Agri chair reports on consultations on G33, G20 proposals

Consensus continues to elude WTO member states regarding developing-country proposals for decisions at the forthcoming WTO Ministerial Conference on public stockholding for food security and on farm export subsidies, the chair of the agriculture talks has reported.

by Kanaga Raja

GENEVA: The chair of the agriculture negotiations at the World Trade Organization (WTO) on 18 July reported to the full membership on his consultations since May on the G33 proposal on public stockholding for food security and the G20 proposal on export competition.

In a statement at an informal open-ended meeting of the Special Session of the WTO Committee on Agriculture, the chair, Ambassador John Adank of New Zealand, reminded members of the time that was remaining in the lead-up to the Bali Ministerial Conference (to take place in early December).

“As members will be aware, the end of next week marks the beginning of the summer break, with many WTO delegates taking leave during August and no expectation of a real resumption of WTO work until September. That, of course, is the case each year but this year is different as when delegations return in September we can expect our work to intensify significantly if we are to prepare effectively for the Bali Ministerial in early December,” he said.

He added that it was important for all members to recognize that they would have at the very most around two months – perhaps only 6-8 weeks – when they return after the summer break to prepare the ground for the Ministerial.

“As I’m not in a position to announce today that we have consensus in any area of our work in relation to Bali, this means that the period after the summer break will necessarily need to be extremely focused and intensive if we are in fact to deliver on the expectation that has been set now for several months that ‘elements of agriculture’ will form part of a suite of Bali decisions,” the chair said.

“So, delegations need to adjust their mindset to take into account this timeframe. I would encourage you before you depart for the summer break to register where things are with your capital, and ensure that both you and they are focused on the challenge that will need to be met if we are to arrive at convergence on agricultural elements for the Bali Ministerial,” he stressed.

Questions on G33 proposal

On the G33 proposal on public stockholding for food security, the chair said that since members last met in May, he had continued to hold consultations on this proposal, based on the four questions that he had initially outlined at a senior officials’ meeting on 30 April.

Question 1 states: “Are members willing to consider that the Bali Declaration/decisions include recognition that, subject to the fundamental requirement of the Green Box relating to no or minimal trade or production distortion, the Green Box needs to be flexible enough to encompass a wide range of general services policies in developing countries along the lines indicated in the proposed paragraph (h) (which the G33 proposal suggests be added to the Illustrative List of Green Box measures)?”

On this question, the chair reported that further progress had been made in clarifying views of members on a number of issues that they had regarding the “general services” elements outlined in proposed paragraph (h) referred to in the G33 proposal.

Following some initial discussion which highlighted potential overlap between some elements in the proposed paragraph (h) and existing elements of the Green Box lists contained in Annex 2 of the WTO Agreement on Agriculture (AoA), it was suggested by Indonesia, on behalf of the G33, to delete “provision of infrastructure services” and “nutritional food security” from the list of general service programmes, given that both of these aspects are addressed in other parts of Annex 2.

According to the chair, the suggestion was positively received by others.

Overall, there seemed to be some convergence emerging around declaration/communique language for Bali that would recognize in general terms that the policies and programmes mentioned in the first part of the G33 proposal – with the suggested modifications – could be considered to fall within the scope of “general services” of Paragraph 2 of Annex 2 to the AoA, provided that the declaration makes clear that the chapeau contained in Paragraph 1 of Annex 2 would fully apply to such policies and programmes.

Ambassador Adank viewed this as positive news.

Question 2 states: “Taking into account what the Ministerial Conference has said in the past (including in the Implementation Decision of 2001), can we use Bali to send a convergent political message that recognizes the role played by public stockholding and similar policies in some developing countries?”

According to the chair, the response to Question 2 had also been positive at a general level.

However, divisions remained between those who had expressed their readiness to start working without delay on text for a possible Bali Communique or Declaration and those who considered that the debate on Question 2 should take place once the “contours” of the possible outcome on the other elements of the G33 proposal (notably, replies to Questions 3 and 4) were clearer.

“So, currently while no consensus has been reached about any specifics of the potential elements to be included in the Bali outcome text, I remain hopeful that, as members reflect further, a broader convergence should be possible on this political messaging issue.”

Question 3 states: “Are members prepared in the lead up to Bali to agree on any amendment or interpretation of existing WTO AoA disciplines that might provide greater flexibility in this area of public stockholding than is currently the case? If so, what is this amendment or interpretation? If not, are members prepared to consider further work on these issues in the post-Bali period, and how would this work be framed?”

On this, Ambassador Adank said that the situation had not changed. Members’ opinions were still divided between those favouring a general systemic solution to the issue for Bali (through an amendment or interpretation of the existing rules) and those questioning whether such amendment or interpretation was either possible or desirable by Bali.

