Azevedo pursuing his controversial ideas to help US, other ICs

A closed-door meeting held prior to the TNC session saw a continued push to steer the Doha Round negotiations on domestic farm support towards an outcome that would unduly favour the US and other industrial countries.

by D. Ravi Kanth

GENEVA: Despite widespread opposition from developing countries to shifting the goalposts for reduction commitments in domestic support, WTO Director-General Roberto Azevedo has persisted with his controversial ideas that would be tantamount to establishing new templates for helping the United States and other developed countries, trade envoys told the South-North Development Monitor (SUNS).

At a closed-door “green room” meeting on agriculture domestic support on 29 July, the Director-General said there is no convergence among major players on what needs to be done in domestic support at this juncture. The green room meeting was with over 30 trade envoys.

The US trade envoy Michael Punke concurred with Azevedo’s assessment that there is zero evidence of any convergence at this juncture on domestic support.

Azevedo then went on to pose some questions on domestic support. For example, the Director-General asked the participants drawn from developed, developing and least developed countries whether they are prepared to “live with” an outcome in only one pillar.

The Doha Round agriculture negotiating mandates – the 2001 Doha Ministerial Declaration, the July 2004 Framework Agreement, the 2005 Hong Kong Ministerial Declaration and the unsettled 2008 revised draft modalities – provide for substantial and significant reduction commitments on tariffs in market access, domestic subsidies, and phasing out of export subsidies and export credits. There is an internal balance constructed between the three pillars of market access, domestic support and export competition.

Besides, there is also an external balance between agriculture and market access for industrial goods and other areas. The Hong Kong Ministerial Declaration has clearly stipulated the principle of equivalence between agriculture and non-agricultural market access in paragraph 24: “... we instruct our negotiators to ensure that there is a comparably high level of ambition in market access for Agriculture and NAMA. This ambition is to be achieved in a balanced and proportionate manner consistent with the principle of special and differential treatment.”

When he was Brazil’s trade envoy (until 2012), Azevedo had publicly campaigned to ensure that the balance between the three pillars as set out in the so-called Rev. 4 or 2008 revised draft agriculture modalities must not be changed. For example, he had said: “The December 2008 draft modalities are the basis for negotiations and represent the end-game in terms of the landing zones of ambition. Any marginal adjustments in the level of ambition of those texts may be assessed only in the context of the overall balance of trade-offs, bearing in mind that agriculture is the engine of the Round...

“The draft modalities embody a delicate balance achieved after 10 years of negotiations. This equilibrium cannot be ignored or upset, or we will need readjustments of the entire package with horizontal repercussions. Such adjustments cannot entail additional unilateral concessions from developing countries.”

Fundamental questions

Against this backdrop, Azevedo’s question at the 29 July green room meeting on whether the participants are prepared to “live with” an outcome in only one pillar raises some fundamental ethical questions about the integrity of the process and what he has in mind, said a participant after the green room meeting.

In the face of a firm disapproval from the trade envoys to an outcome only in one pillar, Azevedo told the trade envoys to think a lot about his question. The Director-General said domestic support in itself is very complex and if members make linkages then it would become more difficult.

“Since the majority would need outcomes on all three pillars, the question to ask is can you live with an outcome only in one pillar,” the Director-General maintained, according to a participant from South America.

“If not, how would you close the gaps in other two areas [market access and export competition pillars], and if policy space exists, what is your problem?” he apparently asked, according to the South American participant.

By asking these questions, Azevedo is suggesting two things: (1) arriving at domestic support commitments based on the 2008 revised draft modalities which are negotiated on the basis of the ministerial mandates of the 2004 July Framework Agreement and the 2005 Hong Kong Ministerial Declaration is out of the question; and (2) he is implicitly asking the developing countries why they are resistant to undertaking fresh commitments if they have policy space.

Under the existing Doha Round mandates, the developing countries are exempt from undertaking any commitments in aggregate minimum support and de minimis (many of them did not have any commitments in the Uruguay Round). China is also exempt under the recently acceded member flexibility.

Therefore, posing the question as to why countries cannot undertake commitments when they have policy space without regard to the existing mandates raises serious questions, said a trade envoy.

In a sharp response, many developing-country trade envoys present at the meeting reportedly said that they would need “credible and concrete outcomes in all three pillars of agriculture talks – domestic support, market access and export competition.”

Following Azevedo’s questions, the United States went on to caution countries present at the meeting that red lines in domestic support are overlapping and they must be respected. (The US was alluding to China and India as having rising subsidy payments and also their de minimis support is a red line for them, according to a participant.)

The US said it is not asking others to deliver in domestic support where they have red lines and therefore, others must reciprocate the same with the US, according to the participant.

The US said it is ready to agree to a global ban on farm export subsidies in the export competition pillar. The US has thus indicated that it is ready to undertake commitments only on export subsidies in the export competition pillar but not domestic support.

During the green room meeting, the Director-General also said an outcome on rules is very important for some members. He suggested that despite demands for sequencing – i.e., an outcome in agriculture followed by market access for industrial goods and later other areas – by some countries, the proponents for improvements in rules must go ahead with their proposals.

Trade envoys from India, South Africa and Brazil, among others, dismissed Azevedo’s suggestion, saying they are not going to address proposals in rules unless they have clarity on agricultural domestic support and other areas of market access.

Brazil told Azevedo that it has no shame in demanding sequencing in which outcomes in all three pillars of agriculture must be decided first before rules, according to a participant at the meeting.

India said rules are not part of the core areas of market access, while South Africa maintained that a credible outcome on domestic support is crucial for unblocking other areas.

In short, said a trade envoy, Azevedo is moving heaven and earth to ensure that there are no substantial commitments in domestic support in order to help the United States.

(The US is required to bring its overall trade-distorting domestic support below $14.5 billion as per the 2008 revised draft modalities. But the latest US farm bill passed last year has provided for domestic support that has surpassed the $14.5 billion limit by several billions of dollars.)

SP and SSM

Meanwhile, in the face of fierce opposition from the US for allowing Special Products and Special Safeguard Mechanism in the market access pillar for developing countries, a large coalition of over 90 countries led by the G33 farm coalition reiterated their call for “renewing development through the special products and special safeguard mechanism.”

In a proposal circulated on 28 July to coincide with the 31 July Trade Negotiations Committee meeting, Indonesia, on behalf of the G33, the small vulnerable economies (SVEs), the African, Caribbean and Pacific (ACP) Group and Chinese Taipei, said the Special Products and Special Safeguard Mechanism ought to remain at the core of any outcome in the market access pillar.

Some members, Indonesia said in its proposal, “nowadays have argued that SP and SSM are no longer needed in the name of ‘simplification’, ‘recalibration’ and ‘lowering of ambition’ in market access, domestic support and export competition. This call and assertion is not only a clear disregard of the July [2004] Framework and the Hong Kong Mandate, [but] even more it is unwarranted given that the inequalities and imbalances including extensive subsidization by developed Members stand to continue”.

“It should be clear to all that the G33, since the beginning of its existence, has deemed and proposed that SP or SSM should be standalone elements of the market access pillar and they should neither be linked with any tariff reduction formula nor with a level of ambition,” the developing countries argued.

“Thus, the G33, SVEs, ACP, and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu deem SP and SSM as ‘must haves’ for a successful outcome in MC10,” they maintained.

The battle lines are drawn: if the developing countries cannot remain united, then the Director-General and developed countries will have a cakewalk in rewriting the commitments of a Development Round in favour of those countries with deep pockets and protectionist barriers. (SUNS8074)    

Third World Economics, Issue No. 598/599, 1-31 August 2015, pp9-10