Brazil derided at G20 meet on domestic support proposal

A proposal co-sponsored by Brazil, a leading member of the developing-country G20 grouping in the WTO, on dealing with trade-distorting farm subsidies has failed to gain traction among some of its fellow G20 members.

by D. Ravi Kanth

GENEVA: India, China, Cuba and Ecuador derided Brazil at a G20 developing-country meeting on 11 July for Brasilia’s volte-face on the 2008 revised draft modalities of the Doha agriculture work programme, and denounced a joint proposal circulated by Brazil, Argentina and Paraguay on domestic support as it went against the G20’s fundamental objectives for reforming global trade in agricultural products, several agricultural negotiators told the South-North Development Monitor (SUNS).

Consequently, Brazil’s move to test the waters on the joint proposal failed to take off, said a South American negotiator who asked not to be quoted.

[The G20 coalition was brought together in August 2003 when, just before the WTO’s Cancun Ministerial Conference, the US and the EU – who had been ranged against each other over the EU’s Common Agricultural Policy and subsidized agriculture from the time the Uruguay Round was launched in 1986 – suddenly agreed to accommodate each other’s interests and formed a common front against the developing world, presenting a framework paper at an informal heads-of-delegation (HOD) meeting.

[At that time, Brazil, India, China and South Africa, among others, joined hands to put forward their own proposal, which was initially co-sponsored by 17 developing countries although this figure quickly rose to 20 (with some more varying supporters). This was how the group came to be called the G20. Brazil’s then envoy to the WTO, Ambassador Luiz Felipe de Seixas Correa, was the prime mover, with close support from the Indian and Chinese envoys, and Brazil became the coordinator of this group.

[This move infuriated the EU in particular. Its negotiator Peter Carl attacked the G20 paper at an HOD meet convened by the chair of the WTO General Council and used some angry and unusually non-diplomatic tones, accusing the sponsors of provocation and introducing a North-South confrontation into the WTO. Carl claimed the paper represented a “Manichean approach to international cooperation”, and that the proponents were aiming at the stars in hopes of getting the moon.

[This prompted a response from de Seixas Correa, who said that it was not the moon that the co-sponsors wanted but down-to-earth markets in Europe and elsewhere for their products through reforms to the unfair agricultural system. – SUNS]

Joint proposal

After lying dormant for many months, Brazil convened a G20 meeting of technical experts on 11 July to discuss a joint proposal prepared by Brazil, Argentina and Paraguay on domestic support. The proposal had earlier been issued as a restricted job document at the WTO’s Committee on Agriculture Special Session (which serves as the Doha agriculture negotiating body) on 17 June. It was also co-signed by Colombia, which is not a G20 member.

The joint proposal emphasized that “the reform process in Agriculture should aim at concrete multilateral outcomes to be achieved by MC11 [the WTO’s eleventh Ministerial Conference, due to be held next year] and beyond.”

The four sponsors raised several questions “to guide discussions on trade-distorting domestic support”. “Our objective is to contribute to a more targeted reflection on the possibilities open to Members for addressing this important systemic pillar of agriculture reform,” they said.

Members, the sponsors argued, “should focus their attention on four approaches potentially open as options for tackling” the outstanding issues in domestic support.

Under Option 1, the sponsors asked: “Should Members pursue a comprehensive limit for trade-distorting domestic support? If so, what should constitute the architecture for such overall limit?”

They suggested that “in the past, Members worked with the concept of an Overall Trade-Distorting Domestic Support (OTDS). OTDS would constitute a new commitment in the AoA [WTO Agreement on Agriculture].

“Such overall limit would be scheduled and work in conjunction with other limiting components. Combined with anti-concentration disciplines, an overall limit would provide a good basis for trade-distortive support reduction commitments while balancing out the need for policy space.”

Further, they said that “OTDS was conceived as a fixed monetary value to be established on a country by country basis. The OTDS base limit was made up of: AMS entitlements (where relevant); a percentage of the value of production (VoP); and where relevant support provided or an additional VoP percentage. The construction of Base OTDS reflected past levels of subsidization and could raise questions related to equity of treatment as well as catering to differences in the intensity of subsidization.”

