Issues covered by the WTO’s committees and agreements
AGRICULTURE NEGOTIATIONS: BACKGROUNDER

Modalities. The export side: subsidies, competition, taxes and restrictions

“Intersessional” informal meetings (3–4 June 2002), informal “special session” (17–18 June 2002), formal “special session” (20 June 2002).

The discussions cover five headings: export subsidies; export credit, guarantees and insurance; food aid; exporting state trading enterprises; export restrictions and taxes.

Within each heading, are a list of subheadings such as: general comments; scope/definitions/product coverage; stages/timetables; transparency and notification; and so on. Special and differential treatment for developing countries and non-trade concerns are discussed under all of them, although members differ as to whether the Doha declaration treats these as equals or whether non-trade concerns have a lesser priority.

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Export subsidies  

Proposals include: 50% downpayment, down to zero in three years for developed countries, six for developing countries; similar but without the downpayment; down to zero in five years; “elimination is neither included nor excluded”, depending on what happens in other areas, including export credit and domestic support; “modulation” that allows more moderate cuts for some products in return for steeper cuts in others. Some countries propose additional commitments on per unit subsidies (e.g. dollars per tonne of wheat).

Many developing countries support elimination and downpayments. But as a whole developing countries differ as to how special and differential treatment should be handled. Some want to see exemptions along the lines of Article 27 and Annex 7 of the Subsidies Agreement. Others say this would worsen distortions and damage trade between developing countries.

Some important players have not proposed specific numbers, and this has led to criticism from others.

 

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Export credit, insurance, etc  

Two approaches have emerged. One is “rules based”. Export credit and insurance would have to be on “commercial terms”, which would be defined according to criteria such as duration of credit (e.g. 180 days), benchmarks for interest rates (e.g. Libor — the London inter-bank rate — plus something), appropriate insurance premiums, and so on. Anything else would be outlawed.

The alternative is to have “reduction commitments”, which means calculating the subsidy component of credit, insurance and guarantees and treating them in the same way as regular export subsidies.

Several developing countries complained that the reduction-commitment route would reinforce the unfairness of the current export subsidy set up — those with high subsidies in the base period are allowed to subsidize more during the reform period. Some countries warned against being too drastic because subsidized credit can be needed in times of foreign currency crises.

Again there were complaints that the proposals lack concrete figures. But some countries said they need more information before they can provide a specific proposal.

 

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Food aid  

Most countries say aid is not a problem if it is given in response to an appeal from a relevant international organization (such as the World Food Program, Food and Agriculture Organization, etc, or if the organization declares an emergency.

But what if the aid is given bilaterally? Some countries would suspect that this is an attempt to offload surpluses, although some delegations point out that individual governments can respond to an emergency faster than international organizations. There are also differences about whether aid should only be in grant form, or whether price discounts and credit should be disciplined under export subsidy disciplines.

 

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State trading enterprises/single desk operators  

This deals with the possibility that exporting state-owned companies, marketing boards or similar enterprises could be a means of subsidizing exports outside the agreed subsidy limits. A lengthy discussion has narrowed down part of the debate to whether a monopoly given by a government to an exporting enterprise is automatically suspect or whether it is the actions of the enterprise that would determine whether it is subsidizing exports.

A number of countries oppose government-granted monopolies. Simply put, one view is that if a monopoly is granted, then the price is transparency — purchase and sales prices and transactions costs would have to be notified. Some countries with state-owned or monopoly exporting enterprises object on the grounds that these are trade secrets that private companies don’t have to reveal.

 

 

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Export restrictions and taxes  

Are export restrictions are as serious as import restrictions? Should bindings and reductions on the two sides be symmetrical? Some countries say “yes” because for them their ability to purchase imports is a food security question. Others reject that argument, saying export barriers are less serious than import barriers. Some propose that any disciplines should apply only to food products, not to all agricultural products.

More concretely, one country proposed converting all quantitative restrictions into export taxes that would be bound and reduced to unspecified levels, with some special and differential treatment to allow developing countries to act in emergencies.

Some countries argue that there is no mandate to discuss export taxes and restrictions. Others counter that these measures legitimately come under the heading “export competition”, under Article 20 of the Agriculture Agreement (which deals with post-2000 negotiations) and within the Doha mandate.

 

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Chairperson’s summary  

At the formal meeting on 20 June 2002, chairperson Stuart Harbinson’s concluding observations were:

“The two days of negotiations in the Special Session and the two days of inter-sessional informal consultations were very useful in bringing forward a number of specific suggestions for possible modalities and in improving the understanding of different members’ positions. It was encouraging to see all participants working in a focused, business-like and interactive way (…).

“However, much more work needs to be done. Although specific suggestions were forthcoming from some participants, others were more reserved in detailing their own ideas or in reacting to those put forward, the configuration varying to some extent from one issue to another. Overall, a greater degree of concrete and interactive engagement will be required if we are to develop a sound basis for an overview paper in December. This means more intensive work between participants with a view to developing specific ideas for draft modalities that others are likely to find acceptable. The Chairman will also need to pursue a number of the issues that were raised in future consultations in a variety of formats.”

 

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