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Info Service on Sustainable Agriculture Geneva, 3 Aug (D. Ravi Kanth) — The African Group at the WTO, comprising more than 40 developing and least-developed countries, and Pakistan on 27 July seemingly proposed doable/credible disciplines for reducing trade-distorting domestic support (subsidies) as well as “blue box” and “green box” subsidies worth hundreds of billions of dollars, which are apparently being provided by the United States and the European Union, said people familiar with the development. The proposal (JOB/AG/242/Rev.1) by the African Group and Pakistan has been tabled for the upcoming World Trade Organization’s 13th ministerial conference (MC13), to be held in Abu Dhabi from 26-29 February 2024. That the “blue box” and “green box” subsidies seem to be largely provided by the US and the EU since the establishment of the WTO in 1995, after the conclusion of the Uruguay Round of trade negotiations, is well known. Significantly, the two trans-Atlantic allies, in their respective ways, appear to have undermined the prospect of any outcome for disciplining domestic support since the launch of the Doha Development Agenda (DDA) trade negotiations in December 2001. Despite several drafts issued by the successive chairs of the Doha agriculture negotiating bodies like the famous Harbinson report prior to the WTO’s fifth ministerial conference in Cancun, Mexico, in 2003, New Zealand Ambassador Crawford Falconer’s draft modalities text on agriculture in 2008, and New Zealand Ambassador David Walker’s proposals on agriculture in 2010 among others, major developed countries, particularly the US, stymied prospects for any movement on domestic support. During a meeting of key trade ministers convened by the former WTO Director-General Pascal Lamy in mid- 2008, the US had initially agreed to reduce its AMS (Aggregate Measurement of Support or the most trade- distorting “amber box” measures) from $19 billion to $15 billion, but at the last minute, pulled back from the proposal due to pressure from its farm lobbies, as reported in the SUNS. In the run-up to the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017, several proposals were floated by different members. For example, Brazil and the EU along with other members proposed floating limits in the overall trade-distorting domestic support (OTDS) based on a percentage of the value of production, with differentiated caps for developed and developing countries. Members of the Cairns Group of farm-exporting countries also proposed overall limits on OTDS. In order to address the continued asymmetrical provisions on domestic support in the WTO’s Agreement on Agriculture, China and India called on the industrialized countries to eliminate their “amber box” support. They argued that eliminating this type of support would remove one of the biggest imbalances in the current farm trade rules by obliging the biggest subsidizers to reduce their special entitlements. Even the ACP (African, Caribbean, and Pacific) group favoured the elimination of AMS, but for all members, while preserving more leeway for developing countries to support their farm sector, in the run-up to the Buenos Aires meeting. However, the US chose to reject the chair’s middle-ground proposal at the Buenos Aires meeting and since then, any discussion of disciplining domestic support remains muted. Even at the WTO’s 12th ministerial conference (MC12) in Geneva last June, the agriculture agenda failed to gain any leeway thanks to the efforts of the US, as reported in the SUNS. DOMESTIC SUPPORT PAYMENTS The latest restricted proposal (JOB/AG/242/Rev.1) by the African Group and Pakistan, seen by the SUNS, sets the ground by exposing the current high levels of domestic support payments by some of the major developed countries. The proposal highlights the levels of AMS (most trade-distorting “amber box” measures), the so-called “blue box” (minimally trade-distorting subsidies), and the “green box” measures, which are exempted from reduction commitments despite their trade-distorting impact as established by several studies and even some members. The African Group and Pakistan provided the following figures that clearly demonstrate the existing asymmetries and suggest what needs to be done at MC13. The figures quoted from the proposal are that in 2018, WTO members’ total trade-distorting Amber Box support was USD 62.49 billion. In addition, USD 6.4 billion of Blue Box Subsidies (as provided under Article 6.5 of the Agreement on Agriculture – AoA) and USD 265.49 billion in Green Box Subsidies (as provided under Annex 2 of the AoA). While developing countries are allowed a product-specific de minimis support of 10% of the value of production (VoP), and developed Members are allowed a product-specific de minimis support of 5% of VoP, many developed Members (the US and the EU, particularly) have