TWN Info Service on UN Sustainable Development (Dec15/04)
18 December 2015
Third World Network

Developing countries get a jolt from WTO
Published in SUNS #8159 dated 18 December 2015

Nairobi, 17 Dec (D. Ravi Kanth) - Developing countries with hundreds of millions of poor farmers on Thursday (17 December) received a jolt at the World Trade Organization's tenth ministerial conference (MC10) here when draft texts on Agriculture issued this morning ruled out any outcomes for the special safeguard mechanism (SSM) and a permanent solution for public stockholding programs for food security.

The draft texts issued by the facilitator Mr Joshua Setipa, the trade minister of Lesotho, nevertheless have delivered favourable outcomes for the United States in the export competition pillar, several trade ministers and negotiators told the SUNS.

"I conveyed my objections line by line in the four draft ministerial decisions on special safeguard mechanism, public stockholding programs for food security, export competition pillar, and cotton to the facilitator Setipa and the chair for Doha agriculture negotiations Ambassador Vangelis Vitalis during a meeting in the morning," India's trade minister Nirmala Sitharaman told the SUNS.

She said the G-33 proposals on SSM and public stockholding programs were not reflected, nor the text on export competition pillar containing the elimination of export subsidies, disciplines on export credits, food aid, and state trading enterprises lived up to the existing ministerial decisions.

She said the language on export credits and state-trading enterprises are imbalanced from several aspects.

The draft texts on export subsidies, export credits, food aid, and state-trading enterprises in the export competition pillar as well as SSM don't even mention the Doha Development Agenda (DDA) trade negotiations.

The draft ministerial decision on special safeguard mechanism for developing countries - which was covered in the July 2004 framework agreement, the 2005 Hong Kong Ministerial Declaration, and more exhaustively in the 2008 revised draft modalities - is now simply referred to as "special safeguard mechanism for developing members - Ministerial Decision of December 2015."

Effectively, the umbilical link with the DDA and the Doha mandate seems to have been broken once and for all, as demanded by the United States in the run-up to the Nairobi ministerial meeting.

The draft Nairobi ministerial decision on SSM says: "work on a Special Safeguard Mechanism for developing Members shall be pursued taking account of proposals by Members and in the broader context of agricultural market access."

The draft decision on SSM, therefore, requires the developing countries to negotiate all over again because of the de-linking with all the Doha trade negotiations on SSM. Though it says in the broader context of agricultural market access negotiations, the draft text implies restarting market access negotiations all over again. Therefore, the existing decisions on several elements in the market access pillar such as tariff cuts, the tariff rate quotas, the sensitive products, the special products, and the special safeguard mechanism seem nullified, according to an Asian farm trade negotiator.

Significantly, the 2005 Hong Kong Ministerial Decision and the 2008 revised draft modalities did not mention any link between the outcome for special safeguard mechanism and other results in the market access pillar.

The 2005 Hong Kong Ministerial Declaration, for example, says, "developing country Members will also have the right to have recourse to a Special Safeguard Mechanism based on import quantity and price triggers, with precise arrangements to be further defined."

The 2008 revised draft modalities says, "the SSM shall have no a priori product limitations as to its availability, i.e. it can be invoked for all tariff lines in principle. A price-based and a volume-based SSM shall be available. In no circumstances may any product be, however, subject to the simultaneous application of price - and volume- based safeguards. Nor shall there be application of either of these measures if an SSG, a measure under GATT Article XIX, or a measure under the Agreement on Safeguards is in place."

On Public Stockholding for Food Security Purposes, the draft ministerial decision says, "members confirm that the interim mechanism as set out in the Bali Ministerial Decision on Public Stockholding for Food Security Purposes, and the General Council Decision of 28 November 2014, shall remain in force until a permanent solution on the issue of public stockholding for food security purposes is agreed and adopted."

Further, it says that "the negotiations on a permanent solution on the issue of public stockholding for food security purposes shall continue to be pursued as a priority in the Committee on Agriculture in Special Session ("CoA SS"), in dedicated sessions and in an accelerated time-frame."

The two implications stemming from the proposed language in the draft text are that developing countries will have to live with the interim solution forever as it has omitted not only the Nairobi deadline but also the Bali ministerial decision of December 2013.

The second major implication is that there is no timeframe for the permanent solution for public stockholding programs for food security.

While the Bali decision on the interim solution suggested the eleventh ministerial meeting or 2017 as the deadline for public stockholding programs for food security, the November 2014 General Council decision had clearly stipulated by end-2015.

The two outcomes on SSM and public stockholding programs for food security seem like a slap in the face of 47 members of the G-33 farm coalition which had consistently tabled proposals despite an aggressive form of stonewalling and diversionary tactics, according to several members from the developing countries.

At a meeting of G-33 trade ministers on Thursday, there was a heightened sense of frustration and resentment about the proposed language on SSM and public stockholding programs for food security.

There were suggestions ranging from downright rejection to imbalanced text from several members, according to a source who was present at the meeting.

In sharp contrast to the draft ministerial decisions on SSM and public stockholding programs for food security, the kid-glove treatment offered to the four elements - elimination of export subsidies, the disciplines of export credits, food aid, and state-trading enterprises - in the export competition pillar has raised serious ethical issues about the manner in which texts are written in global trade negotiations to please industrialized countries, particularly the United States, according to trade ministers.

