Cotton-4 shocked at US “no” to binding outcomes at Nairobi

by D. Ravi Kanth

GENEVA: The four West African cotton-producing countries – Benin, Burkina Faso, Chad and Mali – on 26 November received the biggest shock after the United States categorically rejected binding outcomes at the Nairobi Ministerial Conference on their demands.

The Cotton-4 had called for binding outcomes at Nairobi on duty-free and quota-free (DFQF) market access for some 40 tariff lines and cuts in trade-distorting domestic subsidies on cotton, several trade envoys told the South-North Development Monitor (SUNS).

More aggressively, the US also maintained that the best-endeavour deliverables for the C-4 countries at Nairobi shall not even be referenced to the previous Doha Development Agenda ministerial mandates such as the 2004 July Framework agreement, the 2005 Hong Kong Ministerial Declaration and the 2013 Bali Ministerial Declaration, a C-4 trade envoy told SUNS.

On 26 November, the chair of the Doha agriculture negotiations, Ambassador Vangelis Vitalis of New Zealand, convened a closed-door meeting with trade envoys from around a dozen countries to discuss the possible textual elements for the deliverables on cotton. Countries that attended the meeting included the US, the EU, Brazil, the four countries from West Africa, China, India, Pakistan, Colombia and Argentina.

Chair’s textual elements

Prior to the meeting, the chair on 23 November had suggested draft textual elements on cotton to explore middle-ground outcomes. The chair’s textual elements cover the three pillars of market access, trade-distorting domestic support and export competition.

The elements include, in market access:

a)  Acknowledgement that more is needed to meet the objective of providing DFQF access for cotton and other related products originating from least-developed countries (LDCs).

b)  Confirmation that this objective will be pursued after the 10th Ministerial Conference (i.e., the Nairobi conference), based on an evolving list (“the list”) of products annexed to the text.

c)  Continuation of DFQF market access for products on the list originating from LDCs by developed-country members and developing-country members declaring themselves in a position to do so.

d) Ongoing efforts to improve existing duty-free and quota-free market access coverage by developing-country members which are unable to grant DFQF market access for all the products on the list originating from LDCs.

e)  Transparency and monitoring of the implementation of DFQF market access on markets of interest to LDCs, based on existing notification requirements and supplemented as necessary by additional requests for information by the WTO secretariat.

f)   Review of the list and DFQF access granted for products on the list originating from LDCs by the 11th Ministerial Conference.

g)  Discussion of possible additional measures to improve market access, including the elimination of non-tariff barriers.

In domestic support, the chair suggested the following elements:

l     The C-4 proposal for ambitious cuts submitted on 12 October.

l     Standstill at current subsidy payment levels.

l     Due restraint.

l     Best endeavour.

In the export competition pillar, Vitalis suggested elements based on the Hong Kong ministerial mandate that called for prohibition of all forms of export subsidies for cotton.

On export subsidies, the chair suggested that the industrialized countries must eliminate all their export subsidies for cotton by 1 January 2017 and the developing countries by 1 January 2018.

Further, the chair said that “to the extent that new disciplines and commitments for export credits, export credit guarantees or insurance programmes, agricultural exporting state trading enterprises and international food aid create new and additional obligations for Members as regards cotton, any such obligations shall be implemented by 1 January 2016 for developed country Members, and by 1 January 2018 for developing country Members.”

Binding outcomes

At the 26 November meeting, the C-4 countries demanded binding outcomes in all three pillars at the Nairobi conference. The four African countries said they had waited for more than 10 years for binding outcomes to address the worst crisis they were facing for the past many years.

The four African countries praised the chair for his relentless efforts to find a suitable landing zone but they cautioned that only binding outcomes – “ambitiously, expeditiously and specifically”, as mandated in the 2005 Hong Kong Ministerial Declaration – will address their grave crisis.

The C-4 countries had circulated a detailed draft ministerial decision on 12 October listing out the proposed outcomes in the three pillars on a binding basis. They argued that their proposal is the basis for negotiating the final outcomes at the Nairobi meeting, an African trade envoy told SUNS.

In a belligerent response to the C-4 proposal, the US said it will not accept binding outcomes in all three pillars and will also not agree to any mention of the previous Doha ministerial mandates in the Nairobi deliverables, according to the African envoy. The US said it can only agree to best-endeavour outcomes but not standstill or due restraint provisions for reducing trade-distorting domestic subsidies.

Other developed countries such as the EU were willing to consider binding outcomes in the market access (the Everything But Arms initiative), trade-distorting domestic subsidies (except in the Blue Box and Green Box) and export competition pillars, the African envoy said.

China and India said they will provide DFQF market access of over 90% but ruled out binding provisions as they are not required to do so under the 2005 Hong Kong Ministerial Declaration. “Both China and India addressed our concerns in market access,” according to the African trade envoy.

