Talks in final stretch with limited time before MC11, says agri chair

WTO meetings on 10 and 13 November revealed continued divisions among member states on key issues of agricultural trade reform with only a month to go before the WTO’s eleventh Ministerial Conference.

by Kanaga Raja

GENEVA: With just about a month until the eleventh WTO Ministerial Conference (MC11), which will take place in Buenos Aires on 10-13 December, the chairperson of the agriculture negotiations at the WTO reported on 10 November on the state of play on the issues of domestic support, cotton, export restrictions and agricultural market access.

At an informal meeting on 10 November, the chair of the Special Session of the WTO Committee on Agriculture, Ambassador Stephen Karau of Kenya, said: “We are in the final stretch of our Geneva-based negotiations with very limited time left before MC11.”

He told members that his objective as chair was “to be in a position to present the contours of a possible package on agriculture with a limited number of issues for the consideration of Ministers at MC11”.

According to Karau, “the best way to ensure success at MC11 would of course be for members to fully agree on a package in Geneva before leaving for Buenos Aires”.

“Depending on the issue, the envisaged outcome could be a substantive one, a post-MC11 work programme or a combination of the two,” the chair said.

A dedicated session was subsequently held on 13 November on the agriculture issues of public stockholding (PSH) for food security purposes and the Special Safeguard Mechanism (SSM), with the chair providing an update on the negotiations on both these issues (see below).

Domestic support

According to trade officials, at the 10 November informal meeting, the chair circulated a revised version of a compilation document aimed at facilitating text-based negotiations. The revised document reflects all the proposals that are being discussed in the run-up to MC11. It also contains several new proposals tabled by members over the past fortnight.

According to trade officials, on the issue of domestic support, Karau said that it remains the priority for the vast majority of members. “It is the pillar that has gotten a lot of attention in all our meetings thus far, as well as in my consultations with members,” he said. “We now have six proposals reflected in the compilation document.”

Despite the high level of engagement, the chair said that members’ positions remain divided, with one group favouring an overall limit to trade-distorting domestic support and another calling for the elimination of the Aggregate Measurement of Support (AMS) entitlements by MC11 or at a later stage. “While both approaches aim to limit trade-distorting support, points of departure differ,” the chair said.

According to trade officials, Argentina, which will be hosting MC11, introduced its proposal on domestic support, which it referred to as a “compromise text”. It maintained that the proposal does not reflect Argentina’s national position but rather represents an effort to achieve common ground.

Argentina said that it does not view the overall trade-distorting domestic support (OTDS) and AMS reductions as two opposing objectives, and thus proposed a limit that seeks to cut AMS and addresses overall limits. (For details of the Argentine proposal, see the following article.)

Argentina said that its proposal is not set in stone, and it is open to incorporating members’ comments in further versions.

However, some members voiced strong concerns over the uneven level of concessions that the Argentine proposal implies.

Mexico expressed concern over the significant concessions that it would have to make under the proposal, saying that it would have to cut its domestic support by 50-97% under the options that have been proposed by Argentina. Any contribution should be proportional, Mexico said, adding that it “cannot accept contributions that are greater than that of some developed countries”.

According to trade officials, the EU also expressed similar concerns, saying that while the submission by Argentina purports to represent convergence of the submissions currently on the table, in reality it is nothing of the kind.

The EU pointed out that under the first option in the Argentine proposal, only around 30 members are expected to take cuts to their existing limits on trade-distorting support, while the second option would mean that members which have not reformed their policies will be allowed to continue with their policies or even increase trade-distorting support. Under the third option, more than half of the membership – including the proponents – would actually be given a significantly larger ceiling for trade-distorting support.

The US said the Argentine proposal does not overcome the reality of deep divergences among the members. Members should focus on continuing the agriculture reforms after Buenos Aires, it suggested. “Continuing to ignore the reality of where we are, and to press for outcomes against significant odds will lead to a dynamic that will be deeply unhelpful to a shared long-term goal of making progress,” the US said.

The US called on members to start by fulfilling their notification requirements, in order to “fully understand the state of agriculture policies and trade today to be able to inform us of how we might move forward.”

Switzerland, on behalf of the G10 coalition (Iceland, Israel, Japan, Korea, Liechtenstein, Mauritius, Norway, Switzerland and Chinese Taipei), said that only a modest outcome can be considered for MC11.

