Info Service on WTO and Trade Issues (Oct13/05)
9 October 2013
Third World Network
Expert panel stresses on food security in run-up to Bali
Published in SUNS #7669 dated 7 October 2013
Geneva, 4 Oct (Kanaga Raja) -- An expert panel session at the World
Trade Organisation (WTO) Public Forum on Thursday discussed the issue
of agriculture, in the context of food security and the human right
to food, and laid stress on its inclusion in the ‘Bali package'.
The session, held on the last day of the 1-3 October Public Forum,
was titled "Agriculture: A Development-oriented Outcome at Bali?"
and was sponsored by the French NGO Solidarite.
The speakers on the panel included Ambassador Jayant Dasgupta of India,
Ms Deborah James of the Washington-based Centre for Economic and Policy
Research (CEPR) and coordinator of the Our World is Not for Sale (OWINFS)
CSO network, and Mr Jacques Berthelot, an agricultural expert with
Another panel member, the United Nations Special Rapporteur on the
Right to Food, Mr Olivier de Schutter, was unable to make it to the
panel in time for the early morning session.
The discussion at the Public Forum took place just as the WTO has
intensified consultations since September on the three potential Bali
issues of trade facilitation, some elements of agriculture and development/LDC
Kicking off the expert panel session on Thursday, Deborah James said
that agriculture is one of the key pillars of the Doha Round, adding
that developing countries only agreed to launch a new round on the
basis that developed countries would finally agree to fix decades-old
unfair trade practices in agriculture.
And for 12 years now, even as developing countries have demanded that
developed countries reduce their subsidies and tariffs on agriculture,
the European Union and the United States have continued to extensively
subsidise their exports, and in the case of the US, have actually
Unfortunately, after all of this time, she said, the proposals of
the G-20 and the G-33 to reform these agriculture rules are at a stalemate
due to the intransigence of the US.
Recently, however, she noted, there is some light at the end of the
tunnel because the issue of the human right to food and the need for
countries to pursue policies of food security have arisen in the context
of the global economic and food crises, which have left millions more
people (in hunger) in addition to the millions already who do not
have enough to eat.
In his presentation on existing WTO disciplines and food security
in developing countries, Ambassador Jayant Dasgupta of India said
that the topic of food security and food has been in existence since
the dawn of civilisation and the birth of mankind. This is something
that is a real world issue - it has been an issue in 5,000 BC, it
is a 20th century issue, it is a 21st century issue and will be a
very topical issue in the 22nd century as well.
Focusing on the WTO disciplines and how they encourage, inhibit or
prohibit the solution to food security in developing countries, he
said that there are only two mentions in the WTO Agreement on Agriculture
(AoA), one is in the chapeau where it speaks about food security being
a non-trade concern.
He said that the whole AoA was based on a vision of reform, and the
reform programme is outlined in the chapeau and it says very clearly
that non-trade concerns including food security and special and differential
treatment (S&D) for developing countries will have to be an integral
part of that.
On the provisions in the WTO Agreement to address food security, Ambassador
Dasgupta said that there is only one other mention in the Agreement
and that is in Annex 2 which deals with the Green Box, where there
is public stockholding for food security purposes in paragraph 3 and
there is a complementary paragraph 4 that talks about domestic food
"Now, as long as governments buy from the market at whatever
price, it is considered WTO-consistent, no questions asked. If any
country wants to build up a public stock, it can do so to any extent
based on current market prices," he said, adding that one of
the issues is what is the ‘current market price' and how can it be
The second issue in this context is that for developing countries,
there is a provision that enables governments to have administered
prices because the markets may not be perfect, and there may be cartelisation
and imperfect market conditions, so that administered prices have
But - and this is one of the most important things here - there is
a direct linkage between the Green Box and the Amber Box only for
this provision, which says that if any country has an administered
price for procurement or acquisition of stocks, it will have to be
accounted for in the AMS (Aggregate Measurement of Support). For that,
there is a particular formula that is to be followed, but that formula
does not relate only to food security, but also relates basically
to the market price support system.