Members were also asked to comment specifically on the various ideas raised by the G33 for amending or interpreting the rules relating to: (i) de minimis criteria; (ii) the external reference price; (iii) the “eligible production”; and (iv) the administered price.

The chair reported that many felt that modifying any of the four sub-items would have implications that go far above the public stockholding and therefore be too big an issue for Bali.

About the further work on these issues in the post-Bali period, while some members had suggested focusing now on what a post-Bali work programme might look like, others had suggested that the focus must necessarily remain on what was doable for Bali and only after this was clear should the focus revert to the post-Bali issue.

Question 4 states: “Are members willing to consider a mechanism or process whereby any member with specific concerns that their public stockholding policies aimed at addressing food security objectives were at risk of breaching their WTO commitments could bring those concerns to the attention of members and seek additional flexibility on an interim basis, pending any broader agreement to modify the disciplines in general?”

According to the chair, this question about a possible interim mechanism had made probably the most progress since members last met in May. Different positions on the threshold conditions and the main characteristics of a potential mechanism had been expressed more clearly and some elements of convergence had been starting to emerge.

For example, it had been generally agreed that the mechanism could cover public stockholding programmes of developing countries related to food security, and be applicable to staple crops, given the food security focus.

In addition, it had been generally agreed that its use could be subject to an ongoing provision of information that would allow members to monitor the situation; that members could look at safeguards or guarantees aimed at avoiding a potential spillover effect on markets; and that the Committee on Agriculture would be the appropriate home for the mechanism in terms of notification and monitoring discussions.

There was also a general sense that any flexibility delivered under a mechanism should be time-limited and the mechanism itself should be an interim one.

Among the threshold conditions to access the mechanism, it had been also generally suggested that the member must find itself in a situation of near-breach of its commitments, said the chair.

Other conditions that might justify recourse to such a mechanism had been noted as possibly including: (i) extraordinary and sudden increases in food prices; (ii) the presence of market failure; (iii) respect of the existing notification requirements; and (iv) the importance of ensuring that recourse to the mechanism does not displace a general policy orientation towards economic reforms.

Despite this progress, some crucial questions remain, the chair said, adding that these included, notably, the question of whether the flexibility delivered under such a mechanism should be: (i) automatic; (ii) non-automatic; or (iii) a hybrid arrangement that would involve some degree of automaticity as well as case-by-case elements.

He stressed that members had yet to determine which of these three general directions they preferred to pursue.

He further said that some members had also highlighted the need to ensure that any flexibility delivered under any such mechanism would need to be legally robust to ensure that members were not challenged under the WTO dispute settlement mechanism. How would the mechanism be packaged to provide appropriate legal flexibility? Would it be like a WTO waiver, or something else?

“So, to sum up, the consultations have moved into serious consideration of the parameters of possible solutions. Members have a considerable number of elements to consider, and I have been careful to allow them the space to do so.”

The chair added: “Time is however now pressing and I think it’s important that members start to deepen the discussion of the most appropriate models for delivering flexibility under an interim mechanism, assuming that this is what members are prepared to envisage as an outcome for the Bali meeting.”

According to trade officials, members of the G33 at the 18 July informal meeting said that they would need some “legal certainty” that their use of the mechanism would not be subject to legal challenge. Other members said that they sought a mechanism with time limits, transparency and a means of preventing a “spillover” that would distort markets.

Trade officials said that at the informal meeting, Norway proposed an idea on how to allow developing countries to purchase and stock produce for food security without breaching their committed limits on domestic support.

One of the problems raised by the G33 is the possibility that when a government purchases at a “reference price” instead of the market price, it risks exceeding the country’s limit on domestic support, particularly when prices are high, on account of the size of the support calculated, using the difference between reference prices and those of the 1986-88 base period when prices were considerably lower than they are now.

According to trade officials, Norway’s proposal envisages a downward adjustment in the reference price when markets can be shown not to function properly, although Norway said how the adjustment would be determined still needs to be discussed.

G20 proposal on export competition

According to trade officials, on the G20 proposal on export competition, Ambassador Adank said that the debate on the proposal was clearly still at an early stage and that members needed to discuss it seriously further in order to get a better idea of what could be possible in Bali.

“I think it is probably fair to say that the overall political acceptability of recourse to export subsidies has diminished significantly as these unilateral reforms, undertaken in preparation for the day when export subsidies would need to be eliminated entirely, have been implemented,” he said.

“This trend for reform has positively contributed to the environment for broader reform in agriculture and the WTO more broadly and members may want to think about the importance of encouraging further efforts in this area.”

