TENTH WTO MINISTERIAL CONFERENCE, NAIROBI, 2015
Briefing note: Agriculture issues
Agriculture is one of the most important and politically sensitive issues on the WTO negotiating agenda. At the Tenth Ministerial Conference in Nairobi, WTO members adopted a number of important decisions on agriculture, including a commitment to abolish export subsidies for farm exports, a decision on public stockholding for food security purposes and one on a special safeguard mechanism for developing countries.
The elimination of agricultural export subsidies, new rules for export credits, and decisions on international food aid and exporting state trading enterprises make up an important part of the “Nairobi Package” adopted at the WTO’s Tenth Ministerial Conference in December 2015. Collectively, these issues are known as “export competition”.
The decision to fully eliminate any form of agricultural export subsidies is an historic decision and constitutes a significant step in the reform of agricultural trade. It ensures that countries will not resort to trade-distorting export subsidies and thereby levels the playing field for agriculture exporters. It is particularly meaningful for farmers in poor countries who cannot afford to compete with rich countries which artificially boost their exports through subsidization.
Due to the high commodity prices in recent years, many countries have significantly reduced their export subsidies and only a handful of WTO members still use export subsidies, according to a WTO survey in 2015. In times of low prices, however, countries often resort to export subsidies — and history has shown that once one country does so, others would quickly follow suit. Thanks to this decision adopted by ministers in Nairobi, WTO members will not resort to such action in the future.
Under the Ministerial Decision on Export Competition (WT/MIN(15)/45) adopted in Nairobi, developed countries will immediately remove export subsidies, except for a handful of agriculture products, and developing countries will do so by 2018, with a longer time-frame in some limited cases. In addition, developing countries will keep the flexibility of covering marketing and transport costs for agriculture exports until the end of 2023, while the poorest and food-importing developing countries will enjoy additional time to cut export subsidies.
Other export policies, such as on export finance, international food aid and operations of agricultural exporting state trading enterprises, can also be used to support agriculture exports and circumvent the provisions on export subsidies. The Nairobi decision contains rules to minimize the possible distorting impact of such policies on international trade. These include maximum repayment terms for export financing programmes for agriculture exporters supported by the government, provisions on state trading enterprises engaging in agriculture trade, and disciplines to ensure that food aid does not displace trade and does not cause adverse effects on domestic production.
Export competition has been a long standing issue in the WTO’s agricultural negotiations and the elimination of all forms of agricultural export subsidies constituted one of the United Nations Sustainable Development Goals launched in 2015. The proliferation of export subsidies in the years leading up to the Uruguay Round was one of the key issues that were addressed in these negotiations and they have remained a heated topic in recent years in the WTO. While export subsidies for industrial products have been prohibited for over 50 years, such subsidies in agricultural products were only subject to limited disciplines. Ministers finally agreed at the WTO 2013 Bali Ministerial Conference that members would “exercise utmost restraint” in using any form of export subsidy, and “ensure to the maximum extent possible” that progress will be maintained in eliminating all forms of export subsidies. The Nairobi decision represents a major step forward in agricultural trade by fully eliminating any form of agricultural export subsidies.
At the Nairobi Conference, ministers adopted a Decision on Public Stockholding for Food Security Purposes (WT/MIN(15)/44), which commits WTO members to engage constructively in finding a permanent solution to this issue. In order to achieve such a permanent solution, the negotiations on this subject shall be held in dedicated sessions and in an accelerated time-frame.
Public stockholding programmes are used by some developing countries to purchase food at administered prices for food security purposes. While food security is a legitimate policy objective, the public stockholding programmes are considered to distort trade when they involve purchases at prices fixed by the governments, known as “supported” or “administered” prices. The amount of support provided under the public stockholding programmes at administered prices is therefore counted as trade-distorting domestic support, subject to “Aggregate Measurement of Support” (AMS) limits.
The 2013 Bali Ministerial Conference agreed that the existing programme should be shielded from any legal challenge under the Agreement on Agriculture, until a permanent solution is found. The latter is mandated to be adopted by the 11th Ministerial Conference in 2017. The General Council in November 2014 further mandated members to make all concerted efforts to adopt a permanent solution by 31 December 2015.
Since Bali, members have put forward some ideas on how to find a permanent solution. A proposal was submitted by the G-33 group of developing countries on 16 July 2014. This essentially reintroduced the group’s 2012 pre-Bali proposal to move the support provided under these programmes into the “Green Box” (covering domestic support for agriculture that is allowed without limits because it does not distort trade, or at most causes minimal distortion). In November 2015, the group submitted another proposal, which simply asks for public stockholding programmes of a certain kind not to be included in a country’s calculation of AMS.
