching their WTO commitments could bring those concerns to the attention of Members and seek additional flexibility on an interim basis, pending any broader agreement to modify the disciplines in general?
 
"These questions have served to encourage active and engaged debate during which I am pleased to see that at least some elements of potential convergence have begun to surface. These are, however, so far limited to Questions 1 and 2," the Chair reported.
 
On Question 1, the Chair said, all participants expressed their willingness to work on declaration/communique language for Bali that would recognise in general terms that the policies and programmes mentioned in the first part of the G-33 proposal could be considered to fall within the scope of "General Services" of Paragraph 2 of Annex 2 to the AoA.
 
Several Members considered that the declaration should make clear that the chapeau contained in Paragraph 1 of Annex 2 would fully apply to such policies and programmes. Some Members also asked for some further discussion to better understand the policy measures encompassed in the G-33 proposal with a view to fine-tuning the list to be included in the declaration.
 
On Question 2, on the political message to be delivered in Bali recognising the role played by public stockholding in developing countries, the Chair recalled that there is a precedent contained in paragraph 2.1 of the Doha Decision on implementation-related issues and concerns (WT/MIN(01)/17) that urges Members to "exercise restraint in challenging measures notified under the Green Box by developing countries to promote rural development and adequately address food security concerns". This might provide a useful reference for further elaboration as part of the political messaging.
 
As in the case of Question 1, all Members replied positively at a general level. Some Members considered that the message should bring some value-added in comparison with the 2001 Decision. Other Members considered that there was a need to ensure that any message was appropriately balanced with an acknowledgment of the wider dimensions of food security that spanned all pillars of the agricultural negotiation, including the need to encourage further reform of agricultural policies, as well as the need to ensure greater transparency about existing programmes and measures.
 
"No consensus was reached about any specifics of these potential elements but a discussion has been opened and my hope is that as members reflect further on the perspectives they respectively bring to the table that it should be possible to arrive at some broader convergence on this political messaging issue," said Ambassador Adank.
 
The Chair however said that while there were these general elements of convergence arising on Questions 1 and 2, the same cannot yet be said about Questions 3 and 4. "On the positive note, however - there has been a clearer articulation of everyone's positions. We now know a lot more about where each of us stand and this in itself is an important prerequisite to making any progress."
 
Regarding Question 3, the Chair underlined that Members could be broadly divided into three groups: (i) Members who urge a general systemic solution to the issue for Bali, through an amendment or interpretation of the existing rules; (ii) Members who are not convinced that an amendment or interpretation is either possible or desirable by Bali, but also remain open to a discussion about possibilities in this area in the post-Bali period; and (iii) those who have a more nuanced position, calling for some kind of half-way house involving both a temporary remedy and ongoing work post-Bali.
 
The main arguments put forward against an amendment or interpretation have been: (i) differences in the situations the proponents find themselves in and therefore the unfeasibility of the "one-solution-fits-all" approach; and (ii) the complexity of the issue which many see as only resolvable as part of a much broader agricultural negotiation, which it is suggested cannot happen (in) the short time left before Bali.
 
Accordingly, the Chair said, "I think it's fair to say that the views on the response to Question 3 span a range of different options, none of which is the subject of any consensus at this stage."
 
In the discussions, the Chair said that he had suggested that irrespective of where we get to on the issue of "generalised solutions" of the sort envisaged under Question 3 that it might also be useful for Members to consider and reflect on a mechanism that could be used on a case-by-case basis, as envisaged under Question 4.
 
Members have been willing to engage, albeit tentatively to date, on this aspect which might be seen as offering an additional way to respond to the issues that underline the G-33 proposal, the Chair added, stressing that the discussions to date have been tentative, but that a number of Members have indicated an openness to consider a mechanism/process that might provide for some additional flexibility for specific Members on the basis that this would be time-limited, non-automatic, and create no or minimal trade or production distortions.
 
Some Members have also emphasised that any such flexibility should not be at the expense of accommodating needed economic reforms. It was also stressed again that the transparency - notably through timely notifications - would be an important element in monitoring any flexibility.
 