Commenting on the Argentine proposal, Switzerland said that “we doubt that the divergent views on domestic support could be reconciled under this proposal.” It pointed out that many of the G10 members would still have to contribute in a disproportionate way compared with those members whose subsidies impact world markets the most.

Other members of the G10, including Japan, Korea and Norway, expressed support for the statement made by Switzerland.

Norway noted that the red lines of some major members are clearly not matching. On the Argentine proposal, Norway said that the required cuts for some members are “too big to defend to their domestic stakeholders”.

According to trade officials, India underlined that its joint proposal with China (which calls for elimination of the AMS) had garnered support from most members.

China pointed out that the Argentine proposal does not address product-specific AMS limits. It noted that some developed members can provide product-specific AMS as high as hundreds of percent of the value of production, whereas developing members can only have access to the de minimis. Members can never achieve an equitable, development-oriented outcome on domestic support without tackling product-specific AMS, China emphasized.

Botswana, on behalf of the African, Caribbean and Pacific (ACP) Group of countries, said that the group’s proposal also calls for the elimination of the AMS.

Australia said that the exclusion of both Article 6.2 support (which allows developing countries additional flexibilities) and Blue Box support is not feasible. According to Australia, if members leave some elements unaddressed now, it will be very difficult to address them in the future.

Canada also said that both Article 6.2 and the Blue Box should be included in the limit.

Brazil noted some areas of convergence between the Argentine proposal and the joint EU-Brazilian proposal, saying that this could set the basis for “further incremental results for the future”.

Chinese Taipei, on behalf of the Article XII members (also the group of recently acceded members), said that members of the group made higher levels of concessions during their accession process to the WTO. It said that according to their simulations, some of the group’s members would need to further reduce their policy space under some of the domestic support proposals on the table.

Saudi Arabia, another Article XII member, voiced similar views.

While it welcomed the Argentine proposal, Pakistan said that it is not comfortable with the equal treatment of the AMS and de minimis. As a net food-importing developing country, it needs to maintain policy space to address food safety concerns, Pakistan underlined.

Ecuador s.aid the proposal cannot be supported as the limited policy space under de minimis would be further reduced.

According to trade officials, Indonesia said that Option C in the Argentine proposal would be problematic.

Chile, Colombia and Uruguay broadly supported the Argentine proposal, while Thailand also expressed support but said that it would like to see the Blue Box addressed.

Guatemala, speaking on behalf of the Small and Vulnerable Economies (SVEs), said that the group’s special conditions need to be respected.

El Salvador, Venezuela and Cuba supported the call for special and differential treatment for special groups.

Paraguay expressed caution over attempts to clean up the negotiations agenda before MC11, which it said could result in an “empty Christmas tree”. While the efforts made by Singapore with its proposal on export restrictions could be a side dish, it still trusts that “Argentine beef” will make a party in Buenos Aries, said Paraguay.

Cotton

Also at the 10 November informal meeting, the chair reported that domestic support on cotton remains the central and most controversial issue and that views remain far apart on what could constitute a possible outcome in this area.

According to Karau, several delegations consider that the proposal from the Cotton Four (C4) group – comprising Benin, Burkina Faso, Chad and Mali – cannot constitute a realistic basis for an outcome on cotton domestic support at MC11.

“No participant, for example, has indicated support for the idea that further disciplines on Green Box direct payments granted to cotton producers could be part of an outcome at MC11,” the chair maintained.

“As regards the other components of Cotton – Market Access, Export Competition, implementation and follow up as well as development assistance – delegations reaffirmed the continued relevance of the Nairobi Decision,” the chair further said.

According to trade officials, Mali, speaking on behalf of the C4, said that it was surprised to hear the chair’s report, while Benin, another C4 member, voiced strong objections to the notion that further disciplines on Green Box direct payments granted to cotton producers run counter to the objective of the reform process in agriculture.

Pakistan pointed out that members have a mandate to address the cotton issue and the negotiations on cotton must lead to significant reductions of domestic support. It however said that the disciplines on the Green Box suggested in the C4 proposal, though desirable, will not be realistic. In the current environment, the EU-Brazilian proposal can be a realistic basis, while for future work, the C4 proposal is the most complete proposal, it added.

