DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF
I am pleased to join you today at this important Farm Foundation event.
This is a WTO Spring. The G2O leaders meeting in Buenos Aires declared on December 1, 2018, that the WTO was very valuable, but that it needed to be improved. It was a mandate for reform endorsed without dissent from a wide range participants — 19 countries and the European Union (EU). The 19 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Republic of South Africa, Russia, Saudi Arabia, Turkey, United Kingdom, United States of America. The G20 countries represent three-quarters of the world’s economic activity (GDP). What they say should count.
A key question is how this can and should affect the rules governing global agricultural trade, rules for which the World Trade Organization is given responsibility.
There are some important proposals that have already been tabled at the WTO that would have significant effect on global agricultural trade.
The first is E-commerce. Electronic commerce is increasingly a dominant part of the landscape of trade. It moves commodities across borders. It identifies the location of where products and services are available and where innovation is taking place. It allows access to the best that is available in other countries — to the extent that information flows freely and borders are open to goods and services. 77 WTO Members accounting for three quarters of global GDP are working hard to create a set of rules in the emerging area of E-Commerce which is so important to agriculture, where few rules exist.
Technology is of vast importance to agriculture. World population is projected to reach 9.7 billion by the year 2050. It is now 7.3 billion. Creating enough production to feed the world’s peoples one generation from now is a policy challenge which needs both technological and organizational, rules-based solutions. It also requires having the ability to move produce from surplus areas to deficit areas. Information must flow to farmers. Access to information, without reference to borders, must be their acknowledged right. They need to know where to get the best inputs such as seed, and the latest techniques for improving production, information for resisting pests, plant disease, drought and other challenges. To know what is needed is the first hurdle for farmers, they then have to be able obtain the right seed, the right inputs, to have access to the latest technological breakthroughs as well as traditional knowledge, from near and from distant places, and all in a timely and sure way. The transmission belt is E-commerce, which must include freedom of movement of goods, services and data across borders. Today an NGO in London helps farmers in Kenya know when to apply lime to their land. China is experimenting with artificial intelligence to identify sick pigs to cull them in order to stop the spread of swine flu. Increased dairy production in China increases the demand for feed from other sources. E-commerce is an enormous enabler of advances in agriculture.
All of this is under threat today. There is talk of the moratorium on customs duties on electronic transmissions which expires in December of this year not being renewed. If this is the case, there is more than some mischief that could befall the world’s economies and their agricultural sectors. If the expiration meant that countries could now decide what tariffs to apply to the content of electronic transmissions, world commerce could be strangled. The WTO buys consulting services and software from India to process documents, so do innumerable others. The world would be poorer with the imposition of tariffs on all manner of transmissions between producers and consumers, within companies and between them. It would be a clever way to open a golden goose to try to get to a golden egg, destroying large segments of economic activity, causing devastation to both the economies of originators of data flows as well as those of the countries of customers. But this has not yet come to pass, it is just a severe and an all too real threat. The E-commerce negotiation might be one vehicle to head off this disaster.
A second joint initiative that might have positive near-term results is one designed to facilitate investment for development. Investment is the foundation for production, for distribution, for consumption and for trade itself. This joint endeavor can help support agriculture just as well as other products and services.
Yet another set of proposals concerns notifications, which is another way of saying creating reliable transparency. It is impossible to resolve agricultural trade problems without current and solid information. While the initiatives are not aimed at agriculture alone, there are a lot of deficiencies in current notifications in agriculture with respect to domestic support and other measures. It would be a major step forward to make sure that the gaps in data are filled by Members. Other tools are also being used, as the system repairs itself, such as through counter-notifications.
The IT revolution is already changing the WTO’s daily operations, with Members able to file notifications on line, including not least, proposed SPS and TBT (standards) measures. More and more is becoming automated.
All of this spells a more effective WTO at present and in prospect.
The picture is not unmixed, of course.
Agriculture has always been a challenging issue at the WTO. This is to be expected. Farmers around the world face variable environmental conditions, fluctuating world prices, and rapidly evolving value chains. Every country has a unique landscape, shaped by water, soil, and weather conditions. Countries seeking to address food security challenges have to balance the diverse needs of consumers and producers. The perspectives of WTO Members on how to approach the challenges in this sector and the measures that they feel that they need take vary considerably, hence the difficulties in making progress in the agriculture negotiations in Geneva.
The multilateral trading system is vitally important to the global agri-food system in general, and to US agriculture specifically. Without rules, there would be chaos, with enormous costs for farmers, processors and consumers. Dispute settlement has been an important part of the benefits. It is now essential that the system evolve so that it can address the current and future challenges. This will take a full measure of commitment and leadership.
