MC11 in brief
Agriculture remains among the most important and challenging issues facing the WTO membership. WTO negotiations on agriculture began in 2000 as part of the mandated "built-in agenda" agreed at the end of the 1986-1994 Uruguay Round, and were later incorporated into the Doha Round of trade talks launched at the end of 2001.
The WTO's 11th Ministerial Conference in Buenos Aires (MC11) will provide members an opportunity to discuss important outstanding issues such as domestic support in agriculture, disciplines applicable to public stockholding programmes, cotton, export restrictions, market access, and a special safeguard mechanism for developing countries.
While many are looking for progress on these issues at MC11, some members emphasise that the ministerial “should not be seen as the end of the journey" and an outcome in agriculture should also contain a work programme to continue reforms beyond Buenos Aires.
Public stockholding programmes are policy tools used by governments to purchase, stockpile and distribute food when needed. While stockpiling and distributing food is permitted under WTO rules, food purchases at fixed prices or “administered” prices which are higher than market prices are considered to be subsidized and hence the support provided is counted towards a country’s overall ceiling on trade-distorting support under current WTO rules.
Some members believe the current WTO rules on public stockholding are too restrictive and prevent governments from meeting the food security needs of their people. Others, while recognizing the legitimacy of such programmes, want appropriate safeguards in place to prevent such programmes from harming the trade interests or food security programmes of other WTO members. The December 2017 Buenos Aires meeting represents the deadline agreed by Ministers at the 2013 Ministerial Conference in Bali for establishing a “permanent solution” to the issue.
In Bali, ministers agreed on an interim “peace clause” allowing developing countries to provide subsidies under public stockholding programmes without being legally challenged in the WTO's dispute settlement system. Provided these countries meet the conditions specified in the Decision, the peace clause applies even if the country exceeds its agreed limits for trade-distorting domestic support. A General Council decision in 2014 and the 2015 Nairobi Ministerial Conference further confirmed that members would make every effort to agree and adopt a permanent solution on this issue by 2017 and that the interim solution would remain in force until a permanent solution is agreed.
In the run-up to MC11, members held dedicated discussions on this issue. Members have agreed on the need to have an outcome on the public stockholding issue and have broadly converged on the elements that should form part of a permanent solution, including safeguards and transparency requirements. But their views differ on a number of elements such as product coverage, country coverage, information sharing, and preventing excess stocks from seeping into global markets.
Four proposals are currently on the table:
1) A Proposal on Domestic Support, Public Stockholding for Food Security Purposes and Cotton by Brazil, the EU, Colombia, Peru and Uruguay, submitted in July 2017;
2) A proposed Permanent Solution on Public Stockholding for Food Security Purposes by a group of developing countries coordinated by Indonesia known as the G33 group dated 19 July 2017;
3) A proposal on Public Stockholding for Food Security tabled by Russia and Paraguay in late October 2017, and
4) A proposal submitted by Norway and Singapore on 27 November 2017.
The first two proposals suggest exempting the support provided under the public stockholding programmes from the calculation of trade-distorting domestic support.
The proposal by Brazil, the EU, and other co-sponsors covers existing public stockholding programmes as well as new programmes of least developed countries (LDCs) and smaller programmes of developing countries.. The G33 proposal, on the other hand, advocates wider country and product coverage, including all public stockholding programmes for food security purposes used by developing countries and least-developed countries.
The other two proposals follow the "peace clause" approach spelled out in the Bali Ministerial Decision, which seeks to provide a legal shield against challenges under the Agreement on Agriculture.
The Norway-Singapore proposal is largely based on the Bali Ministerial Decision, and covers existing public stockholding programmes as well as new programmes of LDCs and smaller programmes of developing countries. The proposal by Russia and Paraguay provides additional safeguards to ensure that stocks procured do not distort trade or adversely affect the food security of other members.