The EU and Brazil highlighted their joint proposal to address cotton, with Brazil saying that it offers the only real path to a comprehensive outcome on domestic support, public stockholding and cotton.

The EU maintained that it was a leader in implementing cotton reforms and it is committed to making progress.

On the issue of export restrictions, the chair reported that the discussions confirmed that many members support a limited outcome, mainly focused on enhancing transparency in export prohibitions and restrictions. They also confirmed the wide support for the exemption from such export restrictions of foodstuff purchases by the World Food Programme for humanitarian purposes.

Singapore presented its revised proposal on export prohibitions and restrictions, saying: “We are not seeking to change any existing WTO agreement, but rather to enhance and clarify the transparency provisions.”

According to trade officials, while the proposal was generally welcomed, some members including India emphasized the view that notification requirements should not become too burdensome for developing countries. It was also pointed out that the requirement to have further advance notice before applying export prohibitions or restrictions can lead to speculation.

On agricultural market access, Karau reported that members are not targeting a substantive outcome at MC11 but rather are seeking to achieve a collective agreement on a work programme to guide market access negotiations post-MC11.

Some members cautioned against an excessively detailed work programme or any selective approach that might potentially lead to picking and choosing among the various market access issues, the chair said.

Tunisia introduced its proposal on tariff simplification, saying that despite 20 years of the WTO Agreement on Agriculture, the market access pillar of agricultural reform is still harmed by complex tariffs.

Paraguay introduced its proposal, co-sponsored by Argentina, Brazil, Chile, Thailand and Uruguay, on a post-MC11 work programme on market access.

Paraguay said market access is an important pillar in agriculture and has the potential of boosting international trade if it is properly addressed. “The proposed work programme is not aiming at prejudging any results or approach,” said Paraguay.

It pointed out that the average tariffs on agricultural products remain over eight times higher than tariffs on industrial products, and tariffs of more than 300% are not uncommon.

According to trade officials, many members supported the proposed work programme as an incremental step in addressing the market access pillar. However, some members including the G10 suggested that the language of the work programme should remain simple and non-controversial.

Some members including the EU voiced caution against cherry-picking individual issues in the absence of a wider market access package covering both agricultural and non-agricultural products.

The chair reported that the issue of elimination of the special agricultural safeguard (SSG) – which allows some members to temporarily increase import tariffs on specific agricultural products in cases of import surges or price drops – has also been raised specifically by some members.

The Philippines introduced a new proposal aimed at gradually phasing out the SSG. Some members however called for it to be maintained.

Canada, Chile and Switzerland circulated a proposal on export competition. Introducing the proposal, Canada said that there is still room for improvement to the Nairobi decision on export competition to ensure that other measures do not threaten to circumvent elements in that decision.

Argentina expressed support for the proposal and hoped to be a co-sponsor.

Brazil said that it would submit a proposal on sanitary and phytosanitary measures (SPS). “We have adjusted our ambition,” Brazil said, adding that “we will essentially propose a place-holder for SPS issues in an agenda for future work, without prejudging the agenda nor the results of such future work.”

Public stockholdings

At the dedicated session on 13 November, the chair provided an update on the status of the negotiations on PSH and on the SSM.

According to trade officials, the chair reported that he found members’ engagement increasingly encouraging. “While I can’t say that we are close to a consensus, I have seen genuine efforts to attempt to narrow the gaps in Members’ positions,” Karau said.

The chair provided a detailed report on the individual components of a permanent solution for PSH.

On the core provision, the chair said that the main issue has been which approach to take. Members’ views differ between an exemption from the AMS calculation or a Bali-type solution shielding PSH programmes against legal challenges, with an increasing number of views expressed in favour of a Bali-type solution.

On product coverage, the chair reported that some members want the current language in the Bali decision to be replaced by “foodstuffs”, while others have expressed a strong preference for maintaining the phrase “traditional staple food crops” in the Bali decision. It was pointed out that the current language resulted from intensive consultations among members in the run-up to the 2013 Bali Ministerial Conference, he said.

On country and programme coverage, the chair reported that members generally agree that the permanent solution should cover other developing countries. The main difference comes from the fact that some would like to extend the solution to all developing countries, while others suggest extending it only to “small” programmes, defined as programmes under which the procurement remains below a certain percentage of the value of production or of the quantity produced. There is nevertheless an agreement from both sides that the coverage should be extended to include least developed countries (LDCs), said the chair.

