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Info Service on WTO and Trade Issues (Jul21/13) Geneva, 14 Jul (D. Ravi Kanth) – The African Group has highlighted the damage caused by the European Union, the United States, Japan, Switzerland, and Canada among others through their billions of dollars of most trade- distorting domestic farm subsidies. In a comprehensive paper (Job/Ag/203) titled, “Domestic support: disciplines on final bound AMS entitlements”, the African Group has called for sharp reductions in the Aggregate Measurement of Support (AMS) that indicates the volume of the most trade-distorting domestic support as well as the product-specific support. At a time when the EU, the US, and the Cairns Group of farm exporting countries are seeking sharp cuts in Article 6.2 of the Agreement on Agriculture (AoA) dealing with special and differential treatment for developing countries and the de minimis support, the African Group pointed out that the real problem lies with the EU, the US, Japan, and other industrialized countries in exacerbating the prevailing “inequities” in global farm trade, as compared to the developing countries. In sharp contrast, the developing country Members have zero Final Bound AMS as compared to the high levels of AMS being provided by the four major industrialized countries. Earlier, China and India had called for the elimination of the most trade-distorting domestic subsidies, namely the AMS. THE BIG PICTURE In its paper, the African Group explained that under Article 6.3 of the Agreement on Agriculture and as specified in Part IV of a Member’s Schedule, 32 Members (counting the EU as one) enjoy Final Bound Aggregate Measurement of Support above the de minimis levels of 5%. The EU, the US, Japan, Switzerland, and Canada among others account for 96% of total Final Bound AMS entitlements while the developing country Members account for the residual 3.9%. Interestingly, the remaining 104 developing countries have zero Final Bound AMS entitlements. According to the African Group proposal, the EU has Final Bound AMS entitlements of USD 81 billion; Japan, USD 36 billion; and the US, USD 19.1 billion. Even the distribution of the most trade-distorting domestic subsidy entitlements remains highly skewed, with six WTO Members accounting for 92% of total Final Bound AMS entitlements. The European Union accounts for 51.4%, Japan 23.1%, US 12.1%, Russian Federation 2.8%, Switzerland 2.7% and Canada 2.1% of such Final Bound AMS entitlements. Further, these additional entitlements add two types of bias to product-specific AMS. First, any product may receive AMS far above the de minimis level that other countries are restricted to. As an illustrative example, the EU’s AMS on skimmed milk powder (SMP) has been high and increasing from 49.1% of value of production (VOP) in 2008-09 to 88.6% of VOP in 2017-18. In a similar vein, the US AMS was 57% on sesame, 59% on sugar, 16% on cotton, 14% on millet and 16% on peanuts in 2014. It was 27% on mohair in 2009 and ranged between 23% to 12% in dairy between 1995 and 2009. However, the de minimis limit is 10% of VOP for developing countries and 5% for developed countries. Little wonder, that these countries are exceeding both their own and even developing country limits, said the African Group. These high levels of AMS and product-specific subsidies “allow them much higher flexibility and market power to be focused on products of choice compared to other developing countries.” Also, in 2013, the US focused 23% of its product-specific AMS on dairy, 22% on corn and 12% on livestock; the EU focused 39% of its product-specific AMS on butter, 16% on SMP and 29% on common wheat; and Canada focused 65% of its total product-specific AMS on milk alone. “Therefore,” the African Group argued, “the Final Bound AMS entitlements not only allow higher absolute amounts of domestic support to be given by the Members enjoying such entitlements compared to other Members but also allow much higher flexibility and policy space in assigning the support to specific products.” In the wake of the worsening COVID-19 pandemic, several developed countries, “most notably the US and the EU, have given very high levels of domestic support to their farmers as pandemic support above the de minimis levels accounted through their Final Bound AMS entitlements but these subsidies may have even exceeded the entitlement levels in some cases.” The African Group has also proposed a draft ministerial decision to be considered by trade ministers at the WTO’s 12th ministerial conference (MC12) to be held in Geneva in end-November. The draft decision calls for a cut in the final bound AMS entitlements, suggesting that “current Final Bound AMS entitlements allow for large concentration and higher policy flexibility in specific products as there is no limit on amount per product and can exceed the product-specific de minimis limits that other Members are required to adhere to.” The African Group proposed three alternative options for disciplining such final bound AMS levels to de minimis levels primarily asking the top entitlement holders to reduce first. The first alternative suggests disciplines on those Members with a share of 10% or above in all Members’ total Final Bound AMS entitlements. The second alternative proposes a combination of the first or those with high shares in global exports should cut down their FB AMS, while the third option suggests countries discipline FB AMS in respect of each agricultural product where the total product-specific support has exceeded 25% of the value of production as notified to the WTO any time within the last five calendar years. For each alternative, different time periods are offered for different categories of countries and for non-product specific support. Special and differential treatment options are also suggested with more lenient time periods or final levels for implementation for developing and least-developed countries. The proposed text on the three alternatives is the following: [ALT 1 1. All Members with Final Bound AMS entitlements exceeding applicable de minimis levels and accounting for a share of 10% or above in all Members’ total Final Bound AMS entitlements shall cap their total product-specific AMS at the de minimis level for each agricultural product within a period of three calendar years from the date of this Decision. 2. All other Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total product-specific AMS for each agricultural product at the de minimis level within a period of six calendar years from the date of this Decision. 3. In addition, all Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total non product-specific AMS at the de minimis level within a period of five calendar years from the date of this Decision. 4. [Alt 1: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at the de minimis level.] [Alt 2: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at [50]% of its average value in the last five calendar years as notified to the WTO.]] [ALT 2 1. All Members with Final Bound AMS entitlements exceeding applicable de minimis levels; (i) either accounting for a share of 10% or above in all Members’ total Final Bound AMS entitlements, or (ii) accounting for x% of global exports of WTO Members over the last [3] years in that product shall cap their total product-specific AMS for each agricultural product at the de minimis level within a period of three calendar years from the date of this Decision. 2. All other Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total product-specific AMS for each agricultural product at the de minimis level within a period of six calendar years from the date of this Decision. 3. In addition, all Members with Final Bound AMS entitlements exceeding applied de minimis levels shall cap their total non product-specific AMS at the de minimis level within a period of five calendar years from the date of this Decision. 4. [Alt 1: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at the de minimis level.] [Alt 2: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at [50]% of its average value in the last five calendar years as notified to the WTO.]] [ALT 3 1. All Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total product-specific AMS at the de minimis level in respect of each agricultural product where the total product-specific support has exceeded 15-20% of the value of production as notified to the WTO any time within the last five calendar years, within a period of three calendar years from the date of this Decision. 2. All other Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total product-specific AMS at the de minimis level in respect of all other agricultural products within a period of six calendar years from the date of this Decision. 3. In addition, all Members with Final Bound AMS entitlements exceeding applicable de minimis levels shall cap their total non product-specific AMS at the de minimis level within a period of five calendar years from the date of this Decision. 4. [Alt 1: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at the de minimis level.] [Alt 2: Developing country Members with Final Bound AMS entitlements exceeding applicable de minimis levels covered under paragraphs 1, 2 and 3 above shall have double the time period specified in paragraphs 1, 2 and 3 to cap their relevant AMS at [50]% of its average value in the last five calendar years as notified to the WTO.]]
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