TWN Info Service on WTO and Trade Issues (Jun16/10)
14 June 2016
Third World Network

Amending AoA export subsidy schedules raise legal, systemic issues
Published in SUNS #8259 dated 10 June 2016

Geneva, 9 Jun (D. Ravi Kanth) - Three developing countries - India, the Philippines, and Cameroon - on Wednesday (8 June) challenged the leading proponents for amending schedules on export subsidy commitments for incorporating the Nairobi ministerial decision on eliminating export subsidies at the World Trade Organization.

The move lacks legal justification and creates dangerous "systemic" problems, agriculture negotiators told the SUNS.

At a meeting of the WTO's Committee on Agriculture on Wednesday (8 June), 16 proponents led by Australia, New Zealand, Norway, and Canada called for rapid notification of amended scheduled commitments to reflect the Nairobi ministerial decision on eliminating export subsidies.

In their schedules, filed at the end of the Uruguay Round accords, 18 countries undertook scheduled export subsidy commitments in terms of the Agreement on Agriculture (AoA).

Two members - New Zealand and Panama - had phased out their export subsidies to zero since the launch of the Doha Round of negotiations in 2001. The remaining 16 countries are yet to eliminate their scheduled export subsidy entitlements.

Countries with export subsidy entitlements before the tenth WTO ministerial meeting in Nairobi include Uruguay, Brazil, Canada, the European Union, Israel, Norway, Australia, Iceland, South Africa, Switzerland, Mexico, the United States, Indonesia, Colombia, Panama, Turkey, and Venezuela.

After the Nairobi ministerial meeting last December, which adopted a decision for the elimination of export subsidies, WTO Director-General Roberto Azevedo has held one-on-one meetings with the 16 countries to drive home the message for amending schedules.

Recently, Azevedo called on the Indonesian trade minister Thomas Lembong to pressurize for Jakarta's submission of the amended export subsidy schedule commitment in line with the Nairobi ministerial decision, according to a source familiar with the meeting.

The Cairns Group of farm exporting countries led by Australia and New Zealand brought the issue to the agriculture committee by circulating a detailed paper on export competition review.

The paper revealed graphically that there is no significant benefit from the elimination of export subsidies as "export subsidy use at an aggregate and individual Member level has dramatically decreased, and in some cases has been discontinued, since notifications became mandatory in 1995 as part of the Uruguay Round exceptions."

Exceptions to this declining trade in export subsidies, according to the Cairns Group paper, are Canada, Norway, and Switzerland whose most recently notified outlays were in the range of US$32-81 million per annum.

In short, the much-touted Nairobi ministerial decision is pretty inconsequential, according to the Cairns Group proposal.

Yet, New Zealand and Australia along with Norway from the group of ten protectionist countries upped the ante for immediate notification of amended schedules of zero export subsidy entitlements following the Director- General's secret meetings, a source told the SUNS.

India, the Philippines, and Cameroon asked the Cairns Group members to show the legal provisions in the GATT/WTO agreements that would necessitate amended scheduled commitments.

The three countries said categorically that there is no legal provision either in Article 9 of the Agreement on Agriculture or Article 28 of the GATT for incorporating amended scheduled commitments on export subsidies under Part 4. While changes in tariffs, tariff-rate quotas, and domestic support have to be amended as per procedures set out for GATT Article 28 consultations, there is no such requirement for notifying export subsidies.

The United States and the European Union remained silent during the meeting. Norway said that India and the Philippines are creating legal complications.

However, New Zealand and Norway failed to provide any legal justification for the issues raised by India and the Philippines, agriculture negotiators told the SUNS.

The Nairobi ministerial decision did not require members to submit amended export subsidy schedules.

[Some on-going research at the Geneva-based South Centre, also suggest that the Nairobi decision cannot be translated into enforceable commitments, by the countries concerned notifying the WTO and amend their UR schedules; the research suggests that the procedures used to amend tariff schedules, by lowering tariffs and bind them unilaterally, may not be feasible for the AoA, as there is no such provision in it. - SUNS]

But the Director-General has pursued the issue of amended schedules on a sustained basis without discussing it at an open-ended multilateral forum, said a negotiator familiar with the meetings.

Azevedo, for example, asked the Indonesian minister to submit an amended schedule in which export subsidy entitlements are brought to zero, according to the trade envoy, who asked not to be quoted.

The Nairobi ministerial decision on export subsidies says in paragraph six: "Developed Members shall immediately eliminate their remaining scheduled export subsidy entitlements as of the date of adoption of this Decision."

Further, the decision on the elimination of export subsidies is further clarified in footnotes three and four: "3. This paragraph shall not cover quantities counted against export subsidy reduction commitments found to exist by the Dispute Settlement Body in its recommendations and rulings adopted in disputes DS265, DS266, and DS283, with respect to the existing programme, which expires on 30 September 2017, for the product concerned by those disputes.