Some Members also stressed that whatever the temporary solution, it should be an operational one and/or should not be a substitute to a broader solution - "I think the idea here was the thought that it might be possible to put in place a specific solution framework at the same time as allowing work to proceed on possible longer term and possibly more general solutions."
 
"I know that some delegations will be disappointed that I am not able to report rather more definitive progress in defining a solution for Bali on the G33 proposal. To do so would, I believe be a distortion of the current reality we face which is that notwithstanding the progress discernible in the discussion on Questions 1 and 2, members are still very much divided over the most fruitful approach to take to Questions 3 and 4," said the Chair.
 
"It is the detail of both the definition of the problem and the response to it that we need to explore further as our work proceeds," the Chair said further, suggesting that Members could focus on what can be done about the problem in general terms (covering a wide spectrum of suggestions from political messaging to formal amendment); and what can be done about it at a specific level, and under what circumstances and conditions.
 
"I think the only way that all this can be achieved is if members enter the discussions, which I would propose to continue in further informal consultations in a range of configurations, on a ‘without prejudice' basis."
 
"We need to build the confidence amongst us to identify more clearly the range of potential landing zones, which would then require political decisions to take forward," the Chair said.
 
The Chair also commented on the G-20 proposal on Tariff Rate Quota (TRQ) administration, noting that there have been no further wider consultations specifically on that proposal, although he has continued to meet with delegations to hear their views on this and other issues. As he had mentioned in the last meeting in March, Members continue to see this as a useful one to explore for possible decision in Bali, even though there are some sensitivities about some aspects of the proposal that Members do not yet seem in a position to settle.
 
"We will therefore need to return to the proposal at an appropriate time but I'm not suggesting we take this up immediately. I'll keep this under review and determine, in consultation with delegations, when it would be useful to resume consultations on this proposal."
 
According to trade officials, Members broadly differed over a general approach that would amend the Agriculture Agreement, or a case-by-case approach.
 
Those that spoke in favour of the G-33's preference for a more general approach were: Indonesia (for the G-33), the Philippines, Honduras, the Dominican Republic, Cuba, China, Republic of Korea, India, Turkey and Bolivia.
 
Those that opposed an amendment or an interpretation of the AoA, either in principle or because this could not be achieved by the Bali ministerial conference in December, and instead favour a case-by-case solution were: Australia, the European Union, Chile, the United States and New Zealand.
 
According to trade officials, members of the G-33 defended their proposal and were also willing to discuss various proposals.
 
Others such as Australia, the EU, the US, New Zealand and Chile voiced caution particularly about whether there should be an amendment to the Agreement on Agriculture before the Bali ministerial conference in December. If the issue is going to be discussed, it should be after the conference, they added.
 
Indonesia (for the G-33) thanked the Chair for his report as well as others involved in the consultations. It stressed that the G-33 proposal is driven by the alarming fact that the 1986-1988 base period has eroded their ability to use food stockholding for food security. It said that high global prices require higher administered prices driving up de minimis space.
 
A concrete solution for all by Bali is a must, it emphasised, adding that if food security is a concern for everybody, then a solution is needed. It is willing to work on the Chair's four questions, noting convergence on questions one and two, and that work on that will continue.
 
On public stockholding, it said that it can discuss an interim mechanism, but it needed clarity on how long, how it works, and how it deals with the concerns of all developing countries. It rejected a case-by-case tailor-made solution.
 
Australia said that a one-size-fits-all solution will be difficult. We've been clear that we do not consider amendments or interpretations to be possible this year, it said, in reference to the Chair's Question 3. This would undermine the benefits of the Agriculture Agreement, it said.
 
It is also unrealistic to think that Members could undertake such a large task by Bali, said Australia, adding that there are too many issues and they are too complex to do by then.
 
Seeking solutions that take account of varying circumstances of developing countries is useful, it said, adding that it thought that Question 4 was useful, with Questions 1 and 2 as well for moving forward.
 
Australia said that from the technical discussions so far, it is not clear that public stockholding would benefit anything more than a small number of countries, and that therefore seeking a holistic solution would not be productive.
 
