TWN Info Service on WTO and Trade Issues (Nov16/16)
25 November 2016
Third World Network

Agriculture: Proposals tabled on domestic support, market access
Published in SUNS #8361 dated 23 November 2016

Geneva, 22 Nov (Kanaga Raja) - A meeting of the Special Session of the Agriculture Committee at the World Trade Organisation (WTO) on 16 November discussed several proposals on domestic support in agriculture and on agricultural market access.

The Chair, Ambassador Vangelis Vitalis of New Zealand, convened the meeting to report on his small group consultations since the last meeting in July and to allow the full membership to voice their views on the way forward in the negotiations.

In his statement, the Chair said that his report back was based on 67 bilateral consultations undertaken since the summer break, supplemented by meetings with several Groups that were able to see him, as well as a meeting on 9 November to which he invited all 15 Group Coordinators.

He said he has been particularly encouraged that broad agreement - if not necessarily consensus - continues for a set of shared objectives for the negotiations, including that: (1) Agriculture should form part of any outcome at MC11; (2) Ministerial expectations should be delivered upon, including as set out in the relevant Nairobi Ministerial Decisions, the Nairobi Ministerial Declaration, as well as Article 20 of the Agreement on Agriculture; (3) An outcome at MC11 on agriculture is difficult to envisage without progress across the Doha agriculture issues, as well as in other areas of the wider (i.e. non-agriculture) negotiations, including in NAMA, services, Rules, Development and on 'new issues'. It is acknowledged, however, that these other non-agriculture areas may move at different speeds and deliver different types of outcomes both in scope and ambition; and (4) Members continue to seek to avoid polarising debates in CoASS (Committee on Agriculture in Special Session) and understand that any such polarisation risks paralysis, not simply in agriculture, but more generally.

In his latest round of consultations, however, five very specific contextual elements - two of which are new - appear to be at the forefront of Members' thinking:

(1) Engagement of Ministers: Since our last meeting, Norway's Minister of Foreign Affairs convened an informal meeting of a group of Ministers in Oslo on 21-22 October. The Chair's Summary of Discussion Note, issued under his own authority, reports that: "Ministers were in general agreement that further work in the lead- up to MC11 with development at its centre would include elements of domestic support in agriculture based on updated notifications, the mandated permanent solution for public stockholding for food security purposes; other mandated tasks from Nairobi."

The sub-set of Ministers in Oslo were also clear about their expectation that outcomes "should be achieved through incremental steps rather than major leaps, at least in the short term." Ministers recalled the agreement at Nairobi that all Doha issues remain on the table, Ministers pointed to well-known topics that probably need more time before results may be harvested. They include: continued reform in agriculture; market access in NAMA, agriculture and services..."

(2) Greater engagement of private sector stakeholders: The Chair said he is pleased to report that there has been a sharp rise in the interest of stakeholders in the negotiations. This level of interest is in sharp contrast to the situation ahead of the Nairobi Ministerial last year. "This suggests to me that we may have begun the process of re-energising agricultural stakeholders to believe that the WTO still matters to them," he added.

(3) The Known-unknowns: "Previously I have recalled that Members have been reflecting on the likely impact on our negotiations of the recent referendum result in the United Kingdom. To this I would now add the recent election results in the United States. In addition, many Members are also considering the potential effect of the launch of a Dispute Settlement case by one Member on a specific aspect of another Member's agricultural domestic support. Members have also been thinking about the implications for our negotiations of the ratification processes related to two significant preferential trade agreements - the Canada-EU Trade Agreement and the Trans-Pacific Partnership Agreement."

(4) UN Sustainable Development Goals: The Chair said he has been pleased to see that increasing numbers of Members have been expressing an interest in how to ensure that the WTO negotiations in agriculture can contribute to achieving the United Nations Sustainable Development Goals (UN SDGs).

"Many of you have expressed concern, for instance, that in the absence of progress it will be difficult to achieve Goal 2 which emphasises the need to 'correct and prevent trade restrictions and distortions in world agricultural markets'. As I continue to remind Members, you have already delivered one specific sub-component of the Goal 2 target - that which relates to the elimination of agricultural export subsidies. We now need to deliver on the remainder," said Ambassador Vitalis.