"4. This paragraph shall not cover processed products, dairy products, and swine meat of a developed Member that agrees to eliminate as of 1 January 2016 all export subsidies on products destined for least developed countries, and that has notified export subsidies for such products or categories of products in one of its three latest export subsidy notifications examined by the Committee on Agriculture before the date of adoption of this Decision. For these products, scheduled export subsidies shall be eliminated by the end of 2020, and quantity commitment levels shall be applied as a standstill until the end of 2020 at the actual average of quantity levels of the 2003-05 base period. Furthermore, there shall be no export subsidies applied either to new markets or to new products."

As regards the developing countries, the Nairobi decision says in paragraph seven that: "Developing country Members shall eliminate their export subsidy entitlements by the end of 2018."

And it is further clarified in footnote five that they can eliminate the export subsidies by 2022 due to Article 9.4 of the Agreement on Agriculture.

But the Director-General is silent on other notifications concerning cotton, duty-free and quota-free notifications, and public stockholding programs for food security as decided at the WTO's ninth and tenth ministerial conferences.

The Nairobi ministerial decision on cotton market access says, "developed country members, and developing country members declaring themselves in a position to do so, shall grant, to the extent provided for in their respective preferential trade agreements in favour of LDCs, as from 1 January 2016, duty-free and quota-free market access for cotton produced and exported by LDCs."

It further says in paragraph four on cotton market access that "developed country members, and developing country members declaring themselves in a position to do so, shall grant, to the extent provided for in their respective preferential trade arrangements in favour of LDCs, as from 1 January 2016, duty free and quota free market access for exports by LDCs of relevant cotton-related products included in the list annexed to this Decision and covered by Annex 1 of the Agreement on Agriculture."

Clearly, these two decisions on cotton market access can also be included in the scheduled commitments that the DG is promoting, but he has not raised this, the envoy said.

At the agriculture committee, China said "we believe all ministerial decisions must be implemented." China also suggested that the WTO Secretariat must provide legal clarity on the issue.

The chair for the agriculture committee, Garth Erhardt, however, said that the Secretariat cannot provide legal opinion.

In a separate development, Australia, the European Union, and Canada among others raised serious questions about the "discrepancies" in the US export credit programs and food aid.

The three countries sought clarifications on several discrepancies in the US notifications to the WTO.

Australia, for example, sought to know about the discrepancy between "the annual average repayment period under GSM-102 is around 14 months, [and] the typical repayment period under ExIm for agricultural trade is 180". Canberra asked the US to explain "why tenor lengths vary so greatly between the two programs?"

Australia pressed the US to "provide a breakdown of total exports by region for the 2015 fiscal year for GSM-102" and "a breakdown of total agricultural exports by region for fiscal years 2013 and 2014 for ExIm."

The EU asked the US to explain "discrepancies" in the total value of exports of agricultural products covered by the GSM-102 program for the US Fiscal Year 2015 (US$1.83 billion) and the data provided by the USDA FAS which is around US$1.81 billion (guarantee value) and US$1.86 billion (port value).

The US has been asked to explain how it operates export-risk-cover programs on a self-financing basis as required under the Nairobi ministerial decision, according to the EU unofficial document.

Brussels also raised several queries about the food aid provided by the US and whether it continues to provide monetized food aid after the adoption of the Nairobi ministerial decision.

Under the Nairobi ministerial decision, members may monetize international food aid only when there is demonstrable need for monetization for specific programs. The EU has asked the US to demonstrate whether a need for monetization has occurred since the Nairobi decision.

Canada asked the United States to clarify why Washington did not notify the Export-Import Bank credits for agricultural products under the export credit insurance programme which is under operation since 1945.

In an unofficial room document on export subsidies, export credits, insurance programmes, international food aid and agricultural exporting state trading enterprises, Canada sought clarifications from the US on why the US Export-Import Bank was not notified under the previous compiled report by the WTO Secretariat.

Ottawa asked the US to provide "the breakdown of annual value of exports by export destination (the same as what is shown for its response to the subheading โ˜Programme use by product or product group')."

In the preparation for the upcoming regular meeting of the WTO Committee on Agriculture, Canada also posed questions to India and Japan. Canada asked India to explain about "the maximum average repayment terms [in] the ECGC Limited Programs where agriculture products received export financing support."

But the US is yet to provide any replies, according to agriculture negotiators.

In sum, the Nairobi ministerial decision on export completion is full of "manholes" to enable a major developed country (the US) to continue with its trade-distorting practices in export credits and food aid, agriculture negotiators maintained.