MC12 briefing note
Agriculture remains one of the top priorities for the WTO membership. Progress in this area could lead to significant improvements in how markets for food and agriculture function by helping to correct and prevent restrictions and distortions in global trade. WTO negotiations in this area began in 2000 under a mandate set out in Article 20 of the Agreement on Agriculture, which was adopted in 1994 at the end of the Uruguay Round. WTO members have intensified discussions recently, with the aim of taking concrete decisions for immediate action as well as charting a path forward for ongoing negotiations.
The aim of the negotiations is to ensure global trade rules respond to today’s and tomorrow’s challenges, including the COVID-19 pandemic, the Ukraine-Russia conflict, climate change and food security.
Since taking the helm in July 2020, the agriculture negotiations Chair, Ambassador Gloria Abraham Peralta (Costa Rica), has organised a series of negotiating meetings, including talks among the full WTO membership, small-group consultations in different formats, and bilateral discussions.
WTO members engaged in intensive talks on possible negotiating outcomes for the 12th Ministerial Conference, which took place on 12-17 June. These talks initially took place on the basis of a draft negotiating text that was first introduced by the Chair in July 2021, and which built on previous discussions among the membership. On 23 November 2021, Ambassador Abraham Peralta issued a revised draft negotiation text (TN/AG/50).
At the end of May 2022, three draft negotiation texts emerged from an informal consultation process with WTO members undertaken by Director-General Ngozi Okonjo-Iweala since early May to tackle difficult issues and to set the negotiations on a new path forward. The texts included a draft ministerial decision on agricultural trade reforms, a draft ministerial declaration on trade and food security and a draft ministerial declaration on exempting from export bans food bought by the UN's World Food Programme (WFP) for humanitarian purposes.
In early June 2022, the DG and the Chair revised the three texts based on members' preliminary comments. While many members supported using the texts as the basis for an outcome on agriculture at MC12, they agreed more work needed to be done to close the gaps on some of the most sensitive questions in the negotiations on agriculture reforms, in particular in the areas of domestic support, public stockholding, as well as market access to a lesser extent.
At the WTO, negotiations are taking place on seven agricultural trade topics - public stockholding for food security purposes, trade-distorting domestic subsidies, cotton, market access, the special safeguard mechanism, export competition, export restrictions and prohibition, as well as one cross-cutting issue, transparency.
Public stockholding for food security purposes
Public stockholding programmes are policy tools used by governments to purchase, stockpile and distribute food when needed. Some developing countries have expressed concerns that WTO farm subsidy rules could limit their ability to purchase food at government-set prices, as part of their public stockholding programmes for food security purposes. While there is no limit on how much food governments can buy at market prices under these programmes, support provided to farmers through government-administered minimum prices is considered trade-distorting and needs to be counted towards a country's limit on trade-distorting agricultural subsidies under WTO rules.
At the WTO's Bali Ministerial Conference in 2013, WTO members agreed on an interim “peace clause”. Under this, they agreed not to challenge in the dispute settlement system the consistency of the support provided by developing members under public stockholding programmes with the Agreement on Agriculture while searching for a permanent solution. This was on the proviso that developing countries complied with certain conditions, such as providing more information on how these programmes operated, and how stocks were procured and released.
Two years later, at the Nairobi Ministerial Conference, ministers agreed that talks aimed at a “permanent solution” in this area would proceed in dedicated negotiating sessions and under a separate track. However, no outcome was reached by the agreed deadline of the 11th Ministerial Conference, which was held in Buenos Aires in 2017.
Many developing countries see a negotiating outcome in this area as a high priority and argue that this is one of the policy tools that could help developing members deal with the looming food security crisis. However, a number of exporting countries, both developed and developing, have said that a solution should not allow countries to distort trade and undermine food security elsewhere — for example, by enabling countries to export subsidised food that was bought for public stocks. Some members have also pointed out food security is more than just public stockholding and needs to be tackled in a holistic manner as an integral part of the overall agriculture reform package.
In Article 20 of the Agreement on Agriculture, members agreed to pursue ongoing negotiations aimed at substantial and progressive reductions in trade distorting support. Virtually all WTO members consider that domestic support to the farm sector is central to the agriculture negotiations. However, their views diverge on how best to address the issue.
Subsidies that distort trade and production continue to undermine fair competition on global markets, by disadvantaging those producers in countries which do not — or cannot — provide these forms of support. However, subsidies which cause no more than minimal trade distortion are allowed without limits under existing WTO rules.
In recent months, members tabled several negotiating proposals, with a view to actively identifying possible “landing zones” for an outcome at MC12. Some members, notably those from the Cairns Group of developed and developing country agricultural exporters, proposed a domestic support framework which would commit the membership to halving overall levels of trade-distorting support by 2030.
Others, including some emerging economies, proposed a sequenced approach whereby members first eliminate aggregate measurement of support, a trade-distorting support that exceeds de minimis thresholds (defined as a share of the value of agricultural production, and set at different levels for developed and developing countries), while maintaining current flexibilities for developing countries to provide input and investment subsidies under Article 6.2 of the WTO Agreement on Agriculture.
The Chair of the agriculture negotiations has said that members’ positions continue to diverge on a numerical target for subsidy cuts, a timeframe for doing so, a so-called proportionality principle, and the scope (i.e. which categories of subsidies should be addressed), among other things.
Cotton has been high on the WTO agriculture agenda since 2003, when four West African cotton producing countries (Benin, Burkina Faso, Chad and Mali - also known as the Cotton-4 Group) proposed a special sectoral initiative to address the problems they face in this area. As highlighted in the initiative, reforming cotton subsidies that distort world markets remains an important priority for the group. However, progress has been slow as some WTO members want to address this issue as part of the broader discussion on domestic support.
