TWN Info Service on WTO and Trade Issues (Oct26/22)
22 October 2026
Third World Network

WTO: LPF talks expose sharp divisions over SOEs & agriculture
Published in SUNS #10538 dated 21 October 2026

Geneva, 20 Oct (D. Ravi Kanth) -- Sharp divisions have seemingly emerged during the World Trade Organization (WTO) reform discussions on 19 October on "level-playing-field" (LPF) issues, with China defending the role of state-owned enterprises (SOEs) and noting that "certain members are currently nationalizing private firms for various reasons," according to people familiar with the discussions.

Brazil is understood to have raised concerns about an Australian proposal framed by the facilitator overseeing the LPF discussions.

While Canberra recognizes that agriculture suffers from significant distortions, the proposal excludes the sector from the LPF debate, Brazil apparently noted, according to people familiar with the discussions.

A trade envoy, who asked not to be quoted, said Brazil argued that LPF issues cannot be reduced to industrial policy and that agriculture must also be included.

The African Group also sharply questioned proposals by Australia and Paraguay, pushing back against what sources described as the facilitator's seemingly one-sided efforts to steer the discussions.

Ahead of the meeting on 19 October, the facilitator, Ambassador Elmer Jose German Gonzalo Schialer Salcedo of Peru, issued a restricted room document (RD/GC/REFORM/4), seen by the SUNS, posing questions for members to consider on the Australian and Paraguayan proposals.

The questions reflected an "activist" approach that sought to steer the discussions towards stringent disciplines on SOEs, said a trade envoy who asked not to be quoted.

Rather than asking members how to restore the binding dispute settlement system to level the playing field or address asymmetries in agriculture, the facilitator said the questions were "intended as guidance only and is entirely optional," while acknowledging that "Members remain free to raise questions during the meeting itself."

Without identifying the source of the questions or the members who had submitted them, the facilitator said: "we have received the following questions for proponents on their written submissions:"

To Australia: "One, what are some reference points that Australia is considering in terms of possible disciplines on SOEs [state-owned-enterprises, an issue that has been brought onto the center stage by the United States, the European Union, and Japan to target China] and transparency?"

"Two, would Australia be able to provide details of how we could develop more "sophisticated market intelligence" [a move to penalize Chinese SOEs] to highlight the extent of issues such as anti-competitive conduct, dependencies and market concentration?"

To Paraguay: "One, how does Paraguay envisage the level-playing field discussions interacting with discussions in the Committee on Agriculture in Special Session, with a view to avoiding possible overlaps?"

The questions appeared aimed at imposing stringent disciplines on SOEs, including through the Agreement on Subsidies and Countervailing Measures, while undermining efforts to treat agricultural subsidies on a par with industrial subsidies, a person familiar with the questions said.

CHINA'S RESPONSE

In a forceful statement at the informal meeting on LPF issues convened by Ambassador Salcedo, China said it appreciated "Australia's view that there is a legitimate role for industrial policy, and reform discussions should strike a balance between preserving legitimate policy goals while mitigating adverse effects on competition and trade."

Without naming the US or other members, China stated that it did "not share the view of a range of Members that resorting to tariffs or investment restriction or other restrictive measures results from insufficient WTO discipline on market [distortion]."

While agreeing with Australia on the "importance of multilateral rulemaking," China said: "We are open to discuss disciplines on government intervention while recognizing that unilateral tariffs, unjustified investment restriction or distortion are themselves significant market intervention."

China challenged the Australian proposal because Canberra "argues that government ownership, control or direction enables trade-distorting support."

Beijing questioned "whether this perspective suggests government ownership inherently compromises fair competition and distorting trade."

China stressed that "state-owned enterprises are established by numerous WTO Members to play a role in their economies," adding that "certain Members are currently nationalizing private firms for various reasons."

Australia clarified during the meeting that it did not advocate privatization or discrimination against SOEs.

China further argued that "to presume that government ownership inherently causes unfair competition and trade distortion is inaccurate," adding that "such an assumption would lead to discriminatory treatment against the enterprises with different ownership structure."

Offering advice to proponents seeking stringent disciplines on SOEs - namely the US, the EU and Japan - China said that "discussions on WTO reform, including potentially on unfair competition of enterprises of different ownership, should not proceed from such a flawed premise."

BRAZIL'S RESPONSE

Brazil raised several concerns, according to people present at the meeting. It cautioned that dividing members into "major and minor" categories would leave little room for progress on LPF issues or outcomes of interest to all members.

Brazil urged members to stop treating the discussions as an exercise for major members followed by minor members, as though the WTO had a two-tier membership.

