US cherry-picking MC11 outcomes, holds members hostage

The fate of the WTO ministerial meeting will hinge to a large extent on the US, which has thus far been determinedly selective on the subjects to negotiate and advance for Buenos Aires.

by D. Ravi Kanth

GENEVA: The United States continues to cherry-pick outcomes for the WTO’s eleventh Ministerial Conference in Buenos Aires.

The US has indicated its willingness to negotiate a deliverable for prohibiting subsidies to vessels that contribute to illegal, unreported and unregulated (IIU) fishing while categorically ruling out a work programme on domestic farm subsidies, trade envoys told the South-North Development Monitor (SUNS).

It has adopted an ambiguous position on retaining the transparency and safeguard provisions in the Bali interim decision on public stockholding programmes for food security, according to trade envoys familiar with the development. Meanwhile in the area of services, it has rejected an outcome on domestic regulation for trade in services.

The diametrically opposite positions adopted by the US came into full display during two meetings at the WTO on 14 and 15 November on the domestic support reduction commitments for farm products and on fisheries subsidies respectively.

On 14 November, the chair of the Doha agriculture negotiations, Ambassador Stephen Karau of Kenya, held a meeting on domestic support with 15 countries. The meeting was specifically convened to accelerate discussions on a so-called compromise proposal issued by Argentina, the host country of MC11.

Argentine proposal

The proposal, which aims to forge “convergence for an outcome at MC11”, suggests an overall “limit” (cap) on overall trade-distorting support with several elements. Under the proposal, members shall not provide trade-distorting domestic support which taken in aggregate exceeds a monetary limit (or base cap).

The base cap shall be no greater than the larger of:

Option A: Double the member’s de minimis percentage of its average value of total agricultural production in the period [2011-15];

Option B: [110%] of the average Articles 6.3 and 6.4 support notified by the member for [the most recent three notified years at the date of adoption]; or

Option C: For developing-country members, [$2.0 billion] or equivalent in local currency.

Argentina proposed that “the base cap shall apply to trade-distorting domestic support referred to in Articles 6.3 and 6.4 of the Agreement on Agriculture.”

Under the proposal, members that do not notify their preferred option above within one year of the decision shall be considered to have chosen Option C in the case of developing countries and Option B in the case of developed countries.

In an attempt to satisfy China and India, which have demanded the elimination of the Aggregate Measurement of Support (AMS) or the most trade-distorting domestic support, Argentina also proposed a tiered formula for “Final Bound Total AMS”. The formula suggests that:

(i) Where the Final Bound Total AMS is greater than $40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [30]%;

(ii) Where the Final Bound Total AMS is greater than $15 billion and less than or equal to $40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [21]%;

(iii) Where the Final Bound Total AMS is less than or equal to $15 billion, or the equivalent in the monetary terms in which the binding is expressed, the rate of reduction shall be [15]%.

Argentina called for developed countries to be required to reduce their Final Bound Total AMS in three equal instalments over two years, commencing on the first day of implementation.

For developing countries, the reduction in Final Bound Total AMS shall be two-thirds of the reduction applicable for developed countries. They will reduce their Final Bound Total AMS in five equal annual instalments over four years, commencing on the first day of implementation. Developing countries with Final Bound Total AMS levels at or below $100 million will not be required to undertake reductions under the proposal.

Argentina also proposed in its draft decision that members “agree to establish a work programme with the objectives of reducing the Overall Trade-Distorting Support limit (i.e. base cap) as set out in this Decision, including Blue Box support (Article 6.5)”, and “addressing subsidy concentration, with negotiations to be held in dedicated sessions of the Committee on Agriculture in Special Session with outcomes to be adopted by the [twelfth] Ministerial Conference.”

Even though the Special Sessions on agriculture are conducted under the mandate of the WTO’s Doha work programme, the chair and the proponents have shied away from mentioning the Doha Development Agenda, particularly the revised 2008 draft agriculture modalities, lest it be opposed by the United States.

Other members’ reactions

At the 14 November small group meeting, the US fiercely opposed the Argentine proposal and insisted that it will not agree to any outcome on domestic support at the Buenos Aires meeting due to the continued divergences among members, including on the Argentine proposal.

The US maintained that enhanced transparency and notification requirements are essential before commencing work on domestic support. It called for an outcome at Buenos Aires on its proposal on transparency and notification. (For more on the US proposal, see the article “US transparency proposal criticized at WTO Goods Council” in this issue.)

The US stand on domestic support created a serious impasse, said one trade envoy who asked not to be quoted.