The sponsors sought to know whether there were “other ways to think about a comprehensive limit for trade-distorting support of Members? Do Members consider possible and desirable to explore other avenues in order to address a limit for the overall trade-distorting support, perhaps a cap somehow linked to the VoP?”

The second option put forward by the four countries asked whether members should “take advantage of the existing structural elements of trade-distorting domestic support pursuant to Article 6 of the AoA and aim at reduction commitments for each or some of those elements”.

The sponsors maintained that the second option is relatively simple and straightforward, under which trade-distorting domestic support under the AMS, de minimis and Blue Box would be reduced by an agreed percentage.

This option comes close to what was suggested by the US last year, under which Article 6.2 of the AoA would be jettisoned. Under Article 6.2, developing countries are allowed to provide investment subsidies that are exempted from domestic support reduction commitments.

The third option proposed by the four countries centred on “new structural elements for disciplining trade-distorting domestic support, such as product-specific AMS limits”.

Without mentioning the 2008 Rev. 4 draft agriculture modalities text, the sponsors argued that “product-specific AMS limits were part of the discussions in the past. Caps per product would avoid concentration of expenditures and therefore limit the potential for distortion. Product-specific caps can be even more relevant in the context of overall limits.”

They sought to know whether there should be product-specific caps for de minimis in which China, India and other developing countries have taken commitments.

The last option involved developing “alternative ideas for addressing trade-distorting domestic support with the introduction of new variables (e.g. exports of domestically subsidized products)”. The sponsors sought to know whether members must consider “commitments linking limitations to trade-distorting domestic support and exports … Should market share and the potential to affect international prices be defining features of such option?”

In addition to the above four options, the sponsors also raised the following questions:

(i)     How should special and differential treatment be addressed?

(ii)    How should balance in levelling the playing field be achieved, recognizing past and future trends in trade-distorting domestic support?

(iii)  How would cotton be dealt with?

Common strategy

During the meeting, India thanked Brazil for convening the meeting but regretted that the G20 could not even issue a communique at the Nairobi Ministerial Conference despite a meeting of the G20 trade ministers.

Before addressing this paper, India said, the G20 must finalize its strategy and what it intends to accomplish and which ought to be the issues that must be pursued in the run-up to the eleventh Ministerial Conference next year.

India said it is not correct to cherry-pick issues when there are so many outstanding areas of concern such as the permanent solution for public stockholding programmes for food security, the Special Safeguard Mechanism for developing countries, and export credits. Therefore, the G20 must have a clear path on all issues so as to adopt a common strategy for the eleventh Ministerial Conference. The G20, India said, worked on export competition and tariff rate quotas at the Bali Ministerial Conference in 2013 but remained silent on export competition at Nairobi.

China said the G20’s position has all along been that outstanding issues in agriculture must be addressed on the basis of the Rev. 4 text.

The former Brazilian ambassador to the WTO Roberto Azevedo, who is now the WTO’s Director-General, had maintained that “the December 2008 [Rev. 4] draft modalities are the basis for negotiations and represent the endgame 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 [Doha] Round.

“The draft modalities embody a delicate balance achieved after ten 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,” Azevedo as Brazilian envoy had said at that time.

China asked Brazil pointedly how it could move away from Rev. 4 without discussing with other members of the group. China said there is a need to have a strategy.

Ecuador said that Rev. 4 remains the basis for the negotiations, arguing that it would not go beyond those modalities.

Cuba concurred with India and China, maintaining that the joint proposal will not fly in the G20 when the group has had a clear position.

Argentina supported the joint proposal, saying that domestic support is the fundamental issue. Chile and Mexico also supported the joint proposal.

Brazil said the proposal is only for technical discussion, suggesting that the group can consider other ideas.

However, the “technical discussion” resulted in what other members viewed as Brazil’s “unabashed attempt” to test the waters at the G20 meeting on its controversial proposal which went against Rev. 4, and it failed to take off. It remains to be seen what Brazil’s next move is going to be, said a South American negotiator who asked not be to quoted. (SUNS8281)                                          

Third World Economics, Issue No. 621/622, 16 July – 15 August 2016, pp22-23