PSH must cover all DCs and not be country-specific

The permanent solution being negotiated at the WTO on public stockholding programmes undertaken for food security purposes should address the needs of all developing countries, the G33 country grouping has said.

by D. Ravi Kanth

GENEVA: The G33 farm coalition led by Indonesia has called for a permanent solution for public stockholding programmes to address the concerns of all developing countries, instead of any one country-specific solution, at the WTO’s eleventh Ministerial Conference in Buenos Aires in December, trade envoys told the South-North Development Monitor (SUNS).

As attempts to arrive at a permanent solution are intensified, several members of the G33 seem concerned that a country-specific solution is being talked about behind the scenes by some powerful deal brokers at the WTO along the lines of what was done on export subsidies at the tenth Ministerial Conference in Nairobi in 2015, said several trade envoys who asked not to be quoted.

India, which is a leading member of the G33, has demanded that the permanent solution must cover the food security programmes implemented by all developing countries in a covered agreement that would provide legal certainty, as was the case with the Trade Facilitation Agreement.

During a meeting convened by the WTO Director-General Roberto Azevedo with trade envoys from 27 countries on 17 March, Indonesia delivered an unambiguous message on behalf of the G33 coalition that the permanent solution for public stockholding for food security purposes (PSH) “shall take into account elements contained in our proposal dated 17 July 2014, as they provide Members with a reasonable way in addressing the food security issue faced by not only G33 members, but also other developing countries.”

In its 17 July 2014 proposal, the G33 advocated amendments to Annex 2 of the WTO Agreement on Agriculture (AoA) on the basis of three elements:

(i) To add new sub-paragraph (h) to the existing Paragraph 2 of Annex 2 of the AoA with a view to including certain policies and services designed to promote rural development and poverty alleviation adopted in developing countries;

(ii) To modify the existing footnote 5 of Annex 2 of the AoA so as to provide that acquisition of stocks of foodstuffs by developing-country members with the objective of supporting low-income or resource-poor producers shall not be required to be accounted for in the Aggregate Measurement of Support (AMS);

(iii) To modify the existing footnotes 5 and 6 of Annex 2 of the AoA with a view to reinforcing and supplementing the proposed modification to footnote 5 and also strengthening the existing footnotes 5 and 6 further so as also to cover the programmes designed to lower prices to more reasonable levels (as compared to the 1986-88 reference period prices for AMS calculation).

Indonesia also said “the existing provisions on public stockholding for food security purpose under the current WTO rules will not be able to address the real need of developing members to effectively support their low-income or resource-poor farmers, nor to fight hunger and rural poverty.”

More importantly, the AoA does not provide “adequate policy space” for developing countries to implement their justifiable food security programmes.

This is more so in the context of “higher inflation and increasing wages in developing countries that have been building up over the years – which are eroding and inundating the flexibility”, Indonesia said.

Therefore, the envisaged permanent solution “must work for all developing countries who are facing food security challenges but are constrained by the current inequitable Uruguay Round disciplines”, Indonesia emphasized.

In his introductory remarks at the 17 March meeting, Azevedo said that the permanent solution is neither an Indian issue nor an issue of the G33, according to a trade envoy present at the meeting. He acknowledged that it is a “collective members’ issue” and therefore every member has to work hard to find the permanent solution given the short time before the eleventh Ministerial Conference.

Azevedo also suggested that the permanent solution must be found between the G33 proposal and the interim solution agreed by the trade ministers at the WTO’s ninth Ministerial Conference in Bali in 2013.

But the moot issue is whether he can convince the likes of Brazil, the United States, Canada, the European Union, Paraguay, Pakistan, Thailand and Australia which have repeatedly stonewalled attempts to engage in a serious conversation based on the G33 proposal on grounds that it would undermine the AoA.

At a time when major developed countries have shifted their Amber Box subsidy payments to the Green Box, which includes $150 billion in subsidies for the food stamps programme in the US, it has become easy to frustrate the G33’s efforts to find a credible permanent solution, said a former trade envoy from an industrialized country.

Inflexible positions

In response to Azevedo’s remarks, Canada, Pakistan, Paraguay, the European Union and Thailand, among others, stuck to their inflexible positions.

Canada, for example, said that the G33 proposal for the permanent solution offers “carte blanche”, implying unrestricted policy space to developing countries. Further, market price support programmes underlying the PSH cannot be included in the Green Box and such a scheme is a red line and not politically viable, Canada maintained, according to trade envoys present at the meeting. Canada suggested rhetorically that if the Indian Food Corporation procures wheat at prices double the market prices, it would have an impact on the international market. Therefore, the permanent solution must take into consideration the systemic/export impact on the AoA, Canada said.

Canada further said the permanent solution for PSH could have potential impact on import displacement. It sought to know why no developing country had notified the market purchase programmes.

Canada vehemently argued at the meeting that the interim solution for PSH which was agreed at Bali offered a fine balance between food security and potential distortions, suggesting that members need to go back to the original proposal.

Pakistan said that it doesn’t deny the importance of food security but that food security cannot be equated with stockholding programmes. It suggested the need for transparency about public stockholding programmes. Further, it argued, the permanent solution must include adequate safeguards to ensure that it doesn’t contribute to unsustainable production and gains for middlemen.

Paraguay said the permanent solution must not lead to trade-distorting support.

The EU said there are two sides to the issue of the permanent solution for PSH. It said the carte blanche approach for including market price support programmes in the Green Box would not work. The EU suggested that it is possible to work on the basis of a permanent solution based on the interim solution.

The other side, maintained the EU, is that if members want a much broader solution of changing the rules, then it can be possible only in the context of broader negotiations on domestic support.

Norway said the interim solution is a good basis and it has to be implemented in toto, while Japan asked the G33 proponents to provide data and information about their current programmes.

The US said it does not have political guidance yet but argued that the proposed permanent solution must not take things backwards, implying that more flexibilities cannot be added to the existing interim solution.

India maintained that the G33 had already offered the options for finalizing the permanent solution. It said that there has to be legal certainty to the permanent solution as and when it is finalized before the eleventh Ministerial Conference.

In short, the G33 members face a herculean battle in the next nine months for ensuring an outcome that would provide a credible and legally sound permanent solution for PSH for all developing countries at the Buenos Aires meeting in December, trade envoys said. (SUNS8426)                                           

Third World Economics, Issue No. 635, 16-28 February 2017, pp3-4