As many members strongly oppose unlimited exemption of market prices support provided under the public stockholding programmes, the chair of the agriculture negotiations, Kenyan Ambassador Stephen Ndung'u Karau, has noted that a permanent solution based on the Bali Decision is most likely to attract convergence among the membership.
Domestic support in agriculture remains the key priority for the vast majority of WTO members. In the lead-up to MC11, Members have negotiated intensively to curb domestic subsidies that can lead to overproduction of agricultural products and can affect world market prices.
Nevertheless, important gaps still remain in the positions of members on the negotiating issues, with delegations broadly divided between those favouring a limit on overall trade-distorting support (OTDS) and those that believe the “amber box” support (also known as the Aggregate Measure of Support, or AMS) should be eliminated first.
These differences are reflected in a number of proposals that form the basis of recent discussions.
A proposal by Brazil, the EU and other co-sponsors set out floating OTDS limits based on a percentage of the value of production, with differentiated caps for developed and developing countries. The proponents argue that this approach remains the most realistic basis for a possible incremental outcome at MC11.
In a similar vein, a proposal by New Zealand, Australia, Canada, Chile and Paraguay also focuses on OTDS limits. The proponents set out three options to curb trade-distorting support with fixed monetary caps, arguing that fixed limits are more transparent, predictable and would constrain future spending by members.
By contrast, a proposal by China and India calls on developed countries to eliminate their “amber box” support. They argue that eliminating this type of support would remove one of the biggest imbalances in the current farm trade rules by obliging the biggest subsidizers to reduce their special entitlements.
A submission by the African, Caribbean and Pacific (ACP) group also favours the elimination of AMS support but for all members, while preserving more leeway for developing members to support their farm sector.
A few more recent proposals on the issue were made by Argentina, Mexico and the Philippines. They represent attempts to find convergence among the different proposals on the table by suggesting an overall limit to trade distorting domestic support and a reduction of the AMS entitlements.
Some members noted that none of the proposals on the table in their current form have garnered the necessary consensus support among WTO members for a solution at MC11.
Owing to persistent differences in the negotiating positions of members, agriculture talks chair Ambassador Karau recommends members to work towards a limited outcome potentially comprising a decision on some core principles and a work programmes to guide the negotiations post-MC11.
In that regard, Russia and the African Group have tabled their respective proposals on a post-MC11 work programme on domestic support.
The Cotton Initiative was originally put forward by Benin, Burkina Faso, Chad and Mali (Cotton-4) in 2003 at the WTO's General Council. The proposal described the damage caused to them by cotton subsidies in richer countries, called for the subsidies to be eliminated, and for compensation to be paid to cover economic losses resulting from the subsidies. The Cotton-4 subsequently introduced a “Sectoral Initiative in Favour of Cotton”.
Trade ministers at the 2005 Hong Kong Ministerial Conference reaffirmed the 2004 General Council Decision to handle the work on cotton on both the trade and development assistance related aspects. On the trade side, Ministers committed to address cotton “ambitiously, expeditiously and specifically” within the agriculture negotiations, including the commitment to make reductions in trade distorting subsidies and improve market access for cotton exports from least developed countries. On the development assistance side, the Consultative Framework process was initiated by the Director-General, noting the importance of achieving enhanced efficiency and competitiveness in the cotton producing process.
The Nairobi Ministerial conference held in 2015 delivered significant outcomes on cotton. Notably, members agreed to eliminate export subsidies and apply disciplines of other export measures for cotton within a shorter timeframe than overall agricultural commodities. On market access, developed members and developing country members in a position to do so have committed to grant, to the extent provided for in their respective preferential trade arrangements, duty free and quota-free market access for exports by LDCs of cotton and cotton-related agricultural products.
Negotiations in the run-up to MC-11 have mostly focused on the remaining pillar of domestic support for cotton. Most members support a meaningful and specific outcome on cotton domestic support at MC11, but some delegations have cast doubts about the possibility of achieving an outcome, taking into account the overall negotiating environment.