(5) The interface between the CoASS negotiations and domestic policy considerations: "Many Members have underlined to me the emphasis they place on active and dynamic engagement at the CoASS as a signalling mechanism for their intent to deliver outcomes at MC 11 in Buenos Aires. They expect that this will inform Members' thinking on their domestic policy settings, including their future domestic agricultural policy settings," he said.

On domestic support and cotton, the Chair reported that an outcome on Domestic Support in general and Cotton in particular continues to be regarded by the overwhelming majority of Members as a priority for Buenos Aires. "I have detected no change in the determination or intensity of interest in this part of the negotiations."

"In terms of the substance, a feature of this latest round of consultations has been that Members are engaging with me on a level of detail that had been absent hitherto. This has included several Members and most Groups identifying what they can and can't work with, while also signalling their expectation of further specific proposals, particularly on domestic support, but also on cotton."

"I continue to assess that the significant number of questions and submissions members have circulated over the past six months underlines the commitment of all Members to engage with one another on domestic support and, more particularly on what may be do-able for the meeting in Buenos Aires," said the Chair.

According to the Chair, the question before members, however, remains as challenging as ever. There are two aspects to the challenge members confront: (i) it is clear that notwithstanding the overwhelming majority of Members in favour of an outcome on domestic support, several important Members who need to be involved in any outcome are signalling difficulties in this regard; and (ii) we remain some way away from knowing what the content or contours of the domestic support content of the MC11 package should be.

Some Members - regardless of their position on domestic support, or on agriculture more generally - have argued that there needs to be a better balance both within the agriculture negotiations, as well as more broadly including in NAMA, services, Rules and new issues. They do not yet believe that this is the case and this is informing some Members' approaches. And, needless to say, Special and Differential Treatment remains of crucial importance.

On market access, the Chair reported that during the consultations since July, and particularly since the Oslo WTO mini-Ministerial, there has been a noticeable shift on this part of our negotiations. "To be precise, there has been an intensification and expansion of interest in the negotiations on agricultural market access. More Members than ever before have raised the issue of market access with me bilaterally. Several Members have indicated that movement on market access may help them to encourage movement at home on domestic support."

Those Members expressing an interest in market access have identified topics such as: escalation, simplification; tariff peaks, tropical products as well as the special safeguard on agriculture. Many Members also continue to encourage the conversion of non-ad valorem rates to ad valorem rates and binding in any remaining unbound rates. Some Members continue to have an interest in both real tariff cuts and to changes to TRQs, including both liberalisation of administrative procedures, but also to movement in these TRQs themselves. A number of Members have made it clear that if they were to engage on market access, Special Products would need to form part of any tariff reduction negotiation.

On export competition, the Chair reported that this is perhaps the only part of the negotiation where there has not been a discernible shift in positioning since July, and indeed since the Nairobi Ministerial. Continued negotiations on export competition are of continuing interest to a small group of Members. It is the case, however, that this remains a lower priority item for most Members in terms of paragraph 31 of the Nairobi Ministerial Declaration.

In fact, several Members have made it clear during my bilateral consultations that they do not consider export competition to be 'unfinished business' as some have suggested. They believe that the negotiations were taken as far as was possible in Nairobi and that this area is a distraction from the other issues, like domestic support and market access on which CoASS should be focused, the Chair said.

At the informal meeting, Members discussed three proposals on domestic support.

The first proposal, in the form of a room document (JOB/AG/72/Add.1), was introduced by Brazil on behalf of Brazil, Argentina, Chile, Colombia, Paraguay, Peru and Uruguay. It draws on a previous submission by the group and proposes four different options to limit different kinds of domestic support.

These options are: (1) As a comprehensive limit on trade-distorting domestic support appears to remain a valid concept to be explored in the negotiations, the co-sponsors believe that further consideration should be given to the idea of expressing this new limit as a percentage of the Value of Production (VoP); (2) The co-sponsors suggest to use the current structure of the AoA and agree to cuts to the AMS, "de minimis", and to the Blue Box at each ministerial; (3) Anti-concentration disciplines may be an important tool to limit the potential for distortions in the international trade of agricultural products. If Members are willing to pursue this path, product-specific limits as envisaged in the past could be an option; (4) Option 4 aims at limiting the effect that subsidised agricultural production can have in international markets. When highly subsidised products are exported, the domestic subsidy becomes a "de facto" export subsidy, disrupting markets and harming producers elsewhere, with consequences particularly severe for poor farmers in developing countries.

