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TWN
Info Service on WTO and Trade Issues (Oct21/12) Geneva, 12 Oct (D. Ravi Kanth) – As the United States and the European Union appear to oppose any outcomes in the agricultural package at the upcoming World Trade Organization’s 12th ministerial conference (MC12), the developing countries may suffer yet another blow in their attempts to secure any credible decisions in the mandated areas of their core interests, said people familiar with the development. The mandated outcomes on the permanent solution for public stockholding programs for food security (PSH); the special safeguard mechanism (SSM); cotton; and the elimination of trade-distorting domestic subsidies, which are of crucial importance to the developing countries, now hang in the balance at MC12, scheduled to begin in Geneva on 30 November, said people, who preferred not to be quoted. For the third consecutive time in the WTO’s biennial ministerial conferences beginning from the 10th ministerial conference in Nairobi, Kenya (December 2015) followed by the 11th ministerial conference in Buenos Aires, Argentina (December 2017), and now at the much-delayed MC12 in Geneva, the permanent solution for PSH, SSM, and cotton are unlikely to be concluded because of opposition from the US, the EU, and the Cairns Group of farm exporting countries led by Australia. The WTO director-general Ms Ngozi Okonjo-Iweala, at a General Council (GC) meeting on 7 October, said “on agriculture, there was a recognition that this is probably the most difficult, where we are furthest away.” She said that “there is a lot of work to be done to come together with something that would be acceptable at MC12.” Ms Okonjo-Iweala said that “I would say that the spirit emerged to have a basic package and a strong work programme – following that with specifics and not just mentioning the word “work programme” – but to put some teeth in it, and timelines”. Hence, the DG seemingly wants members to settle on a post-MC12 work program, thereby dashing hopes for any outcome on agriculture at MC12. Continuing her comments on agriculture at the General Council meeting, she said “one issue that I mentioned in my remarks was the need to be cognizant of the impact of the pandemic on low-income and low, middle-income countries, and the need to take into account this issue when we think about food security and what it means. This is a real issue that these countries have to deal with.” However, the DG did not mention at the GC meeting the $700 billion in farm subsidies that are provided by the developed countries, which she had mentioned at the Paris ministerial meeting earlier in the week. STAGGERING LEVELS OF FARM SUBSIDIES BY US & EU Part of the problem is the staggering levels of trade-distorting farm subsidies provided by the US and the EU, who want to continue them without any reform of agriculture. This is an attempt to conceal their Aggregate Measurement of Support (AMS) – referred to as the most trade- distorting domestic subsidies – which seems to have gone above their scheduled commitments, say farm trade negotiators. For example, the US has notified figures to the WTO on Washington’s aggregate measurement of support to the tune of more than $18 billion in the marketing year 2019/2020, resulting from the huge subsidies provided by the Trump administration on account of the US-China trade war as well as the COVID-19 pandemic. The figures suggest that Washington’s overall trade-distorting domestic support programs are below the de minimis level of $19 billion, but doubts are being cast as to whether the US is adopting some rather clever accounting practices in an attempt to conceal the likely breach that may have already taken place, said people, who asked not to be quoted. US FARM SUBSIDIES In a 33-page document notified to the WTO’s Committee on Agriculture on 30 September, the US said that its calculation of “domestic support” during the marketing year from 01-10-2019 to 30-09-2020 amounted to US$18,247,479 million. The “big ticket” domestic subsidy programs involve beef, cattle, and calves (US$4.6 billion), corn (US$4.63 billion), cotton (US$1.2 billion), dairy (US$2.39 billion), soy beans (US$1.89 billion), and sugar (US$1.83 billion) among others. In addition, product-specific support for the marketing year 01-10-2019 to 30-09-2020 for sugar is to the tune of US$1.512 billion. The non-product specific support during the same period is US$13.223 billion, of which price-loss coverage programs secured US$1.9 billion and the market facilitation program secured close to US$9 billion. Apparently, the market facilitation program secured a lump sum for years. More importantly, the US notified that its “green box” subsidies, which are exempt from any reduction commitments, amount to US$139 billion, of which domestic food aid (food stamps) comes to over US$120 billion. Early this year, the US had notified a revision in the marketing year for 2017-18 in which it had argued that “all standing and ad hoc disaster and emergency relief programs are notified on a fiscal-year basis that aligns with marketing year of the notification (in the fiscal year 2018, standing ad hoc disaster and emergency assistance programs included the Emergency Assistance for Livestock, Honey Bees, and farm-raised fish (ELAP), the Livestock Indemnity Program (LIP), the livestock forage disaster program (LFP), the Tree Assistance Program (TAP), the Wildfires and Hurricanes Indemnity Program (WHIPS), and the Market Facilitation Program (MFP))”. As a result, outlays for WHIPS and for standing disaster relief programs for livestock (ELAP, LIP, LFP, and TAP) are now notified on a fiscal-year basis that aligns with the notification marketing year. Last year, Canada and China had raised sharp questions about the US notification, alleging that the US had not provided a transparent account of its subsidy programs, said a person familiar with the development. For example, Canada quoted the US Congressional Research Service (CRS) report released on 21 October last year over the Market Facilitation Program of 2018 and 2019 as well as the two coronavirus food assistance programs from 2020, against the US annual WTO domestic support obligations. The CRS report, according to Canada, “concluded that the United States is likely to be in compliance with WTO spending limits but could exceed the annual US spending limit of $19.1 billion in both 2019 and 2020.” The former US agriculture negotiator Joseph W Glauber, together with co-author Vincent Smith, had argued in a “Policy Paper” on 2 January 2021 that “during the Trump administration, there has been an unprecedented increase in the level of domestic support provided to US agricultural producers.” They argued that “direct farm supports, including price and income support programs, federal crop insurance, and supplemental assistance to compensate losses due to the trade war with China and the pandemic, have accounted for more than one-third of net farm income.” Consequently, “those payments have threatened to push the United States over its World Trade Organization (WTO) domestic support obligations and increased its vulnerabilities to potential dispute settlement challenges in the WTO,” Glauber and Smith said. In short, these staggering levels highlighted in the US subsidy programs may have a bearing on how amenable the US would be to undertake serious domestic reforms in the ongoing agriculture negotiations for MC12. For the last couple of months, many developing countries have consistently demanded the elimination of the “amber box” subsidies provided by the US to the tune of $19 billion and the European Union of over $70 billion, trade negotiators said. Studies show that direct payments as a percentage of agriculture value of production in some developed countries are higher than 15 per cent, namely, Norway (28.18 per cent), Switzerland (18.65 per cent), the EU (15.06 per cent), i.e, these countries are giving direct payments to farmers in excess of 5 percent of their annual value of production (VOP) while the de minimis limits prescribed for trade-distorting AMS under Article 6.4 of the Agreement on Agriculture (AoA) are 5 per cent of VOP for developed and 10 per cent of VOP for developing countries. Contrary to the definition of Green Box subsidies, there is huge theoretical and empirical literature that shows that these Green Box subsidies distort trade. The Commonwealth Secretariat estimated that in the period 1995-2007, GB (Green Box) subsidies increased agricultural productivity by approximately 60 per cent in the EU and 51 per cent in the US, boosting their trade competitiveness. A capping of GB subsidies at 2001 levels can lead to a major restructuring of agricultural exports in favour of developing countries with the cost of food declining for net-food-importing countries, it said. (See https://www.twn.my/title2/briefing_papers/twn/Green%20Box%20TWNBP%20Jul%202021%20Ranja.pdf and https://www.thecommonwealth-ilibrary.org/index.php/comsec/catalog/view/214/211/1532)
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