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TWN Info Service on WTO and Trade Issues (Jun20/23)
27 June 2020
Third World Network


North provided billions in farm support during COVID-19
Published in SUNS #9144 dated 23 June 2020

Geneva, 22 Jun (D. Ravi Kanth) – The developed countries have provided billions of dollars in farm support programs for their producers during the current Covid-19 pandemic, breaching their scheduled commitments at the World Trade Organization.

In contrast, India and several other developing countries also provided farm support programs as well as adopting export restrictions which are directed primarily at helping their resource-poor consumers, according to participants who took part in a special meeting of the WTO’s Committee on Agriculture on 18 June.

“What is clear is that the stimulus packages being provided by the developed countries will have serious adverse effects on the productive capacities of developing countries, while developing countries do not have the fiscal space to respond to these stimulus packages being offered by developed countries to their producers,” said a trade envoy, who asked not to be quoted.

“And at the same time, the developed countries are trying to push for less restrictions, new rules, new disciplines, including on export restrictions that can be used under specific conditions, to ensure that they have market access in developing countries,” the trade envoy added.

At the special meeting of the WTO Committee on Agriculture on 18 June, several countries asked Australia, the United States, the European Union, Canada, New Zealand, and India among others to explain their respective export and domestic farm subsidy programs that could constitute as trade-distorting, the participants said after the meeting.

The special meeting was held to discuss farm support programs adopted by members during the Covid-19 pandemic, and whether these measures were promptly notified to the WTO.

The questions posed to members during the meeting had an implied reference to the issues that are being negotiated in the Doha agriculture negotiating group, said a participant from a developing country, who preferred not to be quoted.

In the second such urgent and unique meeting of its kind for addressing the Covid-19-related farm trade measures and policies, WTO members were subjected to intense scrutiny on whether their trade measures and policies were consistent with their bound commitments, the participant added.

In the past, members held a special meeting of the Committee on Agriculture in 2010, following the 2008 financial crisis, when many WTO members resorted to export restrictions in the face of the grave food crisis and soaring international prices of farm products, the participant said.

At the meeting on 18 June, members concurred on the need for the WTO Secretariat to conduct more monitoring work on farm trade measures being adopted in the wake of the Covid-19 pandemic.

Members also agreed to have a standing item on Covid-19-related measures on the agenda of every meeting of the Committee on Agriculture.

But there was no consensus for creating a Working Group to assess the Covid-19-related farm measures at the WTO, as proposed by the Cairns Group of farm exporting countries.

The EU flatly rejected the Cairns Group’s suggestion to create such a group at this juncture. If some members want to privately pursue such an initiative they can do so, the EU said, according to a participant, who asked not to be quoted.

Australia’s trade envoy Ambassador Ms. Frances Lisson delivered a statement on behalf of the Cairns Group of farm exporting countries on “Covid-19 initiative: Protecting Global Food Security through Open Trade.”

The statement, which was not supported by all members of the Cairns Group, such as Brazil and South Africa, noted that “throughout the first phase of this pandemic, the agriculture sector has been resilient and international markets have remained relatively stable despite strong pressure on production, supply chains and rapid shifts in demands.”

The Cairns Group emphasized that “at this critical time, when countries are responding to the challenges of the COVID-19 pandemic, the risks posed by additional distortive subsidies, the disposal of subsidised stocks (whether privately held or in public storage), and other measures that distort or disrupt trade cannot be over-estimated.”

It argued that “producers who are already under pressure could be put in an unviable position and the supply chains that are critical to the global agricultural and food system could be put at risk.”

It cautioned that “such developments could increase the levels of global food insecurity as a result of COVID- 19.”

The Cairns Group said that in rejecting protectionism that could arise from the Covid-19, WTO members must embark on fundamental reforms across all the pillars for achieving “a fairer and more market-oriented agricultural trading system.”

Significantly, the European Union questioned the Cairns Group’s initiative as it ignored the multi-billion-dollar aid packages adopted by some members.

The EU said that the Cairns Group’s guidelines on food aid did not take into consideration the trade-distortive aspects of monetization of food aid, criticizing some members for not notifying their programs until now.

Canada, on behalf of the 13-member Ottawa Group, delivered the Group’s statement that emphasized taking trade policy actions that would support inclusive, sustainable, and resilient recovery.

Other members of the Ottawa Group such as Brazil, Singapore, the EU and Switzerland among others echoed their support while calling on members to keep global food supply chains open.

India sharply questioned the Cairns Group and the Ottawa Group about the underlying rationale of their statements.

New Delhi argued that there is a pressing need for a coordinated global response to the Covid-19 crisis.

However, the Cairns Group and the Ottawa Group are seeking “permanent tariff liberalization on a range of products in response to a temporary crisis”, India said, suggesting that attempts are being made to “use the crisis as an opportunity to gain market access for their exporters.”

India said export restrictions on medical or agricultural products are consistent with the WTO provisions. India underscored the need for a “balanced, inclusive, and calibrated” response to Covid-19 pandemic.

India also called for eliminating the historic asymmetries in the global farm trade, particularly the elimination of the aggregate measurement of support (AMS) or the most trade-distorting subsidies provided by the developed countries.