On cotton, the co-sponsors say that whatever the option or combination of options Members see fit to be part of a solution for domestic support, cotton should be addressed in a manner consistent with the mandates, with specific and more ambitious commitments and shorter implementation periods.

The second submission is by Argentina, Australia, Colombia, New Zealand, Paraguay, Peru, Uruguay and Viet Nam (JOB/AG/83), which is a statistical analysis that seeks to identify the domestic support policies that are being applied today that cause the largest distortions to global trade.

The submission was introduced by Australia on behalf of the Cairns Group of agricultural exporters. According to trade officials, Australia maintained that in the cotton sector, one member is spending over $10 billion on trade-distorting domestic support, and this is a significant number. It was of the view that addressing this issue is imperative.

Australia also mentioned the issue of transparency. There are two main problems with the transparency issue in domestic support - one is the lack of notifications, and the second is under-reporting, it said.

The paper also highlights the issue of de minimis. It says that the rising value of production in some of the world's largest agricultural producers, both developed and developing, is changing the value of de minimis in a way that was not anticipated by the drafters of the Agreement on Agriculture. The combined value of agricultural production for large producers and exports has tripled in the last 20 years.

According to Australia, in old times de minimis was meant to be a small proportion of production but because production expanded exponentially, this has become the major source of trade distortion in the world market today. Back in 1995, the US de minimis was worth $13 billion, but today, the US entitlement is worth $39 billion, said Australia, which is way larger than its amber box support allowance.

The third submission is by Rwanda on behalf of the ACP group (JOB/AG/87). It said that for the purpose of safeguarding rural development, food security and livelihood security in the ACP countries, it is imperative to address all trade-distorting domestic subsidies in an appropriate and sustainable manner. It underlined that negotiations aimed at establishing a fair and market-oriented trading system through a programme of fundamental reforms to correct and prevent distortions in world agricultural markets must continue as a matter of priority, within the CoASS.

The ACP proposed that disciplines should establish a binding overall comprehensive limit to the sum of all trade-distorting domestic support; and establish binding product-specific limits to trade-distorting domestic support to avoid subsidy concentration.

On special and differential treatment, it said that in order to address the special needs of developing country members, negotiations should include, among others, the following elements: flexibilities in the level of commitments and the schedules of implementation; exemption of SVEs and NFIDCs from binding reduction commitments; technical assistance and capacity building to address institutional and financial constraints faced in the implementation of disciplines; and the provisions of Article 6.2 of the AoA should remain unchanged.

According to the ACP, negotiations should aim to reach agreement on a first set of development deliverables by MC11. Such an outcome should reflect the principles of special and differential treatment and include: an ambitious outcome on domestic support; for developed country members benefiting from an AMS entitlement, an agreement on an overall comprehensive limit to the sum of all trade-distorting domestic support, so as to reduce the difference between the maximum AMS entitlement and the current applied levels of domestic support; for other country Members, an agreement on an overall comprehensive limit to the sum of all trade-distorting domestic support without undermining the development and food security needs of developing countries, including LDCs, SVEs and NFIDCs; and an agreement on substantial reductions of, with a view to eliminating, all trade-distorting domestic subsidies for cotton production.

According to trade officials, the EU said that it welcomes incremental steps towards reform rather than major leaps. It expressed support for the idea of a limit on the overall level of support. On cotton, the EU said that members need an equally ambitious outcome while respecting the red lines of all stakeholders. It also called on members to improve transparency.

Switzerland, on behalf of the G10, said that the proposal to base subsidy caps on value of production would be difficult for smaller agriculture producing countries with special characteristics. Norway, a member of the G10, said that combining option 1 and option 3 in the proposal by Brazil and others would be an "explosive cocktail".

Both South Africa and China believed that the Rev. 4 text (2008 draft modalities text) should remain the basis of any reform going forward. China also said that any new idea or approach to address domestic support needs to address aggregate measure of support (AMS) available to twenty-eight WTO members who were traditional agriculture subsidisers.

During the discussion on market access, the Chair said that although market access is not identified as a high priority as compared with domestic support, there are a substantial number of members who said that market access is important. He pointed to three submissions by members.

Paraguay introduced two submissions. One addresses the issue of tariff overhang, i.e. the difference between bound and applied tariff rates, more commonly known as "water", co-sponsored by Argentina, Australia, Colombia, Uruguay, Viet Nam and Peru (JOB/AG/84).

