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Info Service on WTO and Trade Issues (Jun24/05) Geneva, 10 Jun (D. Ravi Kanth) — Brazil has called for discussions on “trade measures that encourage sustainable practices” at the World Trade Organization, instead of taking recourse to “protectionist or otherwise punitive trade measures”, in a proposal that seeks to bring a paradigmatic shift in addressing some of the 21st century challenges, said people familiar with the discussions. It has proposed that the WTO’s General Council hold “a retreat in September 2024 on Sustainable Agriculture, in addition to identifying priorities and appointing a facilitator.” “The General Council would oversee this work and report on progress, including any recommendations, preferably addressing it to a Senior Officials Meeting on Agriculture to be convened in the second semester of 2025,” it said. Brazil’s five-page proposal (WT/GC/W/938), titled “Dialogue on Sustainable Agriculture in the Multilateral Trading System”, has raised several fundamental issues that have been seemingly buried in the Doha agriculture negotiations. “The sustainable agriculture paper is groundbreaking and allows members to have a serious and relevant forward-looking discussion on critical areas of interest for all WTO members, particularly developing countries,” a proponent of the proposal told the SUNS. Without naming the European Union and other farm-defensive countries, Brazil pointed out that “ad valorem equivalents (AVEs) of NTMs (non-tariff measures) are much higher for agriculture than for other economic sectors, while for food products, in particular, AVEs of NTMs are on average almost three times higher than normal tariffs.” The former chair of the Doha agriculture negotiations, Ambassador Crawford Falconer of New Zealand, brought the issue of AVEs to the center-stage of the agriculture discussions, but his efforts proved to be in vain. “Little to no attention has been given thus far to bringing together, in innovative negotiating formats, Members that are interested in creating trade-incentives for products meeting certain parameters of agriculture sustainability or produced in accordance with them,” Brazil observed in its proposal. Without mentioning the Doha Development Agenda (DDA) negotiations in which Brazil played an important role when it led the Group of 20 developing countries on agriculture since August 2003, it now emphasizes Article 20 of the Agreement on Agriculture, saying that agriculture reform “requires a fully dedicated negotiating track for its deliberations.” “This should not preclude a forward-looking discussion on sustainable agriculture under the direction of the WTO General Council, addressing 21st century challenges to agricultural production and trade, which seems timely and appropriate,” Brazil said. Given the multiple challenges arising from climate change and the sudden proliferation of trade policies and measures guided by “environmental goals,” Brazil said that “these policies must make the benefits of inclusive and sustainable development extend to all, including communities in rural areas left behind.” “In other words,” said Brazil, “the effectiveness of the global response to environmental challenges requires building national social and economic capacities (“no farmer will go green if he is in the red”), narrowing the gap between developed and developing countries through increased and more effective international cooperation, coordination, trade, and rule-making.” Also, as the global population is expected to peak at 9.8 billion people in 2050, there is an urgent need to “improve levels of food and nutritional security worldwide,” Brazil maintained. More pertinently, it said “the commensurate boost in agriculture output has been made with marginal change in land use patterns in this period and relative decrease in participation on GHG emissions in comparison to other sectors.” According to Brazil, “from 1990 to 2019, agrifood systems’ share in global emissions fell from 40% to 31%. In the meantime, emissions from industrial processes, energy, and waste grew 203%, 62.0%, and 19.9%, respectively.” Commenting on “agrifood trade and sustainability”, Brazil noted that “the value of global agrifood trade in real terms has more than doubled in the past three decades. Overall, it grew at an annual average rate of 3.8%, reaching USD 1.37 trillion in 2019 from USD 531 billion (in real terms) in 1990.” Despite the enormous dependence on agriculture in the global South, including the large employment it provides in many developing countries, Brazil said that “growth has slowed down as of the 2008 financial crisis, and agrifood trade has since been outpaced by global merchandise trade once again.” “Consequently, its share in total global merchandise exports has dropped, particularly to the detriment of developing countries,” it added. Brazil underscored the need “to reverse this trend through agriculture reform and the promotion of more sustainable patterns of production, freer flows, and less distorting measures.” It highlighted “the 2030 Agenda for Sustainable Development” which defines international trade as “an engine for inclusive economic growth and poverty reduction, [that] contributes to the promotion of sustainable development.” According to Brazil, “regional imbalances between food supply and demand, disparities in the endowment of natural resources, and the different geographical conditions for sustainable food production are closely linked and require concerted global action to eradicate hunger with greater environmental efficiency in food production.” Brazil noted that “trade in the agricultural sector is heavily distorted.” Brazil has shown the proverbial mirror to the industrialized countries which seemingly camouflaged their trade- distorting subsidies, suggesting that “not only are bound and applied tariffs on agricultural products almost double those