used the extra Final Bound Aggregate Measurement of Support (FBAMS) entitlements under Article 6.3, the Blue Box and the Green Box in excess of 5% of VoP, respectively, including on product-specific support, giving them the significant extent of additional policy space to subsidize their agricultural production disproportionate to the size of their agricultural sector as indicated by the VoP. According to the African Group and Pakistan, there are growing analyses that show that in addition to the FBAMS entitlements, which are acknowledged to be trade-distorting, the use of the Blue Box and direct payments under the Green Box (paragraphs 5-13 of Annex 2 under the AoA) have most often been trade- distorting. It is also important to note that Article 6.3 allows fixed additional FBAMS entitlements, which, even if not fully utilized, allow potential policy space to support the agriculture sector in a trade-distorting manner. Noting the evidence as described on AMS Entitlements, Blue Box, and the Green Box, and in continuation of the African Group’s Proposal of 2021(JOB/AG/203) before MC12, the African Group tabled a draft Ministerial Decision to deliver needed disciplines on domestic support specified under Article 6.3, Article 6.5, and Annex 2 of the AoA. In the face of growing food insecurity, which is multi-faceted, Domestic Support for Food Security Purposes is part of the solution, especially the product-specific de minimis support being the only policy space that could be used in situations where a Member faces a severe food crisis or emergency situation. Only 32 Members (counting the EU as one) enjoy FBAMS entitlements totaling USD 174.37 billion (2018 current USD) above the de minimis levels. About half of these are developed country Members accounting for 88.81% of total FBAMS entitlements while the developing country Members account for the residual 11.19%. The remaining 104 developing country Members have zero FBAMS entitlements. According to the African Group and Pakistan, the Current Total AMS (CTAMS) of USD 33.64 billion was given in 2018 over and above the de minimis limits, implying that these were used from the additional FBAMS entitlements. The US gave USD 15.98 billion as CTAMS in 2020-2021, thus utilizing 83.67% of its USD 19 billion entitlement. The EU gave EUR 5.33 billion as CTAMS and, therefore, utilized 7.36% of its USD 85.47 billion entitlement in 2020. Norway utilized 89.8% of its USD 1.4 billion entitlement and Switzerland 33.75% of its USD 4.35 billion entitlement in 2021, while Canada used 16.91% of its entitlement of USD 3.3 billion. All these utilization rates have increased since 2021. Japan used 4.67% of its USD 35.98 billion entitlement in 2019-20. The CTAMS was 48.8% of VoP for Iceland, 31.32% of VoP for Norway, 12.80% of VoP for Switzerland and 3.54% of VoP for the US in 2018. Therefore, the utilization of the entitlements has enabled these countries to use much greater additional policy space in comparison to the size of their agriculture sector, said the proposal. The two proponents pointed out that: “In many cases, these are way above the product-specific plus non-product- specific de minimis limit of 10% applicable to developed countries. If the full FBAMS entitlement is taken as a percentage of VoP, it comes to 42.80%, 40.21%, 34.35%, 18.53%, 6.76% and 5.17% for Japan, Switzerland, Norway, EU, Canada and the US, respectively, (2018 VoP), which means the entitlements offer a potential and available policy space to use trade-distorting domestic support, again disproportionate to the size of the sector as indicated by VoP.” They said that the distribution of FBAMS entitlements is highly skewed even among the entitlement holders as six WTO Members account for 87.58% of total FBAMS entitlements in 2018. The EU accounts for 49% (USD 85.47 billion), Japan 20.64% (USD 35.98 billion), US 10.96% (USD 19.1 billion), Russian Federation 2.52% (USD 4.4 billion), Switzerland 2.49% (USD 4.35 billion) and Canada 1.9% (USD 3.3 billion) of such FBAMS entitlements in 2018. According to the African Group and Pakistan, the following additional entitlements add two types of bias to product-specific AMS: (a) First, these additional entitlements allow for any amount and proportion of the total entitlement to be focused on any product, therefore, leading to large concentration in single products. For example, in 2013, the US focused 23% of its product-specific AMS on dairy, 22% on corn and 12% on livestock; the EU focused 39% of its product-specific AMS on butter, 16% on SMP (skimmed milk powder) and 29% on common wheat; and Canada focused 65% of its total product-specific AMS on milk alone. In recent years, dairy, in particular, has received very high shares of total CTAMS, going as high as 98.56% in Canada (CAD 717 million, 2018), 84.82% in Switzerland (CHF 381.8 million, 2021), 57.18% in Norway (NOK 5.88 billion, 2021), 56.2% in