TWN Info Service on WTO and Trade Issues (Nov17/18)
20 November 2017
Third World Network

Agriculture: Talks in final stretch with limited time before MC11, says Chair
Published in SUNS #8578 dated 20 November 2017

Geneva, 17 Nov (Kanaga Raja) - With just about a month for MC11 in Buenos Aires, the Chair 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 Committee on Agriculture, Ambassador Stephen Karau of Kenya, said that: "We are in the final stretch of our Geneva-based negotiations with very limited time left before MC11".

The Chair pointed out that 10 November marked one month until the opening of the WTO's eleventh Ministerial Conference (MC11) in Buenos Aires on 10 December.

He told members that his objective as Chair is "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 Ambassador 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 held on 13 November on the issues of public stockholding for food security purposes and on the Special Safeguard Mechanism (SSM), with the Chair providing an update on the negotiations on both these issues. (See below.)

According to trade officials, at the informal meeting on 10 November, 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 that have been tabled by members over the past fortnight, including: a proposal on tariff simplification by Tunisia in document JOB/AG/119 on 30 October; a proposal on domestic support by Argentina in document JOB/AG/120 on 2 November; a proposal on special safeguards (SSGs) by the Philippines in JOB/AG/121 on 8 November; a proposal on market access by Argentina, Brazil, Chile, Paraguay, Thailand and Uruguay in JOB/AG/122 on 9 November; a revised proposal on export prohibitions and restrictions by Singapore in document JOB/AG/101/Rev.1 on 10 November; and a proposal on export competition by Canada, Chile and Switzerland in document RD/AG/61 also on 10 November.

According to trade officials, on the issue of domestic support, Ambassador 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," he added.

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 the other calling for the elimination of the AMS (aggregate measurement of support) 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 introduced its proposal (JOB/AG/120) on domestic support, which it referred to as a "compromise text".

It maintained that the proposal did not reflect Argentina's national position but rather represented an effort to achieve common ground.

Argentina said that it did not view the overall trade distorting domestic support (OTDS) and AMS reductions as two opposing objectives, and thus it proposed a limit that seeks to cut AMS and addresses overall limits.

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

(For details of the Argentine proposal, see SUNS #8569 dated 7 November 2017.)

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

Mexico voiced concerns over the significant concessions that it has to make under the proposal, saying that it would have to cut its domestic support by 50% to 97% under the options that have been proposed by Argentina.

Any contribution should be proportional, said Mexico, 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 over the Argentinian proposal, 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 who have not reformed their policies will be allowed to continue with their policies or even increase trade-distorting support.

Furthermore, it said, 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 Argentinian 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 the 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 to those members whose subsidies impact world markets the most.

Other members of the G10 coalition 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 cut for some members are "too big to defend to their domestic stakeholders".

According to trade officials, India underlined that its joint proposal with China had garnered support from most members.

China also 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 emphasised.

Botswana, on behalf of the African, Caribbean and Pacific group of countries (ACP), said that the group's proposal also calls for the elimination of 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 blue box should be included in the limit.

Brazil noted some areas of convergence between the Argentine proposal and the joint proposal tabled by the EU and Brazil, 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 recently acceded members group), said that members of the group made higher levels of concessions during their accession process.

It said that according to their simulations, some of its 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, also voiced similar views.

While it welcomed the Argentinian proposal, Pakistan said that it is not comfortable with the equal treatment of 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 said 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 for the proposal, 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.

Meanwhile, 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 Ambassador Karau, several delegations consider that the proposal (TN/AG/GEN/46) from the "Cotton Four" (C4) - comprising Benin, Burkina Faso, Chad and Mali - could not 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 member of the C-4, voiced strong objections to the notion that further disciplines on Green Box direct payments granted to cotton producers runs 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 Green Box suggested in the C4 proposal, though desirable, will not be a realistic approach.

In the current environment, the Brazil-EU proposal can be a realistic basis, while for future work, the C-4 proposal is the most complete proposal, it added.

The EU and Brazil also 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 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.

It also confirmed the wide support for the exemption of foodstuff purchases by the World Food Programme for humanitarian purposes from such export restrictions.

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 members generally welcomed the proposal, some members including India, emphasised the view that notification requirements should not become too burdensome for developing countries.

It 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, Ambassador Karau reported that members are not targeting a substantive outcome at MC11, but rather 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 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 more than 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 of agricultural reform.

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 SSGs has also been raised specifically by some members.

The Philippines introduced a new proposal aimed at gradually phasing out the SSG (special safeguard) that allows some members to temporally increase import tariffs for specific agriculture products in cases of import surges or price drops.

Some members called for it to be maintained.

Meanwhile, Canada, Chile and Switzerland circulated a proposal on export competition at the informal meeting on 10 November.

Canada introduced the proposal, saying 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."

DEDICATED SESSION ON PSH AND SSM

At a dedicated session on 13 November, the Chair, Ambassador Karau, provided an update on the status of negotiations on public stockholding (PSH) for food security purposes, and on the Special Safeguard Mechanism (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," he said.

He noted that a new proposal has been submitted by Russia and Paraguay (Job/AG/118) on 27 October.

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.

According to the Chair, members' views differ between an exemption from the AMS calculation or a Bali-type solution shielding the 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 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 on extending it to "small" programmes only, with a "small" programme being defined as a programme under which the procurement remains below [X%] of the value of production or of the quantity produced.

There is nevertheless an agreement from both sides that it should be extended to include LDCs, said the Chair.

Regarding transparency, the G33 Members are of the view that the conditions - such as the requirement to be up-to-date with the 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, Ambassador 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 its proposal (with Paraguay), saying that its proposal is based on the Bali decision and represents a delicate balance.

Russia maintained that both existing and new public stockholding programmes are covered in the proposed permanent solution, 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 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 public stockholding.

It said that a permanent solution ought to provide legal certainty, and that the product coverage should be "foodstuffs". It noted that this is the terminology that is 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 who 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.

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 requirement, and safeguards should be in place to ensure that countries should not increase applied tariffs for the products procured under public stockholding 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 public stockholding 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 public stockholding programmes have serious unintended consequences, and can affect 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 safeguards provisions are needed.

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

On the Special Safeguard Mechanism (SSM), the Chair reported that he had not heard anything different from members.

The issue continues to be very important for a number of members who have called for a substantive outcome on SSM, whereas some other Members do not consider that a substantive outcome on SSM 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 - the latest being JOB/AG/111 issued on 15 September - should be the basis for work, they said.