Ambassador Dasgupta explained that the market price system is based
on providing prices at much above market prices - providing administered
prices at much above market prices - which is what was prevalent in
the EU in the 1980s and many other developed countries to give a boost
to production and it ended up in countries sitting on large piles
of stocks and they did not know what to do with it, and so, they ultimately
dumped it on the international market. They could not do it without
providing export subsidies and so they provided huge export subsidies
"Now that is a very distorted system of providing support and
it, of course, led to many distortions and that is why this provision
came in of market price support," said Ambassador Dasgupta, asking
what happens if the administered prices are at current market prices
or just below current market prices?
He pointed out that in the case of India, what is seen is that the
acquisition or procurement is confined to a very small or short window
of only three months after the harvest, and that is when the farmers
are at their most vulnerable, and if there is no price guarantee,
the smaller farmers or marginal farmers are forced to make distress
sales, and the prices go down for their sales to the consolidators
or wholesalers, and then the prices keep going up.
If one looks at the prices in India, for instance, one will find that
the market price irrespective of when the sales is taking place between
a farmer and a wholesaler, or in the market, it is around or above
the administered price but after that for the next nine months of
the year, it is much above the acquisition price.
"So this fallacy that every administered price mechanism will
be much above market prices does not stand careful scrutiny,"
He also noted that there are other Green Box provisions which he said
have been proved to be trade-distorting through the creation of income
and wealth effects. One of the first and foremost is the decoupled
income support programme, he added.
As to why developing countries need to have public stockholding programmes
and not buy it from the market in times of need, Ambassador Dasgupta
explained that firstly, it is to provide food for the poor, highlighting
that in India, as well as in many other developing countries, the
public stocks are meant to provide domestic food aid, which is a Green
Box provision and is completely free of any restrictions.
Secondly, in large countries that are prone to many kinds of natural
disasters and emergency situations, there is need to have stocks from
which to provide the needy and to feed the population in times of
distress. And there are market imperfections, problems of regional
stocking and transportation, "so we need to have public stockholdings
to take care of this factor as well."
Third, he said, is that not all the food that the poor need can be
given through the domestic food aid programme, highlighting that in
the case of India, there is a national food security act which has
been passed and is now under implementation from 10 September 2013.
This provides food to the poorest people, which is the 10% or the
lowest decile of the population, for the full requirement.
But for the rest of the poor, and there are a large number of poor
- hundreds of millions - the food provided takes care of more than
half of their requirements, but not to the full extent, so they have
to buy from the market.
"So, that is another consideration that we can't allow food prices
in the domestic market to go beyond reasonable limits. So we have
to keep them restricted or prevailing at reasonable levels. And if
the prices show volatility, they show a sharp upward trend, we need
to release food from the public stock to bring down the prices, [and]
to curb this volatilty."
Lastly, he said that food banks have been a concept that the UN Food
and Agriculture Organisation (FAO) has been dealing with for the past
thirty years, and it has been saying that regional food banks are
one of the best means of tackling the problems of food security in
a region, adding that the public stock that India maintains has been
used very frequently to provide government-to-government food on-purchase
On why an administered price mechanism is needed, Ambassador Dasgupta
referred to paragraph 7 of the Green Box provisions which talks about
providing income support, income safety net programmes and income
If incomes dip below a certain level, farmers are compensated, he
said, noting however that this is not possible in a developing country
because of resource constraints and certain other administrative reasons.
But the main problem is resource constraints.
There is also the question of large incidence of indebtedness, he
noted, adding that according to statistics published in India, "last
year, we had an incidence of 65% of the farmers being indebted."
When they are investing in seeds, fertilizer, pesticides, in buying
water and electricity, and in hiring transport to take their produce
to the market, they are taking a risk, and if they don't have an income
insurance scheme or a safety net programme, and if they have no assurance,
they are left to the mercy of the market forces which in many cases,
because of imperfect market conditions, could be very exploitative;
if this is so, they need some kind of an assurance.
But if you have a mechanism that is way above the market prices -
the administered prices are way above the market prices - it will
obviously lead to distortions, he said, adding that "we have
heard that Thailand is sitting on a huge pile of rice, [and] the US
is sitting on a huge pile of sugar. That is just the kind of thing
which should not have been happening."
But in the case of India, in 2012, its rice procurement fell way below
the target because the administered price was not good enough. It
was not just below the current market price, it was way below the
current market price, so the farmers did not offer their produce to
In the case of the recently concluded wheat procurement season, Ambassador
Dasgupta said that "we fell short of the target by about 40%
because the government couldn't provide that kind of money which the
other people were willing to provide, so we fell short."