Brazil's trade envoy, Ambassador Guilherme de Aguiar Patriota, also reportedly told the facilitator that framing questions in advance made the discussions resemble the Trade Policy Review Body, which was not their purpose.

The Brazilian trade envoy is understood to have said that the exercise was an informal conversation in which spontaneous and dynamic exchanges could help members advance the process.

Regarding the Australian paper, Brazil recognized the importance of addressing trade distortions arising from government intervention, as well as Australia's acknowledgment that industrial policy can serve legitimate development objectives.

However, Brazil expressed sharp concern that despite recognizing significant distortions in agriculture, the Australian paper excluded the sector from the LPF discussions, according to a trade envoy who asked not to be quoted.

Crucially, Brazil argued that the LPF issues cannot be reduced to industrial policy, SOEs and overcapacity. Agriculture must be central to the discussions, the trade envoy said.

Brazil also highlighted the persistent asymmetry between non-agricultural market access (NAMA) and agriculture in the WTO rules, an imbalance acknowledged by a majority of members, according to another trade envoy.

Barriers are lower for high-value-added manufactured goods and digital-economy products, while agricultural products face high trade-distorting subsidies, tariffs and market-access barriers, Brazil reportedly told members.

This NAMA-agriculture asymmetry has come to the forefront of the LPF discussions and requires a solution, Brazil is understood to have said.

Members cannot address contemporary industrial distortions while ignoring longstanding distortions in agriculture, it argued.

A credible LPF discussion must therefore be balanced and cover all sectors, it said.

Brazil also appeared to support Paraguay's proposal, which emphasized the issue of agriculture.

Ambassador Patriota reportedly urged Paraguay to take a step forward by supporting the emerging agricultural issues initiative advanced by Brazil and other members.

The initiative seeks to address broader agricultural concerns not currently captured in the stalled negotiations in the Committee on Agriculture in Special Session (CoA-SS).

Without naming the countries, Brazil expressed disappointment with members who avoid discussing agriculture on grounds that only the CoA-SS is the appropriate forum for such an issue.

Brazil argued that the same logic applied to SOEs and industrial subsidies, which members refuse to discuss in the LPF track because they fall within the remit of the Negotiating Group on Rules.

SOEs, Brazil reportedly argued, are not the only channel through which trade-distorting or unfair practices affect trade.

According to an African trade envoy, Brazil said that "to deal with these asymmetries we need to discuss also government-directed support or protection directed towards non-SOEs."

Brasilia also cautioned that state ownership alone does not determine market distortions.

Government control, intervention, subsidies and preferential treatment can equally benefit private companies, including through tariff protection, as seen in the last year.

Brazil warned against turning competitive neutrality into a principle that prevents developing members from pursuing legitimate industrial policies.

Differences in fiscal capacity, technological capability and stages of development must be taken into account, it said.

On proposals to use competition policy to address distortions involving SOEs and other corporations, whether state-owned or private, Brazil reportedly noted that a similar approach had failed to advance in the past.

The issue is complex and extends beyond trade, potentially drawing discussions into national corporate law, which lies outside the WTO's remit, Brazil argued.

Outside the WTO, however, relevant reference points could include the OECD Principles of Corporate Governance and the OECD Guidelines on Corporate Governance of SOEs.

Members should not overstep the WTO's core mandates by taking on more than they can realistically address, Brazil is understood to have said.

Brazil also expressed serious concern, not about improving notification and transparency requirements themselves, but about legitimizing counter-notification practices, according to an African trade envoy.

Australia and the US recently subjected India to several agricultural counter-notifications, drawing strong criticism from New Delhi.

Responding to the Australian trade envoy's proposal to enhance counter-notifications using members' own investigations, assessments and research rather than factual information provided by the Secretariat, Brazil reportedly warned that such an approach could quickly spiral out of control.

Members could find themselves facing proliferating counter-notifications used to pressure them with flimsy, unilaterally-generated information or data, Brazil argued. Such a practice would not be supported by existing rules.

Normalizing counter-notifications would also reinforce unilateralism and move the WTO further away from a multilaterally agreed, rules-based trading system, Brazil reportedly said.

Responding to a US question about whether members could address broader global trade imbalances with the required urgency, Brazil expressed doubt, suggesting that progress would be difficult unless members remained open to discussion.

Brazil also stressed that the process must address the concerns of all members and not become a conversation confined to so-called major members, according to people familiar with the discussions.

AFRICAN GROUP RESPONSE

Responding forcefully to the facilitator's questions, the African Group said "the two papers [Australia and Paraguay's proposals] approach the level playing field from different entry points, but together they raise an important question for this track: whether fairness is to be examined selectively, or across the sources of distortion that affect Members at different levels of development."