EU (EUR 3 billion, 2019-20). Japan devoted 88.4% of its total CTAMS to beef and veal in 2019-20 (JPY 163.9 billion) while the US devoted 30.93% of CTAMS to corn (USD 4.95 billion, 2020-21). (b) Second, the above allows any product to receive AMS far above the size or need of the sector as indicated by its VoP and above the de minimis levels that other countries are restricted to. As an illustrative example, the US use of FBAMS (above de minimis) has ranged between 5.08% of VoP for soybeans (USD 2.3 billion) to as high as 56.2% of VoP in the case of sugar (USD 1.78 billion). Important products such as wheat (13.14% of VoP, USD 1.23 billion), millet (18.91% of VoP, USD 20.24 million), cotton (18.49% of VoP, USD 1 billion), and tobacco (18.21% of VoP, USD 142.88 million) all showed high levels. Therefore, the African Group and Pakistan argued succinctly, that “the FBAMS entitlements not only allow higher absolute amounts of domestic support to be given by the Members enjoying such entitlements compared to other Members but also allow much higher flexibility and policy space in assigning the support to specific products”. Citing a 2021 study, the African Group and Pakistan said that “efforts to revive agricultural reform processes at the WTO should prioritize a substantial reduction in the massive levels of trade-distorting domestic support in developed countries as a prerequisite for further discussions on tariff liberalization”. DE MINIMIS Of late, fingers were pointed against India among others that their de minimis subsidy payments crossed the 10% limit for rice even though India’s PDS (public distribution system) forms a critical component of their public stockholding programs for food security. According to the African Group and Pakistan, “domestic support, including Amber Box support, is a necessary policy tool to meet the needs of the agriculture sector and domestic food security as is evident by developed countries’ extensive use of such support during COVID-19. An OECD paper (2020) shows that among policy measures to agriculture during the early period of the COVID-19 pandemic, “54% of measures undertaken by governments in OECD countries focused on the three categories of support (agriculture and food support, general support and food assistance and consumer support measures), including the largest proportion on agriculture and food support (35%), while 58% of measures undertaken by emerging economies were in the non-support categories of measures (sector wide and institutional, information and coordination, trade and product flows and labour measures), including the largest proportion of measures (26%) in the trade and product flow category”. However, policy space, in addition to financial constraints, remains a major constraint for developing countries to meet the needs of their agriculture sector. On the other hand, the FBAMS entitlements allows most developed countries to use Amber Box support extensively in times of crises.” POLICY SPACE FOR SOUTH The African Group and Pakistan argued that “at least during a crisis, policy space on de minimis needs to be expanded for developing countries who need to support their agricultural production and livelihoods through the easiest forms of domestic support including the use of market price support for strengthening the operation of the public food distribution programmes and non-exempt direct payments.” According to UNCTAD (2021), “with the threat of food shortages and rising levels of hunger caused by the COVID-19 crisis, the survival of billions of people also requires strong public distribution systems. Expanding policy space and South-South coordination could ensure the flexibility needed by countries in procuring and distributing food, especially at times of crisis”, the African Group and Pakistan said. On the “Blue Box”, which has apparently been rampantly used by the EU, Japan and Norway, the African Group and Pakistan said that, “The use of Blue Box subsidies under Article 6.5 of the AoA stands at USD 6,297 Million (2018).” Further, they said, “The EU, Japan, Norway, and Iceland have been the most consistent users of the Blue Box while the US has used it in single years. Among developing countries, China has used the Blue Box consistently since 2016 up to 2020.” The African Group and Pakistan pointed out that the Blue Box allows more policy space compared to the de minimis, and also allows both Amber Box and Blue Box subsidies to be simultaneously given to any product thus further expanding policy space to give subsidies to particular products in an unlimited manner, particularly the EU, for example, has used both types of support for sugar beet, seeds, dairy – milk and milk products – sheep and goat meat, tobacco, beef, olive oils, fruit and vegetables in 2016. Further, “While the Blue Box was meant to be “production limiting” and therefore not trade distorting, it is not clear whether