TWN Info Service on WTO and Trade Issues (Jul16/10)
18 July 2016
Third World Network

Brazil derided at G20 meet on domestic support proposals
Published in SUNS #8281 Wednesday dated 13 July 2016

Geneva, 12 Jul (D. Ravi Kanth) -- India, China, Cuba, and Ecuador derided Brazil at a G20 developing country meeting on Monday (11 July) for Brasilia's volte-face on the 2008 revised draft modalities of the Doha agriculture work program, and denounced a joint proposal circulated by Brazil, Argentina, and Paraguay on the domestic support as it went against the group's fundamental objectives for reforming global trade in agricultural products, several agricultural negotiators told the SUNS.

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

[The G-20 coalition was brought together in August 2003, when just before the WTO's Cancun Ministerial Conference, the United States and the EU, who had been ranged against each other over the EU's Common Agriculture Policy and subsidised 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 meeting.

[At that time, Brazil, India, China and South Africa, among others, joined hands to form the group and put forward their own proposals, initially co-sponsored by 17 developing countries, but quickly became 20 (and then some more varying supporters). Thus came its name G-20. The then Brazilian envoy, Amb 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, with its negotiator Peter Carl attacking the paper at an HOD meet convened by the then General Council Chair, and used some angry and unusually non-diplomatic tones, accusing the sponsors of provocation and introducing a North-South confrontation into the WTO. The EC representative, Peter Carl, attacked the paper in an angry and aggressive tone, calling it needlessly confrontational, claiming that it revived the 1970s slogans of South versus North, that it represented a "Manichean (black and white) approach to international cooperation", and that the proponents were aiming at the stars in hopes of getting the moon.

[This prompted a response from Brazil's Ambassador, Luiz Felipe 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. See SUNS #5401 and #5402 of August 2003 for more detailed reports. SUNS]

After lying dormant for many months, Brazil convened a G20 meeting of technical experts on Monday 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 (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 and beyond."

The four sponsors raised several questions "to guide discussions on trade-distorting domestic support," as they put it.

"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 argued.

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

"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 argued 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 (are) 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 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?"

It 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.

The second option proposed by Brazil, Argentina, and Paraguay came close to what was suggested by the United States last year, under which Article 6.2 of the Agreement on Agriculture will be jettisoned. Under Article 6.2 of the AoA, developing countries are allowed to provide investment subsidies that are exempted from domestic support reduction commitments.

It states that "in accordance with the Mid-Term Review Agreement that government measures of assistance, whether direct or indirect, to encourage agricultural and rural development are an integral part of the development programmes of developing countries, investment subsidies which are generally available to agriculture in developing country Members and agricultural input subsidies generally available to low-income or resource-poor producers in developing country Members shall be exempt from domestic support reduction commitments that would otherwise be applicable to such measures, as shall domestic support to producers in developing country Members to encourage diversification from growing illicit narcotic crops. Domestic support meeting the criteria of this paragraph shall not be required to be included in a Member's calculation of its Current Total AMS." (Page 46, Legal Texts)

The third option proposed by the four countries centered on "new structural elements for disciplining trade- distorting domestic support, such as product-specific AMS limits?"

Without mentioning the Rev 4, 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?

During the meeting, India thanked Brazil for convening the meeting but regretted that the group could not even issue a communique at the Nairobi ministerial meeting 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 meeting 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 programs 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 meeting. The G20, India said, worked on export competition and the tariff rate quotas at the Bali meeting in 2013 but remained silent on the export competition at Nairobi.

China said the group's position has all along been that outstanding issues in agriculture must be addressed on the basis of the revised draft modalities of 2008 or Rev. 4.

The former Brazilian ambassador Roberto Azevedo, who is now the WTO's director-general, had maintained "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 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 the Rev. 4 without discussing with other members of the group. China said we 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 the domestic support is the fundamental issue. Chile and Mexico also supported the joint proposal by the four countries. Brazil said the proposal is only for technical discussion suggesting that the group can consider other ideas.

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