Asking what happens if this kind of price guarantee is not given,
he noted that the average size of land-holdings taken about six years
ago was about 1.21 hectares, not to speak of the hundreds of millions
of landless labour who also depend on rural incomes.
If there is nobody to take that decision or risk to cultivate a plot
of land, it lies fallow, and what the family does is it tries to take
to some subsidiary occupation or it migrates to the cities and it
can lead to two problems which are real problems - one is about reducing
food availability because the land remains fallow, and second, endangering
rural livelihoods and leading to a greater number of unemployed.
"So it can lead to a real life problem in terms of civil strife,
in terms of higher rates of unemployment, [and] in terms of lower
On the formula that has been given in the market price support system
which has been premised on the basic fact that the administered price
will be far above the current market price, Ambassador Dasgupta pointed
out that this is the AMS entitlement, which is also the Amber Box
entitlement, (which) should be greater than or equal to - and this
is the limiting factor - the quantity of production eligible multiplied
by the difference between the administered price and a fixed external
As far as the Amber Box entitlements are concerned, there is a de
minimis which is available to all countries - developed and developing
- on different scales, but only 16 out of approximately 100 developing
country members have an Amber Box entitlement.
(In an accompanying powerpoint presentation, Ambassador Dasgupta listed
these 16 countries as Argentina, Brazil, Chinese Taipei, Colombia,
Costa Rica, Israel, Jordan, Korea, Mexico, Morocco, Papua New Guinea,
Saudi Arabia, South Africa, Thailand, Tunisia and Venezuela.)
Noting that China, India, Indonesia, the Philippines, Nigeria and
Kenya are not amongst them, he said that they do not have an Amber
Box entitlement. What it is that they can use for their public stockholding
is the 10% product-specific de minimis entitlement (except for China,
according to the powerpoint presentation, which has 8.5%).
On the quantity of production eligible, he referred to one interpretation
that had been given in passing in the Korea beef case of 2001, which
says that the total volume of production which is there in a particular
crop will be the quantity taken into account in the equation.
"The practical implication is that if you are growing rice and
if you procure even one kilogram of rice by declaring an administered
price in advance, then the whole production of the country will be
figuring in the equation as a multiplier. That is one of the implications
and there is nothing that we can do short of amending this or having
an understanding on what will be an eligible volume of production."
On the external reference price, the Indian trade envoy indicated
that it is keeping with the economic rationale of subsidies. "If
you are buying something below the market price, it is not a subsidy.
If you are buying something above the market price, giving that price
to the producer, it is a subsidy."
So, the question of the subsidy has to be related to the current market
price, and it can't be related to something which is fixed and refers
to the 1986-88 average figures.
This is what the external reference price does, he said, going on
to cite World Bank Commodity Bank figures to point to the kind of
inflation that has taken place even on traded commodities like rice
of a particular kind, and wheat of two different kinds.
The average rate of inflation over the past 27 years has been approximately
225% (for rice, according to the powerpoint presentation) and 270%
(for one particular kind of wheat).
"So, this is one of the problems that comes in when you try to
operate this formula," he underlined.
Turning to the question of administered prices, he said that the administered
price is this year's acquisition price. But what is the current market
price? What is the average market price prevailing in the country
for that year? Are you buying it below that? Are you buying it at
that price? Are you buying it much above that price?
In the case of India, the administered price is much lower than the
average market price prevailing for the entire year. "But there
is no consideration given to this. No reference to current market
Citing World Bank indicators with respect to the Index of Inflation,
taking 1986-88 as a base, and the base figure of 100 for that period,
for China, the Consumer Price Index (CPI) has gone up to 372; Egypt,
1,022; El Salvador, 581; India, 638; Indonesia, 1,078; and Kenya,
2,134. But the main thing is that Nigeria, for instance, the CPI has
gone up to 11,104. It has suffered massive inflation.
In France, the CPI is 161 taken against an index of 100, for the US
it is 202. If you take the OECD country average, it is less than 3%
annualised inflation over the last 25 years, he noted.
As for possible solutions, he called for a revision of the External
Reference Price to a more updated figure, or to use a deflator on
the Administered Price for excessive rates of inflation.