of industrial goods, on average; non-tariff measures (NTMs), such as SPS or TBT measures, disproportionately affect agricultural trade.” Aside from the above distortions, several industrialized countries continue to use “Ad Valorem Equivalents (AVEs) of NTMs”, which Brazil said “are much higher for agriculture than for other economic sectors, while for food products, in particular, AVEs of NTMs are on average almost three times higher than normal tariffs.” More importantly, according to Brazil, “87% of the USD 470 billion spent annually on agricultural subsidies distorts prices and harms people and the planet.” “At the current pace, spending will triple by 2030 to USD 1.759 trillion, with 73% of this amount affecting market and prices,” Brazil argued. Brazil said “in this context, many policies and measures designed to generate positive environmental outcomes may negatively impact the already heavily distorted trade in agriculture.” Significantly, it said “distortions caused by large-scale domestic subsidies, particularly in developed countries with ample fiscal space, tend to jeopardize the economic viability of national agricultural sectors in cash constrained developing countries, particularly, but not exclusively, the least developed among them.” Moreover, Brazil said that “measures enacted for environmental reasons can be trade restrictive and unfair, transferring the onus of adjustments or the ensuing burden of protectionism upon others, enhancing asymmetries contrary to the rules and principles of the multilateral trading system.” Brazil highlighted a study done by the Forum on Trade, Environment and the SDGs (TESS), arguing that ” the use of unilateral border measures, such as bans, restrictions, or additional duties which purport to “equalize” environmental transition costs, passing it on to exporting third countries, remain highly controversial in the multilateral trade setting.” According to Brazil, the farm-exporting countries repeatedly argued “the high probability that such measures would not be considered compliant with the WTO agreements.” The likely “direct consequences are increased food insecurity, the erosion of socio-economic capacities of affected Members and the unwarranted deviation of valuable resources that could be allocated to financing sustainable transitions in a larger pool of countries,” Brazil maintained. It said “the idea that distorting agricultural subsidies can be repurposed as “environmentally smart” has appeared in recent trade and environment literature, as a sort of panacea.” According to Brazil, “one negative effect of the proliferation of private standards and unilateral trade measures, even under the best of environmental intentions, is regulatory fragmentation.” It said that “different certifications define sustainability in radically different ways and there is no standardized, authoritative definition of sustainable production; therefore, no benchmark against which to measure environmental performance.” Brazil maintained that “such fragmentation leaves room for arbitrage, hampering trade and innovation”, while increasing “transaction costs and compliance for agricultural producers, especially in developing countries.” “In a worst-case scenario, agricultural producers from developing countries would be excluded from value-chains and face the widening of the inequality gap between rural and urban populations,” Brazil cautioned. To level the playing field, Brazil said that “Members should refrain from prescribing one-size-fits-all PPMs (processes and production methods) for producers under very divergent climatic and geographical conditions.” Further, “levels of environmental protection cannot be arbitrarily selected, nor can they be divorced from other economic and social development considerations, which are equally important pillars in the promotion of agriculture sustainability,” Brazil argued forcefully. “Therefore, when developing measures to address environmental issues, multilateral indicators should be used, such as the prevalence of clean energy in the energy source matrix,” Brazil said. Lastly, “reducing the level of subsidies is relevant not only to guarantee a level playing field but also to channel natural and financial resources to efficient ends,” Brazil has pointed out. ISSUES FOR DISCUSSION In its proposal, Brazil has outlined a gamut of issues for further discussion: * Policies that support sustainable and productivity enhancing agricultural practices. * Policies that support strong, science-based institutional frameworks and research programs that facilitate innovation and adoption of new agricultural technologies. * Policies that result in over-production, overuse or misallocation of resources, market distortions, or other negative impacts, environmental or otherwise. * Policies that promote access to food for people in situations of food and nutritional insecurity while creating enabling conditions for family and small farmers or groups in a vulnerable situation to participate in and benefit from domestic food markets. * Policies and mechanisms for technology transfer to enhance food security, build agricultural resilience, and encourage or incentivize low-carbon climate-friendly agricultural practices. * Policies that give more favourable access to agricultural products produced with more sustainable methods. * Cooperation in the definition of environment-related parameters for agriculture with a view of mitigating fragmentation. Brazil said the issues listed above are not exhaustive but outline some of the challenges and opportunities that lie at the intersection of agriculture, trade, and environment. It remains to be seen how the EU, which is poised to implement its unilateral trade measures on countries that are allegedly engaged in deforestation, will respond to Brazil’s path-breaking agenda, said a trade envoy, who asked not to be quoted. +
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