The C-4 countries said they cannot accept the US position of denying binding outcomes as well as avoiding referencing the deliverables to the previous Doha ministerial mandates.

The four countries suggested that they would take their battle over the binding commitments for cotton to Nairobi.

“As the conference is taking place in Africa, we shall have concrete results in terms of the level of commitments and time-frame for implementing the outcomes,” the African envoy said. “We are frustrated over the response we heard today at the meeting from the US.”

“The US’ stance has made one thing clear,” said another trade envoy who took part in the meeting. “Even before deciding on reaffirming continuation of negotiations on outstanding issues of the DDA after the Nairobi meeting, the US seems to have embarked on a warpath to ensure that there is no mention of the DDA decisions in the cotton outcome.”

From the US position on cotton at the meeting, “it is clear that the Bali decisions will be repeated at the Nairobi ministerial so as to ensure that the package of outcomes for the least-developed countries will be an empty bag of meaningless decisions,” the envoy argued.

Food security permanent solution

Meanwhile, the G-33 group of developing countries on 25 November upped the ante on their desired deliverable of a permanent solution for public stockholding programmes for food security at the Nairobi meeting.

The agriculture chair Vitalis convened a closed-door meeting on 25 November to discuss the G-33 draft ministerial decision on the permanent solution. Countries that attended the meeting included the US, the EU, Australia, Brazil, Paraguay, Indonesia, China, India, the Philippines and Nigeria.

Indonesia provided a detailed account of the four-page draft decision that calls for amending the WTO’s Agreement on Agriculture by inserting a new Annex 6 to cover the domestic subsidies underpinning public stockholding for food security purposes.

The G-33 draft decision maintained that programmes for the acquisition of foodstuffs at administered prices by developing and poorest countries “with the objective of supporting low-income or resource-poor producers,” and “subsequent distribution at subsidized prices with the objective of meeting food security requirements,” shall be exempt from subsidy reduction commitments.

Australia raised extraneous issues about the draft decision, asking whether it would properly address the “unintended consequences.” The G-33 proposal, according to Australia, will create another “Green Box”.

The EU maintained that it wants to engage constructively in finding a permanent solution. But the real deadline for finding the permanent solution, it argued, is the 11th Ministerial Conference in end-2017 and not the Nairobi Ministerial.

At the Bali Ministerial Conference in 2013, trade ministers set a deadline for finding the permanent solution by end-2017 at the 11th ministerial meeting, while members at the WTO General Council mandated making all concerted efforts to resolve this issue by 31 December 2015.

The EU suggested that the General Council’s decision last year carries less weight legally than what ministers had decided at the Bali meeting in 2013.

The EU said the G-33 countries must start implementing the interim solution as worked out at the Bali Ministerial in 2013, instead of asking for a permanent solution.

The US said it remains committed to public stockholding discussions but the latest G-33 proposal doesn’t change the substance of retaining such programmes in the Green Box, according to participants familiar with the meeting. The US also said that “amending the AoA [Agreement on Agriculture] is not the right way.”

Pakistan defended the EU’s stand by arguing that the Bali decision struck the right balance. Further, the public stockholding programmes will lead to unsustainable production as well as undermine reform of global farm trade, Pakistan maintained.

Brazil said it is seriously concerned about the “unintended consequences” which the proponents have not addressed in the draft decision. Paraguay said the G-33 proposal offers a huge carve-out of exempting the food security programmes from subsidy disciplines.

China said if members have objections about including the public stockholding programmes in the Green Box, then they must suggest in which box they must be placed.

India dismissed the concerns raised by Australia, the EU, the US and Brazil, saying that those countries that are speaking about farm trade reforms remain silent about the huge subsidies provided by a few major industrialized countries.

India said pointedly to the EU that the interpretation of last year’s General Council decision on public stockholding programmes is plainly wrong. According to people familiar with the meeting, India said the Council decision to conclude a permanent solution by December 2015 is on the same footing as any decision taken by ministers at a Ministerial Conference because the General Council has the power to take decisions during the period between Ministerial Conferences.

Some countries, said India, spoke about “unintended consequences” but have not given any suggestions on how they can be addressed, according to participants familiar with the meeting.

India asked the opponents pointedly whether they are rejecting the G-33 proposal for a permanent solution on the ground that the interim solution is adequate and will not require change, according to people familiar with the meeting.

In response, the EU said “we are not rejecting the G-33 proposal but in the current form it cannot be accepted,” said a person who was present at the meeting.

With only a short period left before the Nairobi Ministerial, the developing and poorest countries are all set to face a scorched-earth-policy effort by the US and its allies on African soil that will result in developing countries and LDCs not only returning from the meeting empty-handed but, worse still, suffering the most humiliating outcome in which the Doha Round is put to bed without a trace, an African trade envoy warned. (SUNS8145)                                          

Third World Economics, Issue No. 604, 1-15 November 2015, pp6-8