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Info Service on WTO and Trade Issues (Sept21/26) Geneva, 28 Sep (D. Ravi Kanth) – The fate of the permanent solution for public stockholding programs for food security (PSH), as demanded by a large majority of developing countries, hangs in the balance at the upcoming World Trade Organization’s 12th ministerial conference (MC12). With just about two months left for MC12 that is officially scheduled to begin on 30 November, the United States, the European Union, and members of the Cairns Group of farm-exporting countries seem determined to block the mandated permanent solution, according to people familiar with the development. The US Trade Representative (USTR) Ambassador Katherine Tai, during her meeting with the WTO Director- General Ms Ngozi Okonjo-Iweala on 22 September, apparently indicated Washington’s three priorities for MC12 in which agriculture did not figure at all, according to a report in Washington Trade Daily on 23 September. For the US, the three major priorities at MC12 are a “meaningful” outcome on fisheries subsidies; the WTO’s response to the COVID-19 pandemic; and reforms involving the negotiating function of the WTO that seek differentiation among developing countries on the use of special and differential treatment. It is against this backdrop that a large majority of developing countries could face the prospect of one of their core issues, i.e., the permanent solution for public stockholding programs for food security being eclipsed once and for all, said an analyst who asked not to be quoted. Ironically, the countries that are opposed to the permanent solution for public stockholding programs for food security had actually used them in the past before they became popular in the developing countries. On 23 September, during a regular meeting of the WTO’s Committee on Agriculture, the Rome-based UN Food and Agriculture Organization (FAO) made a detailed presentation on the public stockholding programs and how they have been historically used by the European Union and several other developed countries, according to people familiar with the development. FAO’S ASSESSMENT ON PSH At the meeting, a senior FAO official said governments in Asia and the Pacific, Europe, Latin America and the Caribbean, and North America made public provision of food stocks a common feature of agricultural policy throughout history, people said. For governments in both North and South, promoting food security, managing price risks, and supporting rural incomes have been major priorities, particularly since the 2008 food crisis, the FAO official argued. In the recent past, the PSH programs suffered a big blow due to the structural adjustment measures (imposed by the International Monetary Fund) and market liberalization in the 1980s and 1990s, according to the FAO official. With the COVID-19 pandemic having caused an unprecedented disruption globally, the expansion of food procurement and distribution operations has assumed more importance than ever. More so, the market uncertainty has forced governments to adopt PSH policies to address the food needs of their resource-poor and low-income people. Explaining the ways in which PSH programs can help governments in the Global South, the FAO official provided an account of the different policy instruments underpinning the PSH programs. The official suggested that emergency stocks would reduce the vulnerability of consumers to supply or food price shocks caused by emergencies. In a similar vein, buffer stocks aim to stabilize prices over the regular agricultural production cycle to reduce the vulnerabilities of both consumers to price shocks, and of producers to income variability. And finally, stocks for domestic food distribution/food aid seek to promote physical and economic access to adequate quantities of food for certain target populations. According to the FAO official, the three basic elements of the PSH program include procurement, management, and release of stocks. Based on these three elements, governments take recourse to domestic agriculture support and trade policy measures, the FAO official suggested. Several measures are invariably used for achieving these objectives and they include: 1. Market price support linked to procurement of stocks; 2. Import barriers to maintain minimum procurement prices; 3. Consumer support/social safety net measures for the release of stocks at subsidized prices; 4. Export restrictions to maintain low prices for consumers; and 5. Export subsidies for the release of stocks on the world market. The FAO official suggested that PSH policies can play an important role for both poor farmers and consumers, with guaranteed outlets preventing distress at low prices in places where infrastructure and risk management instruments are lacking. Countries in Asia and the Pacific like China, India, Indonesia, Pakistan and the Philippines seem to have opted for procurement from domestic farmers at administered prices. While China releases stocks through auctions when market prices or demand are high, India, Indonesia, and the Philippines operate food distribution programs aimed at specific target populations (in India, it is referred to as the public distribution system where targeted populations are offered food grains at