No convergence on PSH or domestic support reduction

Attempts by the WTO head to spur progress towards outcomes at Buenos Aires on the key issues of public food stocks and domestic farm subsidies have yielded no breakthrough thus far.

by D. Ravi Kanth

GENEVA: Two closed-door meetings held by WTO Director-General Roberto Azevedo – one with proponents of a permanent solution for public stockholding (PSH) programmes for food security in developing countries and the second on agricultural domestic support reduction commitments – have failed to bring about any convergence, trade envoys told the South-North Development Monitor (SUNS).

Azevedo held the meeting with the PSH proponents on 25 October and met the proponents for domestic support reduction commitments on 27 October.

Azevedo, who was formerly the chief trade negotiator for Brazil during the run-up to the 2008 revised draft agriculture modalities, assumed the role of negotiator at the closed-door meetings in the absence of the current chair of the Doha agriculture negotiations, Ambassador Stephen Karau of Kenya, who was busy with elections back home in Nairobi.

At both the meetings, the United States was conspicuously absent.

The DG was apparently interested at this juncture only in talking with the proponents rather than opponents on the two issues, said a trade envoy from South America who asked not to be quoted.

The US has made its position clear that there cannot be any negotiated outcomes or a ministerial declaration at the Ministerial Conference in Buenos Aires.

“The DG is aware of all the intricacies and the linkages in both these issues, unlike the current Doha agriculture talks chair who is clueless about the likely outcomes at Buenos Aires,” the South American trade envoy said, adding that Azevedo is in a position to nudge the proponents to come to a common understanding.

The 25 October meeting on the PSH was attended by trade envoys of the European Union, Brazil, Norway, Russia, Indonesia (which coordinates the G33 developing-country coalition), India, Turkey, Korea, the Dominican Republic, Kenya and Egypt among others.

During the brief meeting, Indonesia, India, Korea, Turkey, Kenya and Egypt – all members of the G33 – made an emphatic case for a credible and effective permanent solution on PSH at Buenos Aires so as to enable developing countries to assist hundreds of millions of poor farmers without any legal hurdles.

Indonesia delivered the strongest message during the meeting. It made clear that the G33 members along with a large majority of developing countries will reject any attempt to link the PSH permanent solution with the domestic support reduction issue. It said the two issues stood on their own merit without any linkage, and that any attempt to force a linkage now will not only have serious ramifications but will derail the meeting in Buenos Aires, said another trade envoy who asked not to be quoted.

In response, Azevedo intervened to say that the linkage issue is not the main one, suggesting that the participants must focus on other elements of the permanent solution, the envoy said.

India raised fundamental concerns on the interim decision on PSH reached at the WTO’s ninth Ministerial Conference in Bali in 2013. It said the coverage of products in the Bali decision must be replaced by the current Annex I list of products in the WTO’s Agreement on Agriculture. Suggesting food products only in the Bali decision has created confusion, said India.

Azevedo maintained that the inclusion of food products in the Bali agreement was agreed among ministers instead of inserting language on “few products”. He said that if India insists on any change on the issue of product coverage, then it would have to agree to tightening the safeguards or other issues in the permanent solution, the South American envoy said.

India then raised several issues on the safeguards as well as transparency provisions for the proposed mandated permanent solution. The Bali agreement, it said, contained the most intrusive and unworkable transparency provisions that none of the developed countries, except New Zealand, would be able to implement in reality.

Instead of working to develop an effective permanent solution, India said, some proponents are making the permanent solution impossible to use.

Turkey demanded an easy and effective permanent solution, a view which was also shared by other members such as Korea, Kenya and Egypt.

In response to India’s position, the EU, Brazil and Norway maintained that the permanent solution must remain as close as possible to the Bali interim decision. The three countries stuck to that line with varying nuances, and maintained that the permanent solution must remain anchored on the Bali agreement, trade envoys said.

The EU said it is in favour of a permanent solution for PSH programmes but insisted on transparency and safeguard measures.

Brazil said that it is expanding the scope for a balanced outcome on the permanent solution by including it with domestic support, and suggested that the unresolved issues in the two areas can be taken up later after the Buenos Aires meeting.

Brazil said the permanent solution must reflect the Bali decision and any changes must be minimal. It argued that if India wants to add any substantive changes, then they must be discussed after Buenos Aires given the paucity of time.

Norway said the permanent solution must be close to the interim solution that was agreed in Bali.

Russia circulated a proposal on PSH programmes on 27 October in which it argued that while it is willing to agree to lesser transparency provisions in the permanent solution, it will need enhanced safeguard provisions, according to a person familiar with the proposal. In effect, Russia, a major wheat exporter, raised the bar on safeguard provisions in the permanent solution so as to ensure that China and India do not export wheat, the person said.

The DG – who did not call for the consultations the other key opponents to the permanent solution for PSH such as the US, Australia, Canada, Pakistan and Paraguay – said that any attempt to open up the elements in the Bali decision could lead to reciprocal demands from other members, according to people familiar with the development.

Domestic support

During the meeting on domestic support on 27 October, the DG pleaded with the proponents that they must make every effort for a beginning on domestic support at Buenos Aires, failing which they will be sending a wrong signal to the people who are watching from outside, said a trade envoy who asked not be quoted.

“If you don’t do anything on domestic support, then it will not send a good message; therefore be prepared to discuss something among yourselves,” the DG said, according to the envoy.

The EU, Brazil, Australia, New Zealand, Japan, Switzerland on behalf of the G10 countries, Mexico, China, India, Guyana on behalf of the Africa, Caribbean and Pacific (ACP) Group, and Paraguay took part in the meeting.

India and China referred to their own joint proposal which called for eliminating the most trade-distorting domestic support or the Aggregate Measurement of Support (AMS). The two countries maintained that the AMS in the industrialized countries is the biggest issue at this juncture.

India made a forceful case that because of the AMS, some members are able to support some products up to 200% and 300% of the value of the production, while developing countries only have de minimis that cannot be breached beyond 10%, said a participant from South America.

India and China noted that there are huge divergences among members on domestic support, saying that they are not sure whether they will be able to proceed further.

China said the ultimate goal for members must centre around the elimination of the AMS, suggesting that the two countries are suggesting a process that eventually leads to the elimination.

The EU and Brazil maintained that their own proposal on domestic support is basically a middle-ground solution for kickstarting the negotiating process.

Australia and New Zealand referred to their proposal, saying that it offers a credible route to all members to address domestic support with a small beginning.

But Mexico, Japan and Switzerland said they cannot accept the EU-Brazil and Australia-New Zealand proposals, which they said target some countries while leaving others untouched.

Japan acknowledged the need to cut “water” but maintained that it should not be at others’ cost. Japan asked for a price for cutting water in the AMS, suggesting that it is engaged in its own reform.

Switzerland said that while it has not carried out as big a reform, it also has the same concerns over the EU-Brazil and Australia-New Zealand proposals.

In short, the divergences on domestic support remained unbridgeable, said a participant who asked not to be quoted.

The participants remained sharply divided even on the future programme on domestic support, with Switzerland suggesting that Article 20 in the Agreement on Agriculture will remain the basis for future work.

With only a few weeks left ahead of the Ministerial Conference, the developing and least-developed countries are facing an ugly situation, as the entire Doha edifice on agriculture and other issues is being reduced to rubble even before they reach Buenos Aires. (SUNS8564)                                          

Third World Economics, Issue No. 649, 16-30 September 2017, pp6-8