TWN Info Service on WTO and Trade Issues (Dec15/04)
7 December 2015
Third World Network

US wants S&D on its export credits, NO to SSM and food security
Published in SUNS #8149 dated 4 December 2015

Geneva, 3 Dec (D. Ravi Kanth) - The United States has sought special flexibilities for itself to continue with its trade-distorting provisions in export credits even as it wants to deny a permanent solution for public stockholding programs for food security and a special safeguard mechanism (SSM) for developing countries, several agriculture negotiators told the SUNS.

At a meeting convened by the chair for Doha agriculture negotiations Ambassador Vangelis Vitalis of New Zealand on Wednesday (2 December), the US demanded a long time-frame for self-financing provisions and a repayment period of two years in export credits for agricultural products.

Significantly, the US demands in export credits are diametrically opposed to what has been negotiated in the Doha agriculture negotiations until now. The 2005 Hong Kong Ministerial Declaration (HKMD) had suggested a repayment period of 180 days for export credits as well as strong disciplines for self-financing.

The HKMD reads: "We agree to ensure the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect to be completed by the end of 2013. This will be achieved in a progressive and parallel manner, to be specified in the modalities, so that a substantial part is realized by the end of the first half of the implementation period. We note emerging convergence on some elements of disciplines with respect to export credits, export credit guarantees or insurance programmes with repayment periods of 180 days and below. We agree that such programmes should be self-financing, reflecting market consistency, and that the period should be of a sufficiently short duration so as not to effectively circumvent real commercially- oriented discipline."

The December 2008 revised draft modalities also proposed a repayment period of 180 days and a rollover period of 4 years for self-financing. The draft says, "the maximum repayment term for export financing support under this Agreement, this being the period beginning at the starting point of credit and ending on the contractual date of the final payment, shall be no more than 180 days. For developed country Members, this shall apply from the first day of implementation or the last day of 2010, whichever comes first."

On self-financing, the 2008 revised draft modalities has suggested, "Where premium rates charged under a programme are inadequate to cover the operating costs and losses of that programme over a previous 4-year rolling period, this shall, in and of itself, be sufficient to determine that the programme is not self-financing."

In their recent joint proposal on export credits to address the US concerns, the European Union, Brazil, Argentina, Uruguay, Paraguay, Peru, and New Zealand suggested diluted provisions such as a repayment period of nine months - 270 days. The sponsors of this proposal kept the repayment period open for further negotiations.

As regards the self-financing, the EU, Brazil, Argentina, Uruguay, Paraguay, Peru, and New Zealand further diluted the language of Rev.4 by not mentioning that export credit guarantee, insurance and re-insurance programmes, and other risk cover programmes included within sub-paragraphs 1(b), (c) and (d) above shall be self-financing.

The joint proposal merely suggested that: "where premium rates charged under a programme are inadequate to cover the operating costs and losses of that programme over a previous 4-year rolling period, this shall, in and of itself, be sufficient to determine that the programme is not self-financing."

At the chair's meeting on Wednesday, the US said it cannot accept even the diluted provisions for export credits in the joint proposal, according to agriculture negotiators present at the meeting.

The US demands, said an agriculture negotiator, is "tantamount to special and differential treatment only for itself and a broad exemption from multilateral disciplines."

At a meeting on food aid and disciplines for state-trading enterprises (STEs) last Friday (27 November), Canada said pointedly that "when members go back to their constituencies, they will have to say that they tightened their WTO agriculture trade provisions except for one member, the United States," according to a participant present at the meeting.

On export subsidies, Switzerland said it will need seven years, until 2023, for phasing out export subsidies on processed agriculture products. Switzerland argued that "lowering the level of ambition for export credits, STEs and/or food aid, while increasing it for export subsidies, as some submissions are suggesting, is no political sell at home and even less so if the outcome were to be reduced to the sole area of export subsidies."

Clearly, Switzerland needs considerable flexibility on export subsidies.

