Developed countries want financial cap for permanent food security solution

Efforts to produce meaningful outcomes in Nairobi on several key agricultural issues – public food stocks, a special safeguard mechanism, export competition and cotton trade – have met with resolute opposition led by major developed countries. The following four articles look at the state of play on these issues in the talks running up to the Ministerial Conference.

by D. Ravi Kanth

GENEVA: Major developed countries at the WTO have maintained that they will agree to a permanent solution for public stockholding programmes for food security purposes in developing countries on the condition that the latter accept a financial cap on the market price support programmes, people familiar with the development told the South-North Development Monitor (SUNS).

At a closed-door meeting of select trade envoys in different configurations, the EU said Brussels can only agree to a permanent solution for public stockholding programmes for food security for low-income and resource-poor farmers if developing countries accept a financial cap on their market price support programmes, according to people familiar with the development.

Australia, Canada and Paraguay continued to adopt stonewalling tactics by raising procedural hurdles at a meeting on 5 December to block an outcome on the permanent solution at the WTO’s tenth Ministerial Conference in Nairobi, people familiar with the development said.

The EU’s demand for a financial cap on public stockholding programmes will have far-reaching consequences for developing countries, according to a person familiar with the negotiations. “This is an outlandish demand under which the developing countries put a financial ceiling despite challenging economic developments in their economies,” the person said.

India rejected the EU’s demand by asking whether there will be any financial cap on trade-distorting international food aid or export credits. India pointed out that the public stockholding programmes are vital to developing countries which have a large number of people dependent on agriculture.

Millions of farmers in the developing countries are not only in the low-income and resource-poor category but would need governments to assist them in marketing their produce, unlike the heavily subsidized rich farmers in the developed countries, India pointed out.

In response to India’s questions on international food aid, which is highly trade-distorting according to African countries, the US said that the food aid it is supplying to people in Syria and Afghanistan will continue without changes despite the current negotiations at the WTO. But the US did not answer whether the food aid it provides is trade-distorting or not, said another person familiar with the development.

Director-General’s report

Meanwhile, WTO Director-General Roberto Azevedo presented a report to the WTO General Council in which he suggested that outcomes on public stockholding programmes for food security and the special safeguard mechanism (SSM) are almost difficult due to continued divergences.

Azevedo said the consultations held by the chair of the Doha agriculture negotiations, Ambassador Vangelis Vitalis of New Zealand, on the SSM “have continued to show entrenched and widely divergent positions.”

Proponents of the SSM have stressed that they consider the SSM to be a balancing element in relation to other potential outcomes for Nairobi, he argued. “Other Members have maintained their position that an outcome on the SSM was not possible in the absence of a broader outcome on agriculture market access. Given these sustained divergent views, the negotiations on this issue have reached an impasse,” Azevedo said. He, however, added that the negotiations will continue in different formats.

As regards “the separate issue of public stockholding,” Azevedo said there is a new submission from the G-33 and also one from Australia, Paraguay and Canada. The G-33 members have called for a permanent solution to be adopted this year in Nairobi, citing the General Council decision of 28 November 2014. They have noted that the recent G-33 proposal seeks to address the systemic concerns of members.

The G-33 proposal calls for creating a new Annex 6 in the WTO’s Agreement on Agriculture to include public stockholding programmes for developing countries. The proposal says:

“1. Programmes for public stockholding for food security purposes shall include:

(a) programmes for the acquisition of foodstuffs at administered prices by the Government in developing country Members/Least Developed Country Members with the objective of supporting low-income or resource-poor producers;

(b) programmes for the acquisition of foodstuffs at administered prices by the Government in developing country Members/Least Developed Country Members and its subsequent distribution at subsidized prices with the objective of meeting food security requirements of urban and rural poor, and of maintaining adequate availability of foodstuff and/or ensuring food price stability.

2. The operation of programmes referred to in paragraph 1 above shall be transparent and conducted in accordance with officially published objective criteria or guidelines.

3. Programmes referred to in paragraph 1 above shall not be required to be accounted for in the Aggregate Measurement of Support….”

But other members, according to Azevedo, consider that the G-33 proposal “still does not adequately address a variety of concerns, both systemic and trade-related.”

On export competition, Azevedo was not particularly harsh as compared to his remarks on the SSM and public stockholding programmes. He said the chair of the agriculture negotiations has initiated a text-based negotiation process using the Rev.4 text (revised draft agricultural modalities text of 2008) as a basis and taking also into account textual proposals by members.

But the Director-General did not mention that the US has rejected the Rev.4 text as the basis for negotiating export credits and food aid.

Azevedo merely said “so far these consultations have not led to significant convergence either.”

“Among other issues, specific substantive concerns continue to be expressed about the timeframes and conditions envisaged for the elimination of export subsidies, repayment terms in the area of export finance, coverage of self-financing provisions, special and differential treatment, transparency provisions, monetization in food aid – it’s a large list of issues which are still unresolved,” he pointed out.

But the Director-General conveniently avoided mentioning the concerns of India, China and several other countries that there are attempts to change the Rev.4 text upside down to suit only one member and that these attempts would result in huge “systemic” changes.

India has proposed that in the chapeau to the text on export competition there should be specific language that the outcome in the export competition pillar will not be implemented unless there is an outcome in the domestic support and market access pillars based on the Doha Development Agenda mandates.

But the US and the EU rejected the Indian proposal, according to sources familiar with the negotiations.

On cotton, Azevedo did not provide a credible account that the US has ruled out binding outcomes in market access, trade-distorting domestic support and export competition. He sidestepped the main issues raised by the four West African cotton-producing countries (Benin, Burkina Faso, Chad and Mali) by saying that “delegations have moved into a text-based negotiation based on this proposal, including its list of products of interest, as well as on written inputs from Members.”

In short, the proposed Nairobi outcomes on SSM, public stockholding programmes and cotton are given a stepmotherly treatment as compared to the wholesale changes in the export competition pillar that remain inconsistent with the Doha mandates, according to trade envoys familiar with the development. (SUNS8152)                              

Third World Economics, Issue No. 604, 1-15 November 2015, pp3-4