below market prices). Since the 2007/2008 food crisis, countries like Brazil revitalized the national food supply agency to manage food stocks for both emergency purposes and price stabilization. The FAO official suggested that procurement at government-set prices or administered prices can be linked to any type of public stocks in maize, rice and wheat. Over the past ten years, the administered prices in national currencies have been rising while international prices have tended downward. Several countries have also witnessed the rising trend in administered prices being somewhat reversed because of conversion to US dollars and due to significant currency depreciation, said the FAO official. Also, the administered prices can experience a downward trend if they are adjusted for inflation. DENIAL OF PERMANENT SOLUTION BY US, EU & AUSTRALIA It is well established that the methodology adopted in the calculation of market price support (MPS) based on 1986-88 reference prices, and the de minimis threshold (of 10% of the value of production) for calculating countries’ domestic support under WTO rules needed fundamental changes. However, the US, the EU, Australia, and several other farm-exporting countries from South America fiercely opposed any change in these determinants of domestic support. In the run-up to WTO’s tenth ministerial conference in Nairobi, Kenya, in 2015, the G-33 group of more than 40 developing and least-developed countries proposed the permanent solution based on three options. The options include: (1) adding a new paragraph to include market price support for food security in the so-called green box disciplines of the Agreement on Agriculture that are exempted from any subsidy reduction commitments; (2) modifying the existing rules to ensure that the acquisition of food stocks by developing countries to support low-income and resource-poor farmers is not required to be calculated under the current method of calculating aggregate measurement of support (AMS, or trade-distorting farm subsidies); and (3) modifying or amending the rules that calculate subsidies based on the so-called external reference period of 1986-88 prices, which was decided during the previous Uruguay Round of negotiations. The G-33 proposal was fiercely opposed by the US at the Nairobi meeting, following which the issue was deferred to the eleventh WTO ministerial conference (MC11) held in Buenos Aires, Argentina in December 2017. However, a modest proposal for the permanent solution as submitted by India at MC11 was blocked by the US. The US also blocked any outcome on agriculture at the Buenos Aires meeting. Undeterred by opposition from the US, the EU, Australia and some South American countries, the G-33 group circulated its proposal on 15 September to drive home the message that the permanent solution is crucial for a successful MC12 in Geneva. The group said that “taking note of the Ministerial Decision of 7 December 2013 (WT/MIN(13)/38 – WT/L/913), the General Council Decision of 27 November 2014 (WT/L/939) and the Ministerial Decision of 21 December 2015 (WT/MIN(15)/44 – WT/L/979)” and recognizing “the importance of public stockholding for food security purposes for developing country Members and Least Developed Country Members (LDCs)”, ministers must decide on the permanent solution. According to the G-33, the central elements of the permanent solution for PSH programs must include: 1. Members agree to put in place a permanent solution (this decision shall be an integral part of the Agreement on Agriculture, including but not limited as a subsequent annex of the Agreement) as set out below, for the use of public stockholding for food security purposes by developing country Members and LDCs. 2. Provided that the conditions set out in paragraphs 3 to 4 are met, Members shall not challenge through the WTO Dispute Settlement Mechanism, compliance of a developing Member with its obligations under Articles 6.3 and 7.2(b) of the Agreement on Agriculture (AoA) in relation to support provided for foodstuffs in pursuance of public stockholding programmes for food security purposes, that are consistent with the criteria of paragraph 3, footnote 5, and footnotes 5 and 6 of Annex 2 of the AoA. 3. A developing Member benefiting from this Decision must have notified the Committee on Agriculture that it is exceeding or is at risk of exceeding either or both of its Aggregate Measurement of Support (AMS) limits (the Member’s Bound Total AMS or the de minimis level) as result of its programmes mentioned above in respect of the concerned foodstuff for which the Member is seeking benefit of paragraph 2 of this Decision. 4. For the programmes referred to in paragraph 3, the Member shall notify to the Committee on Agriculture in the format specified under the Annex to this Decision. 5. A developing Member shall endeavour not to export from the procured stocks covered under paragraph 1 of this Annex unless requested by an importing Member. 6. Paragraph 5 shall not apply to exports for the purposes of international food aid, or for non-commercial humanitarian purposes. With just about two months left for MC12, the developing countries have one last opportunity to wage a grim battle for securing the permanent solution for PSH.
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