The joint proposal of the EU, Brazil, Argentina, Uruguay, Paraguay, Peru, and New Zealand suggested a phase- out period of three years for developed countries to eliminate their export subsidies. The seven countries suggested a five-year period for developing countries to eliminate subsidies after the developed countries completely eliminate their programs.

In sharp contrast to the joint proposal, the US maintained that the deadline for phasing out export subsidies must remain the same for both industrialized and developing countries. Under Article 9.4 of the Agreement on Agriculture, the developing countries are provided a longer duration as part of special and differential treatment flexibility.

But the US wants to deny that flexibility and by suggesting the same time period for everyone, the US is disregarding the existing WTO provisions and the ministerial mandates, developing country agriculture negotiators maintained.

India, China, and the Philippines severely opposed the US demand, saying that they will not accept new demands that are not based on the existing decisions and mandates, according to developing country negotiators.

The three developing countries also rejected calls for enhanced transparency-related disciplines as proposed in the joint proposal.

While the US continues to demand fundamental changes in the export competition pillar that includes export subsidies, export credits, international food aid, and state-trading enterprises, it fiercely opposes genuine developmental goals in agriculture of the Doha Round, agriculture negotiators maintained.

The US is joined by Brazil in shooting down two developmental deliverables such as the permanent solution for public stockholding programs for food security and the special safeguard mechanism.

At a meeting convened by the chair, Ambassador Vitalis of New Zealand, on the G-33's proposal on permanent solution for food security on last Monday (30 November), the US, the EU, Brazil, Pakistan, Australia, Canada, and Switzerland effectively ruled out an outcome at the Nairobi meeting.

The G-33 proposal called for amending the WTO's Agreement on Agriculture by inserting a new annex six to cover the domestic subsidies underpinning the public stockholding for food security purposes. The proposal emphasized that programmes for the acquisition of foodstuff at administered prices by developing and poorest countries "with the objective of supporting low-income or resource-poor producers," and for subsequent distribution at subsidized prices with the objective of meeting food security requirements shall be exempt from subsidy reduction commitments.

Argentina, a leading member of the Cairns Group of farm exporting countries, said that the permanent solution based on creating a new annex in the agriculture agreement will not pose any problems according to a detailed examination carried out in Buenos Aires.

However, Argentina maintained that it cannot take back an outcome on the permanent solution for public stockholding programs to its domestic constituencies without securing credible deliverables on the export competition, said a South American negotiator.

Other members of the Cairns Group such as Canada, Australia, and Pakistan raised several concerns about agreeing to the permanent solution. Canada, for example, said that the permanent solution gives rise to unlimited subsidies which, in turn, will result in export surges and import substitution.

The US said it remains committed to public stockholding programs for food security but maintained that the program should not injure producers in other countries. The new solution suggested by the G-33 is not a path to finding a permanent solution, the US argued, according to negotiators present at the meeting.

The Philippines challenged Canada's claims by saying that the permanent solution as set out in the G-33 proposal will restrict subsidies. It argued that the G-33 is ready to look into safeguards once there is broad agreement on the annex six.

Switzerland said the G-33 proposal does not address the problem while the European Union raised serious concerns on transparency and notification requirements.

Pakistan ruled out an outcome on the permanent solution at the Nairobi meeting while Australia maintained that the permanent solution will have unintended consequences without proper safeguards.

India dismissed the baseless concerns raised by the EU, Australia, Canada, and Pakistan by arguing that they must provide evidence to back up their claims instead of political stonewalling, according to negotiators present at the meeting.

Egypt said it will need a permanent solution at the Nairobi ministerial while India said the G-33 members have addressed all the concerns on an issue that is being negotiated since the past three years.

In a nutshell, the developed countries have resorted to an unprecedented form of cherry-picking to suit their interests by altering the existing ministerial decisions and mandates underpinning the four elements in the export competition pillar.

But the same developed countries along with some developing country allies have launched a war-like effort to deny minimal credible developmental outcomes such as the permanent solution for public stockholding programs for food security and the special safeguard mechanism for developing countries, trade envoys argued.