On the current status, Ambassador Dasgupta said that the G-33 group
of 46 developing countries (barring one exception) has endorsed the
two options - revising the external reference price to a more updated
figure or to have a deflator mechanism to compensate for excessive
rates of inflation.
Referring to the opponents, who he said are mainly those who have
a primary export interest, Ambassador Dasgupta asked that if there
is a food shortage in a developing country, where will it buy from?
It is most likely to buy it from the major exporters of that and they
are armed with export subsides, export credit guarantees, domestic
support, and decoupled income support in the Green Box, which enable
them to sell things at lower than the cost of production.
"So that is their interest. They want to sell it and they are
looking at it from a mercantilist angle, not from a dispassionate
economist angle or from the angle of providing food security to hundreds
of millions of people in the developing world. But we have offered
on behalf of the G-33 a ‘peace clause' till the time a permanent solution
can be found to this major very important issue afflicting a large
number of poor in the developing world," Ambassador Dasgupta
Addressing the G-33 proposal on food security stocks, Jacques Berthelot
said that the core issue is to allow WTO Members the policy space
to feed their poorest population whilst paying a fair price to their
farmers providing the food, and this is a particular concern in the
largest developing countries where the population would rise, according
to the UN, by 414 million in India, 281 million in Nigeria, 98 million
in Pakistan, 82 million in Indonesia, 64 million in the Philippines,
and 51 million in Bangladesh from 2010 to 2050.
China's population would rise by 93 million in 2030, but then it will
decrease, he said, adding that the population of the EU will remain
flat, and in the US it will rise by 80-90 million.
So, the real challenge for the 40 years to come is really India. It
will have to feed 400 million more people and that all the land available
in India is already cultivated, he said, adding that there is also
a problem of water availability, and "we will face climate change."
Already one-third of India's population, i. e. 400 million, live below
the poverty line of $1.25 per day and 59% of rural children under
five are stunted.
"So it is really absurd to put in the AMS, in the Amber Box,
the gap between the administered prices and the border prices of the
1986-88 period," he said.
As to why it is absurd, he explained that first because an administered
price alone cannot support the domestic market price, unless other
most powerful mechanisms are at play: high import protection, subsidies
to exported products, production quotas, land set aside, domestic
and foreign food aid.
Without all these mechanisms, an administered price will not change
anything to the market price, he added, pointing out that this market
price support - the difference between the administered price and
the price of the 1986-88 period - "is really a fake market price
support" and this fake market price support has allowed the US
and EU to go on massive shifting from the Amber Box (AMS) to the Blue
Box and then to the Green Box without really diminishing their actual
He asked how many Members of the WTO know that in the 1995-2000 base
period for the Uruguay Round implementation commitments, the EU actual
average subsidy represented only 11.5% of its notified AMS of 48 billion
euro, and this proportion was 44% for the US AMS of $10 billion? And
this share did not change much.
Berthelot noted that there is a real inconsistency of putting the
gap between the administered prices and the reference prices of the
1986-88 period in the AMS and that this inconsistency has been acknowledged
by many trade experts of the OECD, World Bank, FAO, and by W. K. Cline,
H. De Gorter and Tim Josling, the father of the OECD's Producer Support
The second reason, said Berthelot, is the very low level of 1986-88
world prices. Taking the example of wheat, this very low level is
due entirely to the EU and US combined massive dumping rate on wheat.
The export value of wheat for both during that period was $5.7 billion,
and the total subsidies to exports was about $100 million higher.
So, the dumping rate (combined) was more than 100%.
For the US export of wheat and flour (during the period 1986-88),
total subsidies were lower at 88% of the value of its wheat exports,
with the main component being domestic subsidies to wheat. For the
EU, the rate of dumping was 130% of the value of the export of wheat,
the main component being export subsidies proper or what is called
With respect to the Green Box, he said that there was a huge expansion
of the US Green Box. Up to now, the total Green Box of the US is $120
billion, and the Amber Box is $4 billion. Domestic food aid is by
far the largest component of the US Green Box. In the last notified
year of 2010, domestic food aid was notified at about $95 billion.
As for the EU, he said that the subsidies component of the EU's AMS
(Amber Box) is very low but it has decreased a lot after 2006 because
at that time the EU implemented "allegedly fully decoupled income
support" due to the ‘peace clause', explaining that in the AoA,
there was an Article 13 on ‘due restraint' that prevented other countries
to sue developed countries' AMS or even Blue Box during a period of
nine years (till 2004).