The EU said that it could not accept price support in the Green Box. The proposals on changing the reference prices/years and de minimis could only be discussed after Bali, but would have to be appropriately worded and delineated.
 
According to trade officials, India said that it would be a travesty to say that only a handful of countries are affected, adding that it could show figures showing a large number of countries are affected because the Amber Box was made available only to those that had Amber Box programmes at the time (at the end of the Uruguay Round).
 
It was encouraged to hear that most delegations are saying that they are willing to work for solutions. A group of countries in the G-33 have said that the solution can only be found in four variables, but India said it has already heard one delegation say that two of these are non-negotiable. It voiced its objection to this.
 
The US said that there is a difficulty facing Members which is that two very important questions are being confused. One is that is the problem important? The meeting had heard that there is an important food security problem in many countries. It agreed that this institution (the WTO) does need to do something on food security.
 
According to the US, the second question is can we fix something before Bali? That is a different question, it said, noting that time is limited and it is central to how the proposal is analysed.
 
It said that it is disappointed to hear the argument that the solution has to be general rather than specific because it is clear that situations and variables are different for different countries. A solution that would be specific has been brushed aside in an un-pragmatic way, the US claimed.
 
It agreed on the need for post-Bali work on food security, and said that it will keep an open mind and keep working, adding however that some solutions appear unlikely to gain consensus between now and Bali.
 
China said that it appreciates the Chair's efforts, adding that the four questions are correct. The consultations have been productive, for example, on adding a new paragraph to the Green Box (sub-paragraph (h)). It is open to discuss any possible solution without prejudice to the G-33 proposal.
 
It said it had once proposed a partial solution for Bali and favours post-Bali work on food security. Members should work hard for a credible Bali package, it added.
 
According to trade officials, Brazil and Pakistan said that the issue is important and that they are willing to work for a solution.
 
Japan said that it is open to a general or specific solution, while Singapore said that a case-by-case interim solution might be possible at Bali with a more general solution afterwards.
 
Canada and Mexico also called for a solution of some kind by Bali. Paraguay called for the elimination of distortions, saying that the agreement could be interpreted provided transparency and predictability are maintained.
 
Meanwhile, Brazil, on behalf of the G-20, submitted a "non-paper" on export competition.
 
The non-paper, in the form of a proposed Ministerial Decision on Export Competition, underlines that among all the measures that distort trade, export subsidies are by far the worst offenders. GATT Members prohibited their use for industrial goods more than fifty years ago. There is no justification to continue granting them for agricultural products, it adds.
 
(In a footnote, the G-20 stated that consultations on issues covered in this non-paper are still under way in Ecuador and Uruguay.)
 
"Export subsidies, in their many facets, are the most distortive form of agricultural support. They encourage inefficient production of agricultural commodities in developed countries; depress international prices; discourage domestic production in food-importing countries, contributing to food insecurity; and unfairly harm the prospects of food-producing developing countries to export themselves out of poverty, and into prosperity. Therefore export subsidies could cause serious prejudice to and adversely affect trading partners," said the G-20.
 
It noted that the end of all forms of agricultural export subsidies is an integral part of the Doha Mandate. The Hong Kong Ministerial Declaration established 2013 as the deadline for their elimination.
 
The G-20 said it can only regret that this is yet another Doha Round milestone to be missed. In order to ensure the continuation of the reform process in agriculture, and the credibility of the DDA (Doha Development Agenda) process, the "early harvest" package currently under negotiation must include, as a minimum, a step forward on export competition disciplines.
 
As a significant contribution to the preparatory process for a successful Ninth Ministerial Conference in Bali in December 2013 - and in a spirit of flexibility and pragmatism -, the G-20 said it has decided to endorse an "incremental approach" for the progressive elimination of all forms of export subsidies, whereby an intermediate commitment will be taken as a "down payment" before full implementation.
 
"In the end, all forms of export subsidies will have to go, as provided for in the Agricultural modalities embodied in document TN/AG/W/4/Rev. 4," said the G-20 adding that the "intermediate commitments" to be adopted in Bali mirror, whenever possible, the phase-in structure provided for in Rev. 4.
 