Article 6.5(a) and its sub-conditions under 6.5(a)(i-iii) has ensured that such measures should be “production limiting”.” It is also important to note that the Blue Box was meant as a tool to enable Member countries to shift their trade- distorting subsidies under the Amber Box to the non-trade-distorting Green Box. Given that 28 years have passed since the AoA was signed, Member States which have made use of Article 6.5 since 1995 have had sufficient opportunity to fulfil that objective, said the African Group and Pakistan. TRADE-DISTORTING GREEN BOX Lastly, they said, an increasing body of theoretical and empirical evidence shows that large amounts of Green Box support given by the developed countries under paragraphs 5-13 of Annex 2 of the AoA, are not in reality decoupled from production, and have created distortions. DRAFT MINISTERIAL DECISION The draft ministerial decision proposed by the African Group and Pakistan for MC13 is as follows: DISCIPLINES ON DOMESTIC SUPPORT The Ministerial Conference, * Having regard to paragraph 1 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization; * Recognizing that domestic support disciplines under the Agreement on Agriculture (AoA) need to be reviewed and redesigned in a fair and equitable manner while preserving and integrating special and differential treatment; * Acknowledging also that such an exercise must include identification and redress of the existing elements of inequity as well the gaps in the existing rules that allow trade-distorting domestic support to continue; * Acknowledging that some Members have enjoyed additional policy flexibility in their domestic support allowances through the extra Final Bound Aggregate Measurement of Support (FBAMS) entitlements under paragraph 6.3 of the AoA which has allowed them not only higher total subsidies but has also allowed them to concentrate these in any product without the product-specific de minimis limits that other Members are obliged to meet; * Recognizing that Blue Box subsidies under paragraph 6.5 of the AoA are most often not decoupled from production and that the Blue Box was meant to be an interim tool to shift subsidies from the Amber Box to the Green Box. Further, Blue Box support allows users to give additional subsidies in comparison to the size of the agriculture sector as indicated by the value of production (VoP) and therefore must be curtailed; * Noting with concern that large amounts of Green Box support given by some Members as direct payments under paragraphs 5-13 of Annex 2 of the AoA are not decoupled from production; are often much higher in comparison to the size of the agriculture sector as indicated by the VoP, and, have in turn created distortions in global trade and impacted producers in developing and least-developed countries; Decides that the relevant provisions of the AoA shall be understood and applied as provided for below. FINAL BOUND AMS ENTITLEMENTS [ALT 1 (1(a) to 1(d)) 1(a) All Members with FBAMS entitlements exceeding applicable de minimis levels; (i) either accounting for a share of 10% or above in all Members’ total FBAMS entitlements, or (ii) accounting for 8% of global exports of WTO Members averaged over the last five years in that product shall cap their product-specific AMS for each agricultural product at their de minimis level within a period of two calendar years from the date of this Decision. 1(b) All other Members with FBAMS entitlements exceeding applicable de minimis levels shall cap their product-specific AMS for each agricultural product at their de minimis level within a period of three calendar years from the date of this Decision. 1( c) In addition, all Members with FBAMS entitlements exceeding applied de minimis levels shall cap their non-product-specific AMS at their de minimis level within a period of five calendar years from the date of this Decision. 1(d) {Alt 1: Developing country Members [1] with FBAMS entitlements exceeding applicable de minimis levels covered under paragraphs 1(a), 1(b) and 1( c) above shall have double the time period specified in paragraphs 1(a), 1(b) and 1( c) to cap their relevant AMS at the de minimis level.} {Alt 2: Developing country Members with FBAMS entitlements exceeding applicable de minimis levels covered under paragraphs 1(a), 1(b) and 1( c) above shall have double the time period specified in paragraphs 1(a), 1(b) and 1( c) to cap their relevant AMS at 50% of its average value in the last five calendar years as notified to the WTO.}] [ALT 2 (1(a) to 1(d)) 1(a) All Members with FBAMS entitlements exceeding applicable de minimis levels shall cap their product- specific AMS at their de minimis level in respect of each agricultural product where the product-specific support has exceeded 25% of the VoP as notified to the WTO any time within the last five calendar years, within a period of two calendar years from the date of this Decision. 