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, leading the cooperation with development partners to provide much-needed financial and technical support to cotton-producing developing countries.
The Nairobi Ministerial Conference held in 2015 delivered significant outcomes on cotton. Notably, members agreed to eliminate export subsidies overall and apply disciplines relating to 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.
While WTO members’ positions on the trade aspects are still far apart, the Cotton-4 Group continues to seek solutions for the reduction of trade-distorting domestic support for cotton and for enhancing transparency.
Protecting agricultural markets through border measures such as high tariffs can impede access to these markets for exporting farmers — and also raise the cost of food for consumers. In the WTO Agreement on Agriculture, members agreed that further negotiations to reduce protection would form part of a continuing wider reform process. However, members remain divided on whether talks on the topic are currently mature enough for a tangible result.
Some members see an outcome on market access as important in balancing commitments they may need to make in other areas, such as domestic support. However, others have made clear they do not see an intensification of talks in this area as a priority at this stage: these members have argued in favour of prior technical discussions to prepare the ground for negotiations, and a focus on steps to improve transparency in this area.
Two main issues are currently on the table for discussion. Firstly, some agricultural exporting members have called for an agreement on a work programme that would provide guidance to negotiations in this area (Argentina, Brazil, Ecuador, Paraguay, Ukraine and Uruguay).
Secondly, some members have proposed agreeing on steps that could help improve transparency, including when countries change their applied tariffs that could have an impact on the shipment en route (Australia, Brazil, Canada, Ukraine and the EU).
It is unclear whether ministers will be able to take decisions on this pillar any time soon. Both proponents of improved market access and other members have emphasised that the commitments made in this area will affect their perception of the overall balance across negotiating topics.
Special safeguard mechanism
A large number of developing countries would like WTO members to agree on a new “special safeguard mechanism” (SSM), which they could use to raise tariffs temporarily in the event of a sudden surge in import volumes or a fall in prices. At the 2015 Nairobi Ministerial Conference, trade ministers decided that talks in this area would proceed in dedicated negotiating sessions, with members reporting on progress to the General Council.
However, progress has been slow, as many agricultural exporting countries — both developed and developing — have said they think any new safeguard of this sort should be part of broader negotiations on how to improve access to markets.
Export prohibitions or restrictions
While quantitative export restrictions can be temporarily applied on foodstuffs to prevent or relieve critical shortages, many food importing countries are also concerned about the potential negative effects of these measures on price levels and volatility in other countries, especially in poor ones, and the resulting impacts on poor consumers.
Following the outbreak of the 2007-2008 Financial Crisis, which then triggered a world food crisis, WTO members decided to carry out regular discussions on the topic under a separate item at the agriculture negotiation meetings.
Discussions on export restrictions have focused on two subjects: the exemption from export restrictions of food which is bought by the World Food Programme (WFP) for humanitarian purposes; and enhancing transparency on export-restrictive measures.
On the WFP exemption, a group of nearly 80 WTO members issued a joint statement in January 2021 pledging not to impose export restrictions on foodstuffs purchased by WFP for humanitarian aid. At MC12, a Ministerial Decision on exempting World Food Programme (WFP) humanitarian food purchases from export prohibitions or restrictions (WT/MIN(22)/29) was adopted by members (see below).
Meanwhile, some food-importing members have proposed improving transparency on export restrictions, including through the advance notice members provide regarding measures to be imposed.
Export competitionWTO talks on export competition cover various measures which can have effects on trade comparable to those of export subsidies. Talks in this area seek to build on the outcome from the 2015 Nairobi Ministerial Conference, when WTO members reached a historic decision to abolish export subsidies and set new rules for other forms of export support.
Some countries consider the Nairobi Decision as “unfinished business” and would like to explore ways to strengthen rules in this area (e.g. Canada, Chile, Norway and Switzerland). However, many other countries do not see this negotiating topic as a top priority. Negotiators are currently looking at ways to enhance and streamline transparency in this area, but without imposing new burdens on poorer countries that may face more difficulty in collecting and reporting trade data. Some believe that data collection should inform future negotiations on this topic.
Transparency is a cross-cutting issue as it relates to all the substantive agriculture negotiating topics on the WTO agenda. Transparency in agriculture trade has been in the spotlight since the onset of the COVID-19 pandemic, as many WTO members have reiterated its importance in enabling them to take well-informed decisions. Meanwhile, developing members have stressed the need for any outcome in this area to take into consideration their capacity constraints. Other members, while supportive of efforts to improve transparency, have emphasised that an outcome on transparency alone would be insufficient.
The MC12 outcome package on agriculture comprised a Ministerial Declaration on the emergency response to food insecurity (WT/MIN(22)/28) and a Ministerial Decision on exempting World Food Programme (WFP) humanitarian food purchases from export prohibitions or restrictions (WT/MIN(22)/29). Both respond to demands from the international community for immediate action by WTO members to address food shortages and soaring food prices and ensure that the most vulnerable can access emergency food aid.
The Declaration underlines the strong commitment by WTO members to take concrete steps to facilitate trade, which plays a vital role in improving global food security and improve the functioning and resilience of global food markets. It also reaffirms the importance of not imposing export prohibitions or restrictions on agri-food trade in a WTO-inconsistent manner.
The WFP Decision was welcomed by World Food Programme Executive Director David Beasley: “This humanitarian exemption … will ensure that critical relief reaches the most vulnerable populations when and where needed.” DG Okonjo-Iweala said the Decision will make it easier for the WFP to “do its difficult job of feeding millions” suffering from acute hunger.
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