The other (JOB/AG/85), co-sponsored by Argentina, Australia, Chile, Colombia, New Zealand, Pakistan, Uruguay, Viet Nam and Peru, calls for an end to the special agricultural safeguard (SSG) by MC11.

The third is a submission by Uruguay (JOB/AG/86), co-sponsored by Argentina, Australia, Colombia, Costa Rica, New Zealand, Paraguay and Peru, which highlights the main market access impediments that have been identified by Members in recent years in the CoASS: high tariffs, tariff escalation (tariff increase at later stages of processing, resulting in greater effective protection), tariff peaks, high level of disparities in tariff levels among members, limitations by tariff rate quotas (TRQs) access only, and non-tariff measures.

According to trade officials, the discussion on SSG was based on a Secretariat note which shows that among the members entitled to use the SSG to increase import tariffs at time of price decline or import surge, only six members used the tool in the past five years, and the use of SSG has generally been declining.

South Africa said further tariff reductions will limit its ability to respond to trade distortions. If the SSG is to end, then it should be replaced by another mechanism, for example, the SSM for developing countries, it said.

Turkey said that the 'cherry picking' season is starting now (in apparent reference to members picking topics for the Buenos Aires ministerial conference next year). On the papers on market access, it argued that market access negotiations should include Special Products (SP). It said that it needs more time to provide detailed comments on the proposals.

Indonesia said that it is still discussing the proposals back in capital. It pointed out that trade remedy tools are used in emergencies and the fact that very few developing countries use the SSG is a sign that a tool should be developed that is easier for developing countries to use.

A technical note on tropical products submitted by Costa Rica was also discussed. Singapore drew the attention of members of a proposal that it had put forward in July on improving transparency on export restrictions, while Brazil said that it is working with some other members on a proposal on private standards on sanitary and phyto-sanitary measures.

The Chair also reported on the issue of notifications of domestic support. He said that in an organisation of 164 Members only twenty-seven have submitted data covering the period to the year 2015. Only two of these are developed Members. Put another way that means that 106 Members (EU counted as one) are falling short of their notification commitments.

"If we take a more generous interpretation of the notification deadline, thirty-six Members plus four recently acceded Members can be considered up to date in their notifications to 2014. Of these only four are developed Members - Australia, New Zealand, Norway and Russian Federation."

The remaining Members which are up-to-date are Developing Members, including several Least Developed Members. Of these and in the context of the negotiations, only Brazil and Argentina are major agricultural exporters. Put another way, this still means that 97 Members (EU counted as one) - the majority in this organisation - are out of date in their notifications.

"Furthermore, Members will be as concerned as I was to learn that fully twenty-nine Members have never submitted a domestic support notification. A further ten Members have not submitted notifications for the past fifteen years (i.e. since 2002). This means that just under a quarter of the WTO's Membership has either not troubled itself to submit a notification in the past fifteen years, or worst still, has not ever bothered to make a notification," the Chair lamented.

"Put simply, the challenge we face in the negotiations is that we risk negotiating either in the dark, or at best in the dusk. That means there is a risk of error - an error that might benefit some and punish others. That clearly is an undesirable situation that none of us will want to risk," said Ambassador Vitalis.

In some concluding remarks at the end of the meeting, the Chair said: "I have been encouraged by the engagement we have had during this meeting and therefore the state of our negotiations."

He said that an overwhelming majority of Members continue to seek an outcome for domestic support for Buenos Aires. What precisely that will look like remains unclear, but the range of submissions and interventions underline that on domestic support there is a lot "on the table."

It is for members to find ways to engage on the well understood sensitivities - many of which were reiterated today - and to find a way forward.

On market access too, this meeting has demonstrated that there is much greater interest than ever before in this part of the negotiation - a shift in gear. That is to be welcomed, though clearly a great deal still needs to be done to find an outcome that can secure consensus, he said.

"It appears to me that we are able to identify a common set of eight guidelines for outcomes at MC11."

According to the Chair, these include that any outcome in whatever area we can agree on must be: (1) transparent in outcome and in negotiation; (2) development-relevant; (3) clear and simple to understand; (4) practical and do-able; (5) effective; (6) proportionate; (7) evolutionary, not revolutionary, i.e. incremental; and (8) a stepping stone to further engagement on agricultural reform.