1(b) All other Members with FBAMS entitlements exceeding applicable de minimis levels shall cap their product-specific AMS at their de minimis level in respect of all other agricultural products within a period of three calendar years from the date of this Decision. 1( c) In addition, all Members with FBAMS entitlements exceeding applicable de minimis levels shall cap their non-product-specific AMS at their de minimis level within a period of five calendar years from the date of this Decision. 1(d) {Alt 1: Developing country Members with FBAMS entitlements exceeding applicable de minimis levels covered under paragraphs 1(a), 1(b) and 1( c) above shall have double the time period specified in paragraphs 1(a), 1(b) and 1( c) to cap their relevant AMS at the de minimis level.} {Alt 2: Developing country Members with FBAMS entitlements exceeding applicable de minimis levels covered under paragraphs 1(a), 1(b) and 1( c) above shall have double the time period specified in paragraphs 1(a), 1(b) and 1( c) to cap their relevant AMS at [50]% of its average value in the last five calendar years as notified to the WTO.}] DE MINIMIS 2(a) Notwithstanding paragraphs 1(a) to 1(d) above, any developing country Member experiencing a severe food crisis may have recourse to a product-specific de minimis that can exceed 10% of VoP but not more than (10+X%) of VoP for a period of three calendar years from the year when the crisis has begun as assessed by the affected Member or until the end of the crisis as assessed by the affected Member, whichever is longer. This option is available for food products where the affected developing country accounts for less than 1% of global exports. An eligible Member may use this option as soon as it has assessed that a severe food crisis has begun in accordance with paragraph 2(b). 2(b) A “severe food crisis” shall be understood to have occurred when for the food product in question; (i) the domestic net availability falls below 80% of the Olympic average of the five years preceding the year when the affected Member assesses a severe food crisis has begun, or (ii) the total public and private domestic expenditure exceeds 130% of the Olympic average of the five years preceding the year when the affected Member assesses a severe food crisis has begun, or (iii) the domestic average price exceeds 130% of the Olympic average of the five years preceding the year when the affected Member assesses a severe food crisis has begun. NOTIFICATION 2( c) Members using paragraph 2(a) above shall file their annual domestic support (DS:1) notifications for the relevant years. In addition, such Members shall also file a notification on meeting the conditions specified under paragraph 2(b) above within the first calendar year of exceeding the de minimis limit. BLUE BOX 3(a) Direct payments in any year under production-limiting programmes for a specific product as allowed under the terms of Article 6.5 of the AoA by a Member which has used such subsidies between 1995 and the date of this Decision may not exceed 2.5% of the Olympic average of preceding five years VoP of that product. 3(b) For Members which have not used such subsidies between 1995 and the date of this Decision but use it in the future, the provision under paragraph 3(a) will be applicable after a period of 20 years from the date of this Decision. NOTIFICATION 3( c) Any Member which uses the Blue Box shall file annual notifications as required under the provisions of the AoA. GREEN BOX 4(a) Total domestic support specified under paragraphs 5-13 of Annex 2 of the AoA shall be capped at 5% of the annual VoP within a period of three calendar years from the date of this Decision. 4(b) When paragraph 8 of Annex 2 of the AoA is used in certain year(s), total domestic support specified under paragraphs 5-13 of Annex 2 of the AoA shall be capped at 5% of the average VoP of the preceding five-year period excluding the highest and the lowest entry, within a period of three calendar years from the date of this Decision. 4( c) Support specified under paragraphs 5-13 of Annex 2 of the AoA may be given without limit to farmers with low levels of income, landholding, factor use and production in developing and least-developed Members. 4(d) The base periods for programmes under paragraphs 5-13 of Annex 2 of the AoA shall be defined, fixed and unchanging. NOTIFICATION 4(e) The base periods for programmes under paragraphs 5-13 of Annex 2 of the AoA shall be notified to the Committee on Agriculture within a period of one calendar year from the date of this Decision, along with a list of the products eligible for each programme notified under paragraphs 5-13 of Annex 2 of the AoA which is to be updated within one calendar year of any change. [1] For greater certainty for the purposes of this Decision, “developing Member” includes least-developed Member. +
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