The past as prologue
It is worth remembering that the WTO, and its predecessor the GATT, have successfully facilitated important reforms in the agriculture sector – historic moments when Members collectively agreed to new rules. Prior to the establishment of the WTO, the distortions in world agricultural markets were pervasive. Dr Gale Johnson famously described the agriculture markets in the 1970's to be in "disarray"(1). This included high levels of domestic support to producers which by the mid-1980's had grown to about 60 % of the value of agriculture production in OECD countries. As a result of domestic support and border protection, countries generated massive production surpluses which could be disposed of in world markets only with export subsidies. The burden of adjustment was not shared equally when, for example, the Russian harvest was bountiful or fell short of expectations. American agriculture paid a price, absorbing much of the shocks of changes in global supply in demand, as compared with more insulated markets.
The GATT often fell short. It gave agriculture special treatment, not always for the benefit of trade. The trade rules did not, for example, include agriculture in the general prohibition on export subsidies. This exceptional treatment for agriculture created the conditions that allowed the "disarray" in international markets to persist. Unstable global markets and artificially low agricultural prices created challenges for all countries. Major exporting countries increased subsidies as they fought for market share. In non-subsidizing countries agricultural productivity suffered due to downward pressure on domestic prices which created disincentives for investments to increase productivity. Eventually, at the start of the Uruguay Round, the GATT parties agreed that there was an urgent need to bring more discipline and predictability to world agricultural trade by correcting and preventing restrictions and distortions.(2)
As a result of the Uruguay Round, WTO Members agreed to limit their trade-distorting subsidies, including export subsidies. In addition, Members recognized that the Agreement on Agriculture was only a first step towards necessary and agreed that negotiations would continue to achieve the long-term objective of substantial progressive reductions in support and production.(3)
Another important step towards reform was taken in the 2015 at the Ministerial in Nairobi, when WTO Members agreed to eliminate their scheduled agriculture export subsidies entitlements. Members have taken steps in this regard. Nine out of the 16 Members which had commitments to reduce export subsidies in their schedules have already certified their revised schedules, eliminating those subsidies. What allowed this progress to be made? By 2015, many Members had already begun to phase out their export subsidies. Only a few Members continued using them within their scheduled limits. Therefore, the costs of giving up the right to use these subsidies were concentrated on only a few Members – mainly Norway, Canada, and Switzerland. This made it easier to reach an agreement for the final elimination.
The WTO’s current activities have responded to the changing world in ways that are encouraging. The SPS Committee, for example, facilitates exchanges between governments on food safety and plant and animal health policies. Last week the WTO co-organized with the FAO and the WHO an international forum on food safety and trade which brought together experts to examine the challenges and opportunities arising from rapid technological change and digitalization in food systems. The event was very well-attended, highlighting the cross-cutting importance of this issue for global health, agricultural production and the global trading system. Discussions showed the complexity and interconnectedness of food systems increasingly characterized by global value chains - and highlighted the important role the WTO plays in ensuring that these systems are able to respond to expected, and unexpected, change. The availability of Big Data as well as Artificial Intelligence has the ability to shorten value chains, increase efficiency for both producers and consumers, and serve the interests of human and animal health.
As noted, a key interest of the agricultural sector is maintaining WTO dispute settlement. The Appellate Body is on the edge of disappearing. Having a working dispute settlement system is extraordinarily important for American agriculture as well as this sector in other countries. It is a substantial means of enforcing obligations and it works. It is not clear how well dispute settlement will work without an appellate function. I applaud the efforts of those who are trying to find solutions. To be sure, a gap remains between the U.S. and its trading partners, but that gap is narrowing.
There is enough of a shortfall in agriculture from what could be to what is, that a redoubling of efforts to find solutions is necessary.
The path forward
As reform is in the air in Geneva, it is worth taking full advantage of this opening. Members are coming forward with new ideas — to enhance the work of the regular committees; to manage agricultural trade information; to find ways to benefit from the rapid developments in the e-commerce.
Second, changing existing rules requires a deeper understanding of the current context and Members are engaging in analysis and deeper technical discussions. This takes time.
Third, leadership is essential to ensure that the pace of change in the WTO can keep up with the pace of change in agriculture markets.
Turning to the first point — reform is a fundamental part of on-going conversations in Geneva.
Members are addressing ways to enhance on-going WTO work. Some proposals target the work of the regular Committee on Agriculture. The Committee monitors Members’ implementation of their commitments and this monitoring depends upon Members’ notifications. The record for notifications has been mixed. A recent proposal sponsored by the U.S., the EU, Japan and others includes suggestions on how to improve the incentives for Members to notify. The U.S. has also submitted several counter notifications since 2018 - activating a tool that previously had been unused since the Committee was created. These efforts can enhance the monitoring function of the Committee and strengthen compliance with the underlying rules.
Work within the WTO on e-commerce and the digital economy, when adopted, will also have an important impact on agriculture. By connecting rural areas to markets, e-commerce can create opportunities for growth within countries. At the same time, these growing markets can become opportunities for exporters. China is also a leading proponent of the use of e-commerce to solve the serious distribution problems of moving produce from where it is grown to markets where demand is higher. Its efforts can be emulated by others.
Turning to my second point - changing existing rules requires both a deeper common understanding of the current context and a willingness to contribute to solutions. The work of the agriculture negotiating group in 2019 has included candid structured exchanges among delegations which contribute to a better appreciation of concerns.