Responding to the Ottawa statement, South Africa spoke about the multiple challenges being faced by the African region, emphasizing the need for “policy space” for supporting its poor and low-income farmers under Article 6.2 of the Agreement on Agriculture.

South Africa expressed concern “about the impact of the disposal of subsidized stocks at a time when our producers are under immense pressure as a result of COVID-19. We are already experiencing the impact of this on some of the agriculture products such as frozen potato chips” from the European Union.

It called “on all members to ensure that agricultural support measures remain within the rules provided by the multilateral trading system.”

More importantly, according to South Africa, “COVID-19 further highlights the urgent need to deliver on PSH (public stockholding programs) for food security purposes and to make provision for the inclusion of new programmes.”

South Africa emphasized the need “to prioritize the conclusion of work on mandated issues, including SSM (special safeguard mechanism) to address the destabilizing and crippling effects of import surges and downward price swings in the increasingly volatile global agricultural markets.”

“We need a balanced outcome that is reflective of priorities in agriculture, effectively responds to the effects of COVID-19 and addresses the long outstanding issues in which S&DT has to be an integral part,” South Africa said.

“COVID-19 is still evolving and affects countries differently. Countries must be allowed to adopt tailored responses that are specific to their challenges in accordance with WTO agreements. We cannot agree to proposals for global rulemaking that limit our policy options to respond to the crisis, to enhance our preparedness for future crises and to pursue our plans for economic recovery.”

The ACP (Africa, Caribbean, and Pacific) group also highlighted the challenges faced by its vulnerable farmers in global farm trade.

Brazil and New Zealand, which defended the Ottawa Group statement, expressed sharp concern on the food stockpiling programs by some members, suggesting that they would have adverse effects on global food markets.

During the meeting, specific farm trade measures and policies adopted by members came under intense scrutiny.

Australia, the leader of the Cairns Group that has repeatedly emphasized the need for fairer market-based farm trade, was grilled on its alleged violation of export subsidy commitments by providing “International Freight Assistance Mechanism (IFAM), an AUD 110 million programme that provides government assistance “by meeting a portion of the airfreight costs” of the export of high-value agriculture and fisheries productions.”

Australia replied that the airfreight support was provided specifically for perishable products and they were used for transporting goods in commercial freight.

Canberra said the Covid-19 freight rates are more than the pre-Covid 19 rates, the participant said.

Domestic farm programs adopted by the United States, the European Union, Canada, and India were also subjected to intense questioning by members.

While the US, the EU, Canada, and other developed countries provided domestic farm support to their producers, India offered support for its consumers, said a farm trade analyst.

The US was questioned on its Covid-19 food assistance program which is estimated at $19 billion, including $16 billion in direct support to farmers and ranchers.

The US program, which is seen as a clear breach of its domestic subsidy commitments, is not yet notified to the WTO.

Australia asked the US to clarify on its Covid-19 food assistance program and whether they were notified.

Australia raised the following questions about the US program.

a. When will the United States notify this package to the WTO?

b. How will the USD 16 billion in direct support to farmers and ranchers be classified under the WTO Agreement on Agriculture?

c. How do the payments under the Coronavirus Food Assistance Program compare to the payments the United States provided under the 2018 and 2019 programmes, which were to compensate producers adversely affected by retaliatory tariffs imposed by WTO Members facing unilateral trade actions by the United States?

In a similar vein, according to Brazil, the US Department of Agriculture (USDA) presented details of the Coronavirus Food Assistance Program (CFAP), whose announced budget is USD 16 billion.

“Through the programme, one can receive direct payments of up to $250,000 per eligible producer,” Brazil said, suggesting that “the USDA has defined that the eligible crops will be those whose prices have fallen by at least 5% since January.”

Canada, the EU, and New Zealand among others also posed questions to the US on its Covid-19 farm support programs.

The EU specifically said that it is concerned with the level of support provided, US$19 billion, for its farm producers.

The EU asked the US on its paycheck protection program under which loans are fully “forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities.”

The US said it had uploaded all answers to the WTO on its website: farmers.gov/cfap, suggesting that it will notify its programs in the period 2019-2020 and 2020-2021.

The US argued that its programs are consistent with the WTO rules, pointing out that they do not distort trade.

The US also grilled Canada, the EU, and other countries over their farm support programs during the Covid-19 pandemic.

Members also sought answers from Cambodia over its “prohibition of rice exports”; Canada’s agricultural support package, dairy policies, and farm credits; China’s measures to ensure agricultural input supplies; the European Union’s private storage aid and aid to potato sector and other support measures in the wake of Covid-19 pandemic; India’s Covid-19 stimulus package; Japan’s support package following the Covid-19 pandemic; New Zealand’s international Airfreight Capacity scheme; and Vietnam’s export restrictions on rice.

Also at the meeting, Myanmar notified its export restrictions on rice.

From the questions raised during the meeting, it emerged that the developed countries offered billions of dollars to their producers, as compared to the insignificant support provided by developing countries to their resource- poor farmers, said a participant from a developing country.

 


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