Meanwhile, the rapporteur on the European Parliament’s development committee has proposed that the bloc’s controversial export refunds be phased out by 2017, a suggestion now being reviewed by other parliamentarians on the committee ahead of a deadline for amendments in two weeks time. The proposal runs counter to the Commission’s insistence that no date should be set for ending the subsidies in the absence of a broader deal with trading partners - such as the accord foreseen under the WTO’s Doha talks.

Under ‘co-decision’ rules set out in the bloc’s Lisbon Treaty, the European Parliament and farm ministers in the European Council are required to reach an agreement on the reform proposals tabled last October by the European Commission - prompting intricate political manoeuvring as various constituencies try to pursue different goals. (See Bridges Weekly, 12 October 2011)

“Member states are trying to stitch up deals between each other,” one Brussels-based source told Bridges.

Greening: “menu approach”?

Farm ministers argued that a “menu approach” that would allow EU member states to pick and choose between options would be preferable to the greening measures outlined by the Commission in October.

The Commission had initially outlined plans to introduce a new ‘green’ payment that would depend on farmers diversifying their crops, maintaining permanent grassland, and setting aside seven percent of arable land as ‘ecological focus areas.’

Several member states argued that the proposed criteria in all three areas should be made more flexible, with a number arguing that various types of farming should be considered ‘green by definition.’ The Commission had originally proposed that organic farming alone should be classed in this way.

A working document prepared by Luxembourg at the end of April foreshadowed many of the arguments raised by ministers in yesterday’s meeting - also proposing an ‘a la carte’ approach to greening measures that farmers could adopt, and broadening the definition of farmers that would be considered ‘green by definition.’

The environmental group Birdlife International was strongly critical of the draft. “If such a deal goes through, it would signal the end of any legitimacy of EU direct payments to farmers,” Ariel Brunner, head of EU policy at the organisation, said in a statement.

New loopholes

In remarks to Bridges, one government official who had been involved in the discussions acknowledged that environmentalist groups may be right to fear that the countries supporting the Luxembourg proposal could open up loopholes in new subsidy rules that would be hard to close.

“Those worries are well placed,” the source admitted.

On Friday, the Commission responded to the Luxembourg working document by circulating a confidential ‘concept note’ indicating that some elements of the original proposal could be made more flexible.

Farmers and others taking part in agro-environment schemes could be considered as fulfilling the greening requirements, the Commission suggested in the note. At the same time, additional flexibility could be introduced to the proposals on the maintenance of permanent grassland and crop diversification.

Commission “gives no ground”

At the same time, the Commission “gave no ground” on the push to establish a ‘menu’ of options which member states could choose between, one government source told Bridges.

“The strength of the three proposed greening measures lies in the fact that they are compulsory for almost all farmers, apply to the entire relevant area of their holding, and ensure a level-playing field in the Union,” the note says.

Countries espousing a menu approach included Finland, Hungary, Lithuania, Slovenia, and the UK, sources said - although some also argued that more discussion over how best to pursue ‘greening’ was needed.

“Member states should be taking stronger environmental measures, rather than working at forming a consensus behind closed doors that will sink the Commission’s proposal,” Tony Long, director of WWF’s European Policy Office, said in a statement.

“The Council is intent on sacrificing the seven percent of Ecological Focus Areas, despite the best scientific advice,” he added.

Proposals for farmers to set aside seven percent of land as ecological focus areas - including land left fallow, terraces, landscape features, buffer strips, and afforested areas - have been criticised by a number of countries. Sources said that Hungary, Latvia, Sweden, Finland, Bulgaria, Italy, Greece, Ireland, Luxembourg, the Netherlands, and Spain were unhappy with the current plans.

Farm groups: Ministers’ views are “welcome”

In contrast to environmentalists, farm groups expressed satisfaction to the direction of the debate. COPA-COGECA, the main lobby group for European farmers and cooperatives, said in a statement that the agriculture ministers’ views were “very much in-line with our demands.”