Even in the export competition pillar, references to the Doha ministerial decisions as well as the 2008 revised draft modalities are almost avoided. It mentions the Marrakesh agreement, the Bali ministerial decision but not the DDA negotiations.

The draft decision on export subsidies in paragraphs 7 to 12 says,

Developed Members shall eliminate their remaining scheduled export subsidy entitlements by the end of 2020.

This shall be effected on the basis of:

budgetary outlay commitments being reduced by 50 percent by the end of 2017 in equal annual instalments from the date of adoption of this Decision, with the remaining budgetary outlay commitments being reduced to zero in equal annual instalments so that all forms of export subsidies are eliminated by the end of 2020[1];

quantity commitment levels being applied as a standstill from the commencement until the end of the implementation period at the actual average of quantity levels in the 2003-05 base period. Furthermore, throughout the implementation period, there shall be no export subsidies applied either to new markets or to new products.[2]

Developing Members shall eliminate their export subsidy entitlements by reducing to zero their scheduled export subsidy budgetary outlay and quantity commitment levels in equal annual instalments by the end of 2023.

Developing Members shall benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2028, i.e. five years after the end-date for elimination of all forms of export subsidies. Least developed countries and net food importing developing countries listed in G/AG/5/Rev.10 shall benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2030.[3]

Members agree not to apply export subsidies in a manner that circumvents the requirement to reduce and eliminate all export subsidies.

Members shall ensure that any export subsidies have at most minimal trade distorting effects and do not displace or impede the exports of another Member. To that effect, Members using export subsidies shall give due consideration to the effects of any such export subsidies on other Members, and shall consult, upon request, with any other Member having a substantial interest as an exporter with respect to any matter related to the export subsidies in question. The Member applying such export subsidies shall provide, upon request, such a Member with necessary information.

COTTON

With regards to cotton, the disciplines and commitments contained in this Decision shall be implemented by developed Members not later than 1 January 2016 and by developing Members not later than 1 January 2017.

Here again the Hong Kong ministerial declaration required the elimination of export subsidies by 2006 while the 2008 revised draft modalities proposed their elimination by the end of 2013.

In short, the elimination period for developed countries is five years as compared to four in the Rev.4. It has to be seen whether Switzerland will accept five years because Berne has demanded minimum seven years.

The developing countries can continue with their export subsidies until 2028 under the provisions of Article 9.4 of the Agreement on Agriculture.

Perhaps, this is the only place where the developing countries can claim to have succeeded as Article 9.4 is retained despite massive opposition from the US, Australia, and other developed countries.

The draft ministerial decision on export credits seems to have accommodated almost all concerns of the US both in repayment period and refinancing.

The draft text provides a repayment period of 18 months as against 20 months in the US farm bill. The 2005 Hong Kong Ministerial Declaration proposed 180 days which is also the case with the 2008 revised draft modalities.

There is considerable re-writing of disciplines in export credits on self-financing. The 2008 draft modalities suggested the following language on self-financing: "export credit guarantee, insurance and reinsurance programmes, and other risk cover programmes included within sub-paragraphs 1(b) (c) and (d) above shall be self-financing. Where premium rates charged under a programme are inadequate to cover the operating costs and losses of that programme over a previous 4-year rolling period, this shall, in and of itself, be sufficient to determine that the programme is not self-financing. In addition, and irrespective of whether these programmes conform with the requirements set out in the preceding sentence, this does not exempt them from complying with any other provision of this Agreement or the other covered Agreements, including by reference to the more generally formulated long-term operating costs and losses of a programme, not limited to the historical rolling period referred to in the previous sentence, under item (j) of the Illustrative List. Where these programmes are found to constitute export subsidies within the meaning of item (j) of the Illustrative List, they shall also be deemed to be not self-financing under this Agreement."

The Nairobi draft has omitted the language of Rev. 4 by removing export credit guarantee, insurance and reinsurance programs and other risk cover programs. It merely says: "Export financing support under this Agreement shall be self-financing and cover the long-term operating costs and losses of a programme in the sense of item (j) of the Illustrative List of Annex I of the Agreement on Subsidies and Countervailing Measures. Premium and/or interest rates shall be charged for all forms of export financing support defined in paragraphs 13 and 14, and shall be risk-based."

For developing countries, there is a phase-out period for export credits of four years along with the same repayment terms.

The draft text also substantially altered the language on international food aid by ensuring that it is a best endeavour agreement in line with what the US demanded. There is no monetization of in-kind food aid.

The 2008 draft modalities says: "there shall be no monetization for food aid inside the Safe Box, except for least-developed countries where there is a demonstrable need to do so for the sole purpose of transport and delivery. Such monetization shall be carried out solely within the territory of the recipient least-developed country[4] such that commercial displacement is avoided or, if not feasible, at least minimized."

The disciplines on state-trading enterprises (STEs) cover all members but not developed and developing countries as in the 2008 draft modalities. China is being targeted in the state-trading enterprises.

The STE disciplines say: "Members shall ensure that agricultural exporting state trading enterprises do not operate in a manner that circumvents any other disciplines contained in this Decision.

"Members shall strive to ensure that the use of export monopoly powers by agricultural exporting STEs is exercised in a manner that minimizes trade distorting effects and does not result in displacing or impeding the exports of another Member."

In short, the trade ministers from developing countries face an extraordinary moment of crisis when they attend the informal agriculture open-ended meeting in the evening. Either they stand up for their concerns on SSM and public stockholding programs or surrender their food sovereignty forever, according to a South American trade minister.