While all members recognize the ministerial mandate to treat cotton ambitiously, expeditiously and specifically, many considered that further disciplines on Green Box direct payments granted to cotton producers as suggested by the C4 could not be achieved at MC11. Some members considered that it was not a realistic perspective for the time being while some others opposed this proposal for more fundamental reasons.
The Cotton-4 circulated a draft ministerial decision on cotton (TN/AG/GEN/46 - TN/AG/SCC/GEN/18) on 11 October 2017. In the initial discussion, some members felt the proposal, which calls for sharp reductions in domestic support for cotton, was too ambitious while others requested the Cotton-4 to clarify some elements of the proposal through a limit of cotton trade-distorting support expressed as a percentage of the cotton value of production. Other members insist on the need to address first the AMS granted to cotton beyond the de minimis level.
Other proposals, notably one from Brazil, the EU, Colombia, Peru and Uruguay, one from the LDC group and one from Argentina, also include elements aimed at making progress on cotton domestic support.
While the main focus of the cotton negotiation is on cotton domestic support, the current discussions also cover other components, including how to further improve cotton development assistance as part of an MC11 outcome. Members reaffirmed the continued relevance of the Nairobi Decision in that regard and most of them agreed that this fact could be recognized in a cotton outcome at MC11.
Export prohibitions or restrictions
The discussions in Geneva thus far have confirmed that many members support a limited outcome on export prohibitions and restrictions.
A proposal from Singapore has garnered support among members. The proposal focuses on enhancing information sharing in export prohibitions and restrictions, with a specific focus on the advance notification timeline. The proposal also suggests exempting from such measures foodstuff purchases made by the World Food Programme for non-commercial humanitarian purposes.
Israel, Japan, Korea, Switzerland and Chinese Taipei also tabled a proposal in October 2017 aiming at clarifying and strengthening the rules when a member applies export prohibitions and restrictions. However, there was broad agreement within the membership that an outcome on these issues could not be envisaged at MC11. The proponents therefore asked for an explicit post MC11 work programme on this issue.
Some members noted that an outcome on export prohibitions and restrictions could not be envisaged in the absence of a more comprehensive outcome in the overall agricultural negotiations. Some members also cautioned against making the transparency requirements too burdensome for developing country members. One member expressed strong concerns, as it believes a decision on export prohibitions and restrictions could constitute a first step to limit the policy space available to developing countries to make use of this policy tool.
Members generally acknowledge that a substantive outcome in market access is not feasible for MC11. Some members nonetheless seek to pursue market access reforms in an incremental manner as part of the agriculture negotiations.
In that regard, a group of members (Argentina, Brazil, Chile, Paraguay, Thailand and Uruguay) has proposed a post-MC11 work programme for market access negotiations to "reduce the level of protection and create meaningful market access opportunities". Seeking to pursue market access negotiations in a dedicated session of the Committee on Agriculture, the group also proposed to annually undertake a transparency and monitoring exercise in the Committee to examine developments in the agricultural market access field.
An earlier proposal by Paraguay and Peru proposed a similar incremental approach towards market access reforms targeting technical work on some issues, including tariff simplification (i.e. converting non-ad valorem tariffs to tariff rates charged as a percentage of the product price), as a first step.
Subsequently, Tunisia also submitted a specific proposal on the theme of tariff simplification.
In the lead-up to MC11, Paraguay (along with Argentina, Australia, Colombia, New Zealand, Pakistan, Peru, Uruguay and Viet Nam), the Russian Federation and the Philippines, have respectively proposed that the use of the existing Special Agricultural Safeguard (SSG) should be curtailed or eliminated, noting that its use has declined over time and that the SSG presents a serious systemic imbalance in the way members may protect their agriculture sectors. The latter two proposals also allude to a limited possibility of SSG "improvement", subject to certain conditions.
Members offered different views on these proposals, with a number of developing countries voicing support for the initiative while others cited the need to maintain SSGs in the absence of broader market access reforms.