It also created confusion on the next steps as the US insisted that there should be a one-line statement at Buenos Aires for continuing work after the Ministerial Conference without any specific agenda, said a participant who took part in the 14 November meeting.

The Argentine proposal was also opposed by China, India, and the coordinators of the African and ACP (African, Caribbean and Pacific) Groups.

The four participants said their proposal to eliminate the most trade-distorting domestic support or the AMS should be the starting point for any discussion on domestic support, and not the Overall Trade-Distorting Domestic Support (OTDS) as demanded by Argentina.

Farm defensive countries – Japan, Switzerland and Mexico – adopted a nuanced position demanding “proportionality” in the domestic support reduction commitments. The three countries said that the only way to commence work on domestic support is to start from the scheduled commitments and not existing levels of support.

In short, the 14 November meeting ended in disarray without any clarity as to what Argentina is planning to do given the opposition from its ally in Washington.

Fisheries subsidies

Meanwhile, the prospects for agreement to prohibit subsidies to vessels engaged in IUU fishing appeared bright after the US suggested compromise textual language.

During a small group meeting on 15 November among 10 countries, the US apparently provided some textual language for addressing concerns raised by the South American proponents for an outcome to prohibit subsidies for vessels that contribute to IUU fishing on the high seas.

However, there are other big issues involving overfishing and overfished stocks to be addressed, according to a negotiator familiar with the consultations.

For example, the proposed language on these two issues remains in square brackets, which indicate a lack of agreement. The language on “overfished discipline” suggests that:

“Subsidies for fishing [and fishing related activities] [outside the territorial sea] [that negatively affect]/[of] [targeted] fish stocks that are in an overfished condition.

“[The negative effect of such subsidies shall be determined] [by the subsidizing Member] based on the [best] scientific evidence [available to] [recognized by][that Member.]]”

Similarly, “[a fish stock is overfished if

[ALT1: it has not been assessed or has been assessed to be in an overfished condition. NZ/ICE/PAK]

[ALT2: it is recognized as such by the Member in whose national jurisdiction the fishing is taking place or by a Regional Fisheries Management Organization [or Arrangement][after taking due account of the objections, if any, of the concerned Member] based on [best] scientific evidence available to [and recognized by] them.]

[ALT3: the stock is at such a low level that mortality from fishing needs to be restricted to allow the stock to rebuild to a level that produces maximum sustainable yield or [alternative][other] reference points based on the [best] scientific evidence available [to the Member within its jurisdiction or to the relevant RFMO] [and with no effective management plan in place] [.][[Fish stocks that are][as] recognized [as overfished] by the national jurisdiction where the fishing is taking place or by a relevant fisheries management organization or arrangement [shall also be considered overfished.]][In the cases of straddling and highly migratory fish stocks, shared among Members, the evaluation related to the fish stocks in the fishery for which the subsidy is provided shall be made pursuant cooperation of the Members involved.]]

[In the absence of sufficient data to make such a determination, the stock shall be presumed to be in an overfished condition. EU].”

“There is a slim chance and some light at the end of the tunnel,” the negotiator said, suggesting that three elements are coming together. The three elements involve a “downpayment” at the Buenos Aires meeting for prohibiting fisheries subsidies for vessels that contribute to IUU fishing, a work programme for addressing issues concerning overfishing and overcapacity, and the chair’s vertical text remaining as the basis for work between the eleventh and twelfth Ministerial Conferences.

“It is too early to suggest a clear outcome but the US language is bridging the gaps,” said another negotiator.

However, the US suggestions, if linked with the transparency and notification requirements for fisheries subsidies, could pose problems, the negotiator added.

The US also remained silent on the special and differential treatment provisions demanded by many developing countries, including India for its artisanal fishermen.

There is also an issue stemming from China’s demand for disputed areas on high seas not to be brought under any disciplines.

Meanwhile, the Philippines on 16 November circulated a draft ministerial decision which stated that “a member shall not provide subsidies to fishing and related activities in waters and areas that are claimed by more than one member at the time of this decision, unless the member involved have agreed inter se to do so through a joint notification to the WTO. For purposes of this provision, the member shall cease from providing subsidies not later than [2020].”

In crux, the outcomes for the eleventh Ministerial Conference in Buenos Aires are sought to be determined by the US while the remaining 163 countries are being held hostage to the demands made by Washington, said a trade envoy who asked not to be quoted. (SUNS8578)   

Third World Economics, Issue No. 650, 1-15 October 2017, pp5-7