According to the proposed Ministerial Decision (for adoption in Bali), developed country Members shall reschedule their export subsidy reduction commitments in Section II of Part IV of their Schedule by the end of 2013 as follows: (a) budgetary outlay commitments shall be reduced by 50 per cent, and (b) export quantity commitments shall be reduced to the actual average of quantity levels in the 2003-2005 base period.
 
In accordance with paragraph 11 of the Hong Kong Ministerial Declaration, those export subsidies for cotton are prohibited.
 
In accordance with the Hong Kong Ministerial Declaration, developing country Members shall continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture for five years after the end-date for elimination of all forms of export subsidies.
 
According to the proposed Decision, in addition to complying with all other export subsidy obligations under the other covered Agreements, and as a step towards implementing the objective laid out in paragraph 6 of the Hong Kong Ministerial Declaration regarding repayment periods and self-sustainability of export credits, export credit guarantees or insurance programmes, Members undertake not to provide export credits, export credit guarantees or insurance programmes
(hereinafter referred to as "export financing support") otherwise than in conformity with the following provisions: Maximum repayment term -- as from the end of
2013, the maximum repayment term for export financing support, this being the period beginning at the starting point of credit and ending on the contractual date of the final payment, shall be no more than 540 days.
 
Developing country Members providers of export financing support shall be eligible to benefit from the following elements: Maximum repayment terms -- the developing country Members concerned shall have a phase-in period of three years after the end of 2013, within which to fully implement the maximum repayment term of 540 days.
 
This shall be achieved as follows: (i) on the first day of implementation, the maximum repayment term for any new support entered into shall be 1080 days; (ii) two years after implementation the maximum repayment term for any new support entered into shall be 900 days; (iii) three years after implementation the maximum repayment term of 540 days shall apply.
 
The draft Decision further proposes that Members also agree that the parallel elimination of all forms of export subsidies for agricultural products and disciplines on all export measures with equivalent effect in accordance with the mandate for negotiations in agriculture, these being disciplines regarding export credits, export credit guarantees and insurance programmes, agricultural exporting state trading enterprises and international food aid, will remain the priority for WTO negotiations following the 9th Ministerial Conference, and that the Revised Draft Modalities for Agriculture (document TN/AG/W/4/Rev. 4) remain the basis for the final agreement on such issues.
 
According to trade officials, G-20 members Brazil, Mexico, Paraguay, Argentina, South Africa, Uruguay, Chile, Cuba, China and Pakistan, and non-members New Zealand, Australia and Colombia supported the G-20 proposal.
 
They argued that this was doable and that there was a consensus at the Hong Kong ministerial conference in 2005 to eliminate export subsidies by 2013, and that Members ought to build on that. They also said that something should be done to mark the fact that this year is the year 2013.
 
They further asserted that export subsidies is the most trade-distorting type of support or trade measure because of the way it distorts markets and depresses prices for other farmers. They argued that the proposal itself is a flexible first step towards eventually eliminating export subsidies.
 
According to trade officials, the US and the EU in particular opposed this proposal. They said that it upsets the balance of what is being discussed in the WTO, and makes a Bali agreement much more difficult because the original agreement to eliminate export subsidies was based on the whole agriculture package and not in isolation. Doing it in isolation would make a Bali outcome much more difficult to achieve. The US said that it will also report back to Washington that the prospects of a Bali outcome were made worse by this proposal.
 
The EU said that it has had little time to examine the proposal in detail and that it will do so soon, but found it troubling that there was something (in the proposal) on export subsidies and export credits but not on state trading enterprises and food aid. In the EU view, phasing out of its export subsidies is a major concession linked to other agriculture pillars and other Doha Round issues, and that Members already have enough on the table for Bali including on Tariff Rate Quota (TRQ) administration. This last respects the balance of the Agriculture Agreement, whereas eliminating export subsidies would affect that balance on its own.
 
According to trade officials, the G-10 (Switzerland speaking), said it would examine the proposal, as well as whether it could be calibrated for a Bali outcome. It also reminded Members that it considers export restrictions to be important and to lack transparency and disciplines. +