This work has proceeded during this year and last – even in the presence of sustained disparate views. A lot of credit should go to the current chair, Ambassador Ford from Guyana. Ambassador Ford has adopted a forward leaning approach – he enthusiastically leads the process and pushes delegations to engage on substance.
Ambassador Ford has laid out three- tracks of work in 2019:
1) The Special Session is the main forum where reports on on-going work is provided and progress is reviewed and endorsed.
2) Member-led Working Groups – on provide a process to build confidence and trust among Members through increased interactions and substantive discussions. The working groups are focused on: Domestic Support, Public Stockholding (PSH), Market Access, Special Safeguard Mechanisms (SSM), Export Competition, Export Restrictions. There have also been Cotton Technical Quad Plus meetings.
3) Intensive and continuous consultations with delegations in various formats provides involvement and greater trust in the process.
Some topics – such as transparency, export restrictions, domestic support and market access — have attracted more attention and detailed technical work.
A number of Members, including the US, are interested in an outcome on transparency and monitoring of compliance with commitments made in the Agreement on Agriculture. This includes identifying new approaches for addressing the lack of notifications in agriculture. In agriculture, for example, more than 20% of Members have never provided a notification on their domestic support. Some consider that an outcome on transparency is the most realistic outcome for the next Ministerial. Others have indicated that they would be dissatisfied with a result limited to transparency.
Many delegations consider that export restrictions – including the non-imposition of restrictions on foodstuffs purchased by the World Food Programme – could be a potential candidate for a stand-alone outcome at the next Ministerial. This is not an acceptable to some others who have indicated that they would like to see an outcome on export restrictions as part of a broader package on agriculture. A few developing countries are opposed to having additional notification obligations imposed on them. They appear to be concerned that his will lead to proposals that would impose additional substantive disciplines that would restrict their policy space in the future.
Many Members consider outcomes on domestic support, public stockholding and cotton to be priority issues. At the same time, Members have divergent views on how the rules in this area should be changed.
- Some large developing countries propose that Members first address current imbalances in the AoA – reducing or eliminating product-specific AMS beyond de minimis level — before engaging in debates about future rules.
- Exporting countries prioritize modifying future rules to constrain all forms of trade distorting domestic support. Before the Ministerial Conference in 2015, EU, Brazil had suggested an overall limit on TDDS expressed as percentage of value of production. Other Members would prefer a fixed limit.
The Working Group discussions have helped increase the understanding of the diverse landscape of policies – but there is no obvious convergence on an outcome in this area.
Similarly, given the difficulty of making progress on market access, making substantive progress on these topics in the short-term is very likely to be difficult. Some Members, including the U.S., have put forward detailed analyses showing the amount of water between bound and applied tariffs in agriculture. For example, some of the largest agricultural traders, such as India, South Africa, and Mexico, have an average level of water greater than 30 percentage points. (Other Members – for example, European Union, China, the Russian Federation, and the United States — have applied agricultural tariffs at or close to the bound rate.) Reductions in bound tariffs for some Members would not require any changes in applied tariffs, while for others any change in bound duties would require that they decrease applied duties.
To add to the complexity, some Members demand that there has to be parallel progress in Non-Agricultural Manufactured Goods (NAMA) and Trade in Services.
Despite the array of views reflecting differing interests, the technical work that is being done can pave the way for future reforms. The Working Group discussions are filling an important role in terms of building trust and a common understanding of complex issues. However, while both of these are necessary, they are not sufficient, for achieving reforms.
In terms of next steps, the technical Working Group discussions will continue until the CoA Special Session planned in July. In July, the Chair plans to circulate an outline of possible elements and related options to delegations to reflect on over the summer. After the summer break he foresees a new phase in which delegations will begin engaging in outcome-oriented discussions.
My third point is related to the critical role of leadership within the WTO to ensure that reforms can keep pace with change.
The key now in Geneva is to encourage the transition from technical discussions and information sharing to real negotiation. For this to happen Members need to be prepared to make trade-offs. Every one of the major players needs to be prepared to contribute something in order to get something in return. A lot depends on the domestic agricultural constituencies. To have the appetite and courage to make major progress on key areas such as market access and limitations on domestic support, the private sector will need to engage proactively. The world has a WTO agreement on services and an intellectual property agreement because CEOs of companies who were engaged in commerce devoted enough time and energy to working for the end result. Progress is possible.
A last point. I leave this weekend for Japan, for the G-20 Agricultural Summit in Niigata. I will seek to find out there what the Agriculture Ministers are willing to do to advance agricultural negotiations in the WTO. A lot however depends on you, in various parts of the agricultural community. Farmers have a disproportionate say in government policies in most countries, although they would not put it that way. They might say it is completely proportionate to their needs, and less than they deserve. Their dedication and perseverance they can help their governments accomplish great results.
Members, and we in the Secretariat, can benefit from the considerable expertise that is to be found in conferences like this one, and in the symposia that are created for Members to hear from outside experts.