Namibia, the African Group's coordinator, said that the Australian paper "notes positively the recognition that industrial policy can serve legitimate objectives, including economic development, and that policy space should be preserved."

Namibia also acknowledged "the proposed stocktake of existing rules [in the Australian paper]," but said "the paper moves quickly from identifying concerns to possible new disciplines on state-owned enterprises and transparency."

Namibia stressed: "the prior question remains whether a specific legal or implementation gap has first been demonstrated, and whether the proposed response would preserve development policy space and special and differential treatment."

Welcoming Australia's clarification, Namibia posed three questions: "First, how would Australia distinguish trade-distorting support from legitimate development support, particularly where SOEs are used to address development needs or market failures? (WT/GC/REFORM/W/16, paras. 2.3 and 2.5-2.7)"

"Second, what additional obligations does Australia envisage for SOEs beyond those already provided under the SCM Agreement and GATT Article XVII? (WT/GC/REFORM/W/16, paras. 2.6-2.7)"

"Third, if agriculture is excluded from this initial work, how would Australia ensure that the level playing field discussion does not become unbalanced? (WT/GC/REFORM/W/16, para. 2.4)"

Regarding Paraguay's paper, the African Group said that it "sees important common ground in the proposition that the level playing field cannot be confined to industrial subsidies and that agriculture must form part of the discussion."

The group added, "the emphasis on cumulative effects of different support measures also merits examination."

While noting that the Paraguayan paper "indicates that further conceptual and empirical detail will follow," the group sought clarification on two issues:

"First, how does Paraguay envisage comparing the level playing field in agriculture and non-agricultural goods while preserving existing mandates, special and differential treatment and development flexibilities? (WT/GC/REFORM/W/17, paras. 1.5(b)-(d) and 1.6)"

"Second, how does Paraguay propose to assess the cumulative effects of agricultural policies, particularly given the different circumstances and capacities of Members? (WT/GC/REFORM/W/17, paras. 1.4, 1.5(e) and 1.6)"

Against this backdrop, the African Group argued that "a pragmatic way forward is to apply the same test to all proposals under this track: identify the precise problem; identify the relevant existing WTO rule or mandate; establish the evidence of the gap and its trade and development effects; and only then consider the least burdensome and proportionate response."

Such an approach, it said, "would allow Members to deepen the discussion without prejudging whether new rules are required."

During the second session on "transparency, notification, and compliance," the African Group commented on the Secretariat's presentation and reports, saying that "the reports are useful because they permit a more precise diagnosis."

The reports "confirm that notification gaps do not have a single cause," the group said, adding that "the Secretariat identifies, among other factors, complex inter-agency coordination, staff rotation and resource constraints, ambiguity in the scope of obligations, overlap between notification requirements, competing workloads and timing difficulties."

Consequently, "a notification gap should not automatically be equated with unwillingness to comply," the African Group said.

It also noted that "the evidence also shows that practical solutions already work," saying that "standardised and, where appropriate, voluntary templates; online submission tools; targeted reminders; simplified procedures; direct Secretariat assistance; experience-sharing; and problem-driven technical assistance have improved notification performance in several bodies."

Namibia said that "the African Group considers that these lessons should be the starting point for reform."

Against this backdrop, the African Group proposed three conclusions:

"First, diagnosis must precede consequences. Before discussing stronger incentives, counter-notification or other compliance responses, Members should distinguish whether a gap arises from capacity constraints, complexity or duplication, uncertainty in the requirement, or deliberate non-compliance. Different causes require different responses."

"Second, the existing committee architecture should remain central. The Secretariat's structured summary shows that notification obligations differ substantially across agreements and that subsidiary bodies have developed agreement-specific solutions. A horizontal reform should therefore support, not displace, this work or create a new one-size-fits-all layer of obligations."

"Third, the data must be used with care. G/L/223/Rev.33 itself states that its listing does not assess the qualitative adequacy of notifications or their effect on Members' rights and obligations. Quantitative notification status alone is therefore not a sufficient basis for presumptions of substantive non-compliance or for legal consequences."

In response to the facilitator's question on "how to carry the work forward," the African Group proposed what it called "a practical Member-driven exercise," suggesting that "for each major notification problem, Members could identify: the existing obligation; the observed gap; the cause of that gap; response."

The group stressed that "priority should be given to simplification, removal of duplication, digital tools, targeted technical assistance and capacity building, and predictable Secretariat support," adding that the "exercise demonstrates a genuine legal gap should Members consider whether further disciplines are necessary."

In conclusion, the African Group said: "This approach would strengthen transparency while remaining proportionate, development-sensitive and consistent with Members' existing rights and obligations."