Regarding transparency, the members of the G33 coalition are of the view that the conditions – such as the requirement to be up to date with notifications and to notify in advance a breach or a potential breach – are too onerous. According to the chair, several others considered however that a member with a capacity to run big programmes should be able to provide the required information; one member suggested that the transparency requirements should be proportional to the size of the programme, meaning that there should be enhanced transparency for bigger programmes.

Safeguards remain probably the most contentious element, Karau said. The preferences are divided between: (1) unmodified Bali safeguards; and (2) “Bali-plus” safeguards, meaning strengthening the safeguards by adding some conditions, notably regarding the prohibition of direct and indirect exports from the procured stocks.

Russia presented a new proposal it had jointly tabled with Paraguay, saying that the proposal is based on the Bali decision and represents a delicate balance.

Russia maintained that both existing and new PSH programmes are covered in the proposal, while LDCs are exempted and strong safeguards are introduced to ensure the stocks are not leaked to export markets. The transparency requirement in the proposal will help members that apply the programmes to share data and thus avoid misunderstanding, it said.

According to trade officials, Indonesia, speaking on behalf of the G33, reiterated the group’s position that the PSH issue should not in any way be linked with domestic support and that any linkage would prevent members from achieving an outcome in Buenos Aires.

Indonesia pointed out that food security programmes should not be counted as AMS; a permanent solution should cover both current and new programmes; and that transparency requirements should not be too onerous, especially ex ante requirements to notify in advance a breach or a potential breach, which would not be feasible.

Indonesia said that the G33 is willing to discuss safeguard provisions.

According to trade officials, India underlined that there cannot be any substantive outcome at MC11 without a solution on PSH.

It said that a permanent solution ought to provide legal certainty, and that the product coverage should be “foodstuffs”, noting that this is the terminology used in the Agriculture Agreement. As for the transparency requirement, India reiterated that members should only be asked to provide information after the implementation of such programmes. On safeguards, India asked members which have concerns to provide text-based suggestions based on the latest G33 proposal.

According to trade officials, the US said that it does not welcome expanding the scope of the interim solution on PSH.

Canada raised a number of questions on the transparency requirement and safeguards. It said that some members have increased import tariffs after releasing stocks, causing disruption in the global market. This is why a permanent solution should include ex ante transparency requirements and safeguards should be in place to ensure that countries should not increase applied tariffs for the products procured under PSH programmes, Canada said.

According to trade officials, El Salvador, Ecuador, China, Chinese Taipei, Turkey, Nigeria and Egypt (for the African Group) voiced similar views to the G33 group.

Egypt said that setting a limit based on value of production would not be favourable to African countries as most of them have small agriculture production. It said that the proposed condition that countries using PSH programmes should not increase their import tariffs beyond certain limits sets out a linkage between public stockholding and market access, and cannot be accepted.

Pakistan said that while many countries have legitimate welfare and livelihood concerns, these should not be construed to create distortions in agriculture trade. It maintained that various PSH programmes have serious unintended consequences and can affect the food security and livelihood of other farmers, and therefore uncapped provisions without adequate safeguards cannot be an outcome for MC11.

Expressing support for the Russia-Paraguay proposal, Thailand said that strong transparency and safeguard provisions are needed.

The EU said that the elements in its own proposal should be maintained. And a standalone outcome on PSH, without domestic support, would not be acceptable, it added.

Special Safeguard Mechanism

On the SSM, the chair reported at the 13 November session that he had not heard anything different from members. The issue continues to be very important for a number of members which have called for a substantive outcome on the SSM, whereas some other members do not consider that a substantive outcome at MC11 is realistic in the absence of a broader market access outcome.

“The only development that I could see in the recent discussions is that one particular member for whom a substantive outcome on SSM at MC11 is very important, even if a partial one, has started to explore the feasibility of linking the proposed mechanism to the existing SSG to address its specific concerns,” the chair said.

According to trade officials, Indonesia (for the G33), the Philippines, India, China, Turkey, Nigeria and Chinese Taipei expressed support for the SSM, reiterating that an effective and pro-development SSM would help small-scale farmers overcome price volatility. The G33 proposal should be the basis for work, they said. (SUNS8578)                 

Third World Economics, Issue No. 650, 1-15 October 2017, pp2-5