The chair went on to report that on the one hand, the G20 and a group of other members, including some who may still have questions related to the G20 proposal including the references to Article 9.4 of the AoA, clearly wanted a step forward in Bali on export competition, including in terms of legal commitments. This position was presented as in keeping with the 2013 deadline agreed at the Hong Kong Ministerial Conference in 2005 for the elimination of all forms of export subsidies, which was of course also incorporated in the Rev.4 draft modalities text.

On the other hand, some of the members with the largest export subsidy commitments had underlined that while they remained committed to the elimination of export subsidies, the conditions under which they could modify the legal commitments in the field of export competition were in their view not met. And this was notwithstanding that their actual use of export subsidies had significantly decreased in recent years.

For them, the text agreed at Hong Kong in 2005 and the Rev.4 text on export competition that followed on from this was conditional upon the overall conclusion of the Doha Development Agenda, as was the implementation of the Rev.4 text overall. A partial implementation of the export competition pillar – or even the full implementation of the export competition pillar without accompanying delivery of other key elements of the Doha package – was therefore not seen as a viable option for the Bali meeting.

According to the chair, there was also another group of members with export subsidy commitments who pointed out that the G20 proposal would have real practical impacts for their use of export subsidies rather than just “cutting water” out of their scheduled commitments.

While not ruling out a discussion, these members pointed to the additional difficulty this would cause and highlighted, along similar lines to the previous group of members, that any move in the direction of the G20 proposal would only be possible in the context of a wider package of reform both across and beyond the agriculture pillar of Doha.

Summing up, the chair said that there was some way to go in this area to locate any convergence, which in his view remained a further task members would need to pursue in the weeks ahead.

A number of members spoke during the discussion of the G20 proposal on export competition.

According to trade officials, the US and the EU voiced strong objections to a decision in Bali on eliminating or reducing export subsidies, as well as dealing with other export competition issues. In their view, this was not well calibrated for a deal in Bali.

Trade officials pointed out that the US’ and EU’s concerns were that the original agreement in Hong Kong to eliminate export subsidies by 2013 was based on agreement on the whole agriculture package, and not on an isolated commitment on export subsidies.

The EU said this was not doable before the Bali Ministerial and put at risk a successful outcome at that meeting.

According to trade officials, the US said that it was joining the EU as the “skunk of the picnic”, noting that people were disappointed that they were not addressing export competition. The US also had its disappointments about other issues such as non-agricultural market access (NAMA), services, fisheries subsidies and agricultural market access.

Japan said that countries should think about things that could be agreed. “Members should seek realistic solutions that are acceptable to all,” it said.

Others broadly said that this was an important issue and should be dealt with, adding that export subsidies had long been a part of agricultural trade policy that was most damaging.

For example, Mexico, supported by Uruguay, called it an outdated policy because in other areas in the WTO, export subsidies were illegal, but they were still allowed in agriculture.

Brazil, speaking for the G20, said that it was very disappointed with the lack of progress in the discussions on export competition, adding that it had already recognized that the G20 was not going for full elimination of export subsidies in Bali.

Export subsidies were an unfair practice prohibited in other goods and one of the most serious imbalances in WTO rules, it said, adding that members must not allow reforms that had already been made to be rolled back.

According to trade officials, Argentina, New Zealand, Thailand, Costa Rica, Chile, Mexico, Paraguay, Uruguay, the Philippines, Pakistan, Bolivia, China and Cuba supported the G20 and the Cairns Group (represented by Australia).

Tariff rate quota administration

On the separate G20 proposal on tariff rate quota (TRQ) administration, the chair reported that there had been no further consultations specifically on this proposal, although he had continued to meet with delegations to hear their views on this issue.

Since the last meeting in May, members had continued to see this as a useful one to explore for possible decision in Bali, even though there were some sensitivities about aspects of the proposal that members had reflected to the chair in various consultations.

In his statement, the chair said that these concerns could be divided into two different areas: first, some concerns about the actual text and specifically the special-and-differential-treatment elements of it; and more general questions that some members had raised about how the mechanism would operate in practice and the need to ensure that it did not end up targeting a situation where the under-fill was due to market conditions unrelated to quota administration conditions.

According to trade officials, most members that spoke on this issue said they considered it to be a candidate for agreement in Bali, describing the proposal as less complicated technically. Some others said that it was simply implementation of the present Agreement on Agriculture.

On the other hand, several others voiced concerns over the special-and-differential-treatment provisions.

According to trade officials, some (the US and EU) said that it would allow developing countries to have persistently under-filled quotas without having to act on the administration method.

Several developing countries including Chinese Taipei, Republic of Korea, the Dominican Republic, El Salvador, China, Venezuela, Barbados and the Philippines stressed the importance of special and differential treatment. (SUNS7631)                                        

Third World Economics, Issue No. 550, 1-15 Aug 2013, pp9-11