Other members, however, feel that while these programmes may seek to address food security concerns, the use of administered prices can still result in unintended consequences on international trade and on the food security of other members. Therefore, they object to the notion that such programmes should be deemed “minimally trade distorting”. Countries with concerns about the G-33 proposal include developing countries such as Brazil, Colombia, Pakistan, Paraguay and Thailand as well as developed countries such as Australia, Canada, the European Union, Norway and the United States.
The United States introduced a paper on proposed elements for discussion on public stockholding for food security in March 2015. This recommended a review of current food security policies and developing best practices by WTO members. In addition, there are other more general proposals which include references to the public stockholding issue by the group of African, Caribbean and Pacific countries, the G-33 developing countries and the G-90 group that includes the poorest and smallest developing countries.
Special safeguard mechanism
Ministers in Nairobi adopted a Decision on the Special Safeguard Mechanism (SSM) for Developing Countries (WT/MIN(15)/43), a mechanism that would allow developing countries to temporarily increase tariffs on agriculture products in cases of import surges or price declines. According to this decision, WTO members will continue to negotiate the mechanism in dedicated sessions of the Agriculture Committee in Special Session, and the General Council will regularly review the progress.
The issue of establishing a special safeguard mechanism for use by developing countries has been pursued in the market access pillar of agricultural negotiations. There have been disagreements among members on various aspects of the SSM. A coalition of developing countries pressing for flexibilities in opening markets, known as the “G-33”, has argued for a simple and accessible SSM as a trade remedy tool to mitigate price volatility risks and to balance distortions in agricultural trade. Other members have sought to have sufficient disciplines within the SSM so as not to compromise the market access reform efforts in the negotiations as well as the existing tariff binding commitments. Some developing countries have specifically raised concerns on the potential negative effect of the SSM on their exports in general and on trade between developing countries in particular.
The proponents of the SSM submitted two revised proposals in October 2015 and in November 2015 covering some specific aspects related to the operational elements (e.g. product coverage, remedies, duration, etc.). The revised proposals allude to exploring an approach similar to the Special Agricultural Safeguard. –This is a mechanism that is available to 34 members, both developed and developing, who undertook “tarrification” (whereby all non-tariff measures were converted into tariffs) in the Uruguay Round, and is included in Article 5 of the Agreement on Agriculture.
In the initial discussions on the revised G-33 proposal, other members broadly welcomed the direction and general thrust of the proposal. Members’ positions differ on the issue of the linkage between the SSM and the overall market access negotiations.
Domestic support and market access
Negotiations on the two other pillars of the agriculture trade reform — domestic support and market opening — have encountered deep divisions among members. Nevertheless, in Nairobi ministers expressed their commitment to advance negotiations on the remaining Doha issues, including domestic support and market opening.
More background on the negotiations
More on groups in WTO negotiations
Subsidies: A form of financial aid or support extended to an economic sector. There are two general types of subsidies: export and domestic. An export subsidy is a subsidy conferred on a firm by the government that is contingent on exports. A domestic subsidy is a subsidy not directly linked to exports.
Export competition: Export subsidies and the “parallel” issues, which could provide loopholes for governments’ export subsidies commitments — export finance (credit, guarantees and insurance), exporting state trading enterprises, and international food aid.
Maximum repayment term: In export credit or financing programmes, the longest period allowed between the starting point of a credit and the contractual date of the final payment, also known as “maximum repayment period”.
Modality: In WTO negotiations, modalities set broad outlines — such as formulas or approaches for tariff reductions — for final commitments.
Special Safeguard Mechanism (SSM): In Doha Round agriculture negotiations: a tool that will allow developing countries to raise tariffs temporarily to deal with import surges or price falls.
Special safeguard (SSG): A temporary increase in import duty to deal with import surges or price falls, under provisions that are particular to the Agriculture Agreement.
Tariffication: Procedures relating to the agricultural market-access provision, in which all non-tariff measures are converted into tariffs.
Amber Box: Domestic support for agriculture that is considered to distort trade and therefore subject to reduction commitments. Technically calculated as “Aggregate Measurement of Support” (AMS).
Aggregate Measure of Support: Domestic support for agriculture that is considered to distort trade and therefore subject to reduction commitments, also known as “Amber Box”.
Green Box: Domestic support for agriculture that is allowed without limits because it does not distort trade, or at most causes minimal distortion.