Special Safeguard Mechanism
At the 2015 Nairobi Ministerial Conference, WTO members adopted a decision (WT/MIN(15)/43) to negotiate a Special Safeguard Mechanism (SSM) for developing countries. Under this decision, the General Council regularly reviews progress on the issue.
The SSM would allow developing countries to raise tariffs temporarily to address import surges or price declines.
The discussions continue to reveal divergent positions on the issue of the linkage between the SSM and the overall market access negotiations. The G33 group contends that an SSM for developing countries is needed so as to enable them to effectively address the negative impacts of international price volatility on resource-poor farmers.
The G33 group submitted a paper in May 2017 seeking to elicit members' engagement in finding solutions to the remaining issues on the SSM. The group subsequently submitted another paper in July 2017 dealing with questions on some technical aspects.
In September 2017, the G33 group tabled a submission indicating that the group is open to the adoption of one aspect of the SSM where the mechanism is triggered either by import surges or by price depressions. The Philippines proposed in November 2017 that members adopt a price-based special safeguard mechanism at MC11.
In contrast, a number of members made it clear that such an outcome was unrealistic in the absence of a broader outcome in market access. A few members believe that the only feasible outcome on SSM at Buenos Aires would be a decision on the continuation of the SSM negotiations post MC11.
Canada, Chile and Switzerland circulated on 10 November 2017 a proposal containing possible language on a post-MC11 work programme to build upon the results of the Nairobi Decision on Export Competition and to further enhance disciplines in this area. The proposal has garnered broad support among members.
Sanitary and phytosanitary measures
Brazil circulated on 10 November 2017 a proposal containing possible language on a post-MC11 work programme on sanitary and phytosanitary measures (SPS). Several members, while acknowledging their interest in the proposal, doubted whether an outcome on SPS was relevant in the context of the agriculture negotiations.
Subsidies: A form of financial aid or support extended by a government to an economic sector, institution, business or individual. There are two general types of subsidies in agriculture: 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.
Domestic support: Government agricultural support policies and subsidies subject to disciplines in agricultural trade reform. WTO rules basically identifies two categories of domestic support — support with no, or minimal, distortive effect on trade (often referred to as “Green Box” measures) and trade-distorting support (often referred to as “Amber Box” measures).
Amber Box/ AMS: Domestic support for agriculture considered to distort trade and therefore subject to reduction commitments. Technically it is calculated as “Aggregate Measurement of Support” (AMS).
Green Box: Domestic support for agriculture that is allowed without limits because it does not distort trade, or at most causes minimal distortion.
Blue Box: Amber Box types of support, but with constraints on production or other conditions designed to reduce the distortion. "Blue Box" support is currently not limited under WTO rules.
"De Minimis": Minimal amounts of domestic support that are allowed even though they distort trade — the amount is generally up to 5% of the value of production for developed countries, 10% for developing members. The de minimis limits apply to specific products as well as overall levels of production.
Ad-valorem tariff: A tariff rate charged as a percentage of the price, as opposed to "specific tariff" that may be based on a specific quantity.
Tariff simplification: The process of converting non-ad valorem tariffs to tariff rates charged as a percentage of the price, or ad-valorem tariff.
Special Safeguard Mechanism (SSM): A tool being discussed in the agricultural negotiations that would allow developing countries to raise tariffs temporarily to deal with import surges or price declines.
Special safeguard (SSG): A temporary increase in import duty to deal with import surges or price declines, under provisions of the Agriculture Agreement.
Tariffication: Procedures relating to the agricultural market-access provision, in which all non-tariff measures are converted into tariffs.
Export competition: Export subsidies and measures that could provide loopholes for governments’ export subsidies commitments — export finance (credit, guarantees and insurance), exporting state trading enterprises, and international food aid.Sanitary and Phytosanitary Measures: Measures dealing with food safety and animal and plant health.