This is the reason why the EU has changed its CAP (Common Agricultural
Policies) subsidies. The prevailing subsidies were in the Blue Box
before and so in order not to be sued, it said that after 2005 all
its direct payments will be in the Green Box, i. e. decoupled.
The farmers will not have to grow anything to receive the same amount
of subsidies they received in the 2000-2002 period, he said.
"It is absurd, but it is the way it has been," he remarked,
adding that if up to now, this type of subsidy has not been challenged
at the WTO, it could have been because of the precedent of the Appellate
Body decision in March 2005 in the cotton dispute.
On the question of taking inflation into account vis-a-vis adjusting
the AMS, Berthelot cited two prominent Indian trade experts (A. Hoda
and A. Gulati in his accompanying powerpoint presentation) as saying
that they "do not see any reason for making less than full adjustment
for the rates of inflation".
He noted that the average rate of inflation in India from 1986-88
to 2012 was 8.0% per annum, so if the whole inflation rate of India
is taken into account, the updating of the 1986-88 administered price
would rise to $405 (per ton), much higher than the market price, so
there will not be any AMS. But if the inflation rate of the high income
OECD countries is taken into account - 2.75% - in that case, the Indian
procurement price of 1986-88 would rise to $218 (per ton), so that
the wheat AMS will be limited to $11.8/t, which multiplied by 17.5
million tons of distributed food aid in wheat in 2012, would only
be $206 million.
Comparing the US and Indian domestic food aid, Berthelot said that
the total value of US food aid in 2012 was $100 billion, compared
to the $9.4 billion of combined rice and wheat Indian food aid - that
is, 10 times more by the US than by India.
He also noted that the number of beneficiaries in the US was lower
at about 80 million people without double count, and about 475 million
in India. Food aid was 6.3 times larger in the US than in India.
Comparing the cereals component in the US food aid, he said that the
cereals component was quite large because you not only have the cereal
product but also all the feed cereals included in the meat, eggs and
diary products consumed by the beneficiaries of the US food aid, which
amounted in total in 2012 to 14.6 million tons of cereals. It was
about three times less than the 41 million tons of cereals in India,
where rice accounted for 24 million tons and wheat for about 15 million
The cereals included in the US food aid by beneficiary was about twice
the level of the cereals food aid received by India, said Berthelot.
In conclusion, he said that because the bulk of the food aid is in
food stamps in the US and these food stamps are bought in agreed shops
without passing through the public procurement channel like in India,
"what is the logic that the WTO demands only to India and to
all developing countries but not to the US that ‘the difference between
the acquisition price' and ‘the external reference price of 1986-88'
be ‘accounted for in the AMS'?"
He also said that all US food programmes other than the SNAP (food
stamps), which account for about $25 billion in 2012, imply public
procurement of food (on the market), and is notified in the Green
Box, but this could even be challenged because the USDA itself acknowledges
that: "These purchases also help to stabilise prices in agricultural
commodity markets by balancing supply and demand."
Commenting on the proposed ‘peace clause', Berthelot said that from
his point of view, the peace clause is a bad idea, for two reasons.
First, he said, the developing countries have already given on that
issue because the peace clause has allowed the EU, and the US, to
continue their massive dumping during nine years up to 2004 without
being challenged at the WTO.
Second, he was of the view that the peace clause on the issue of food
aid will be presented as a huge concession to the developing countries
by the US and the EU which will demand in return a new peace clause
for themselves in the finalisation of the Doha Round or in other plurilaterals
in order to continue their dumping.
What should be agreed instead in Bali is a WTO decision once and for
all that all domestic food aid should be notified in the Green Box
for all Members, including the US, independently of the level of prices
paid to farmers, either through public procurement or direct purchase
at market prices, and independently of the means by which the food
reaches the poor: is there a release in kind like in India or purchased
by food stamps?
Indeed, he said, these distinctions are very futile, provided that
other Members should not be harmed by dumping coming from their stocks
of purchased food.
Such a decision to put all food aid in the Green Box from any country
would be a strong signal to all the world's poor, including the US
poor where we know that the House of Representatives refuses to finalise
the Farm Bill unless the Senate follows its Bill to cut the nutrition
part by $4 billion per year, he said. +