Info Service on WTO and Trade Issues (May16/08)
13 May 2016
Third World Network
Hollowness of Nairobi export competition accord exposed
Published in SUNS #8237 dated 10 May 2016
Geneva, 9 May (D. Ravi Kanth) -- The hollowness of the export competition
accord concluded as part of the package in the WTO Nairobi Ministerial
Conference Decisions (NMD) has been exposed by Canada in a paper issued
by it for the post-NMD agriculture negotiations.
In a restricted paper issued by Ottawa, Canada has suggested that
the NMD accord five months ago on export competition disciplines are
tailor-made for the United States to continue with its trade-distorting
"To a large extent," Canada maintained in its restricted
paper, the new disciplines in the Nairobi ministerial decision "reflect
the current operation of the United States' (US) GSM-102 program,
which in Canada's view has considerable trade-distorting effects."
In the three-page paper issued on 4 May, Canada stated that the Nairobi
decision on export credits "establishes a maximum repayment term
of 18 months and requires that credit programs charge risk-based premiums
and be operated in a manner that covers up long-term operating costs
and losses (i. e. self-financing)."
The Canadian paper, however, did not mention the work done on the
export credits during the Doha trade negotiations, particularly the
2005 Hong Kong Ministerial Meeting and the 2008 revised draft modalities
issued by the then chair of the agriculture negotiations, former New
Zealand Ambassador Crawford Falconer.
The conspicuous silence on the Doha Development Agenda (DDA) negotiations
is a significant pointer in the direction of efforts of US-led developed
countries to erase the work of the Doha Round from the ongoing negotiations
to develop new disciplines in domestic support, and export financing
programs, said a trade negotiator familiar with the development.
The 2005 Hong Kong Ministerial Declaration (HKMD) proposed that export
credits must be limited to 180 days (6 months).
The HKMD says: "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
The 2008 revised draft modalities had suggested the following disciplines:
"Export financing support shall be provided in conformity with
the terms and conditions set out below.
(a) Maximum repayment term: 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. Existing contracts
which have been entered into prior to the signature of this Agreement,
are still in place, and are operating on a longer timeframe than that
defined in the preceding sentence, shall run their course until the
end of their contractual date, provided that they are notified to
the Committee on Agriculture and are not modified.
(b) Self-financing: export credit guarantee, insurance and reinsurance
programmes, and other risk cover programmes included within sub-paragraphs
1(b) (c) and (d) above shall be self-financing. 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 addition, and irrespective of
whether these programmes conform with the requirements set out in
the preceding sentence, this does not exempt them from complying with
any other provision of this Agreement or the other covered Agreements,
including by reference to the more generally formulated long-term
operating costs and losses of a programme, not limited to the historical
rolling period referred to in the previous sentence, under item (j)
of the Illustrative List. Where these programmes are found to constitute
export subsidies within th e meaning of item (j) of the Illustrative
List, they shall also be deemed to be not self-financing under this
Canada ignored the Doha disciplines and went on to argue that "the
GSM-102 program is available for use on a wide range of products,
but the commodities most covered by the program include coarse grains,
oilseeds, wheat and wheat flour, oilcakes, rice and cotton."
It maintained that the GSM-102 "program has been through several
changes in recent years as a result of (rulings in) United States
- Subsidies in Upland Cotton (DS267)."
However, the GSM-102 continues to distort trade by providing importers
of US agriculture products with access to credit at better than commercial
rates, Canada argued.
Canada cited a recent publication by the Australian Rural Industries
Research and Development Corporation that estimated the rates of government
export assistance by comparing the difference between US-based financing
costs with GSM-102 guarantees and domestic financing costs in the
importing market without the guarantees.
Canada maintained that "this degree of subsidisation creates
incentives for importers to favour US suppliers over other suppliers
that do not offer the same degree of preferential finance, or none
"Given the scale of the GSM-102 program, these trade-distortions
are significant and affect the exports of a wide range of countries,"
according to Canada.
It quoted the WTO Secretariat Background document on Export Credits,
Export Credit Guarantees or Insurance Programmes (G/AG/W/125/Rev.
2/Add. 2) which says "that these distortions caused by the GSM-102
impact more than major exporting economies."
The report states, for example, that between 2009 and 2013, 26 exporting
economies were affected by US cereal product sales with finance guarantees
in Asian markets, Canada argued.
"Over the same period, 12 exporting economies in South America
and 5 in Central America were affected by the US export credit scheme,"
Ottawa claimed that "the length of the repayment term is also
an incentive for importers to favour US suppliers. A long repayment
term, coupled with an attractive degree of subsidisation, will provide
incentive for an importer to favour suppliers offering access to these
terms, further amplifying the trade distortion effects of the export
financing support. The current GSM-102 program allows for a maximum
repayment term of 18 months."
"According to the WTO Secretariat Background document the average
annual value of exports covered by the GSM-102 over the last five
years (2010-14) is USD3.244 billion," Canada argued.
The size and scope of US export credits on agricultural goods is not
a new phenomenon, Canada maintained.
"Average annual exports covered by GSM-102 from 2000-2005 were
USD2.714 billion (Ibid.) and an OECD analysis from 2000 notes that
US export credits in agriculture averaged USD3.201 billion from 1995-1998,"
"To put the size of the financing support in perspective, if
the GSM-102 program were a country, it would have been the 43rd largest
exporter in terms of value of agriculture products in 2013,"
In a nutshell, "nearly three quarters of WTO Members export fewer
agriculture products, in value terms, than the sum of GSM-102 financed
exports," Canada concluded.
Therefore, members must address "significant trade distortions
caused by export credit schemes can be disciplined further. For example,
the US GSM-102 program, which distorts trade by providing importers
of US agriculture products with access to credit on better than commercial
rates, was not substantively curtailed."
Canada said "current disciplines are also not dissuading some
other Members from developing similar export credit programs."
The Nairobi ministerial decision was a special and differential treatment
for the US on export credits and food aid, said a trade negotiator
from a developed country. "Why blame the US when Canada and others
could have simply refused to accept the agreement which they did not
do," according to the negotiator. +