“We must ensure that measures to further green the CAP do not have a negative impact on farmers’ production capacity or costs,” Copa President Gerd Sonnleitner said. “And we must ensure that the greening measures are simple, practical, and fair.”

Export refunds: phasing out?

Birgit Schieber-Jastram, the rapporteur for the European Parliament’s development committee, has tabled a set of four draft opinions intended to bring the Commission’s new proposals in line with goals on international development. The opinions are due to be presented to the parliament’s committee on agriculture and rural development on 18-19 June, along with other proposed amendments tabled by the environment committee rapporteur.

The rapporteur’s draft opinion on the Commission’s proposal on the common market organisation for farm products states that “export refunds should be phased out by 2017.” Export subsidies have been widely criticised by developing country governments as well as by aid groups, who argue that these measures undermine the production capacity of local farmers in poor countries.

Other clauses affecting trade with developing countries include those stating that “specific attention shall be paid to eliminating unnecessary obstacles to exports from developing countries, and communicating changes of particular interest to these countries in due time,” and provisions affirming that subsidised exports “should not jeopardise the food production capacity and long term food security of developing countries.”

The proposals were welcomed by European development agencies such as CONCORD. “It’s perfectly feasible to phase out export refunds,” said Laust Leth Gregersen, CONCORD Denmark’s Policy Officer, in remarks to Bridges. Agricultural export subsidies were “damaging developing countries, and costly to European taxpayers,” he said.

Academic experts have also questioned the logic of the European Commission’s position on linking agricultural export subsidies to a wider Doha deal. “Export subsidies are a very expensive and costly way to provide support to farmers regardless of the outcome of the Doha Round,” Professor Alan Matthews of Trinity College Dublin has argued in an online commentary.

While the Commission’s original proposals would have provided scope for member states to continue providing some direct payments that are ‘coupled’ to production, and therefore more trade-distorting, Schieber-Jastram also tabled an amendment that would prevent governments from providing these payments after 2017.

Two further proposals relate to the functioning of the European Agricultural Fund for Rural Development and to the financing, management, and monitoring of the Common Agricultural Policy.

Parliamentarians in the development committee have until 29 May to make any amendments to the rapporteur’s proposals before the opinions are presented to the agriculture committee in a month’s time.

Video of the European Council public debate on agriculture is online here.

ICTSD reporting.

The Rome-based Committee on World Food Security (CFS) announced the new guidelines on 11 May. The Voluntary Guidelines on Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security seek to provide a basis by which to secure access to land, fisheries, and forests for vulnerable rural populations who have historical ties to the land they use, but who often have little legal standing.

The lack of formal documentation for local farmers, herders, and gatherers has, in the past, led to tensions between indigenous populations and the state, the latter of which officially owns the land.

The effort marks a “historic breakthrough,” UN Food and Agriculture Organization (FAO) Director-General José Graziano da Silva said on Friday.

Investment gains pitted against human rights concerns

The World Bank has reported a rapid increase in large scale land acquisitions in the aftermath of recent recurring surges in food prices. These overseas investments have often sought to secure export-oriented food supplies and biofuels, as well as ensuring access to other natural resources.

Proponents argue that big international deals bring much-needed investment and new technology that the region needs for development.

However, some human rights organisations have challenged this assumption by highlighting a number of high-profile cases in Africa, Asia, and Latin America where local populations have been removed from their ancestral lands to make way for large-scale foreign investors (see Bridges Weekly, 20 May 2009). Several hundred civil society organizations, including aid groups Oxfam and ActionAid, signed onto the Dakar Appeal Against the land grab in 2011 calling for an enforcement of such rights.

Oxfam has pressed for the urgent implementation of the guidelines by nations, as it worries about “growing competition for natural resources and land grabbing continuing unchecked.”

The guidelines seek to address many of these concerns, stating that, “where transnational corporations are involved,” they have a responsibility “to ensure that businesses are not involved in abuse of human rights and legitimate tenure rights.”

Caution urged

“These changes won’t happen overnight,” Ambassador Yaya Olaniran, the Nigerian Permanent Representative to FAO and current CFS Chair, cautioned upon the announcement of the guidelines. “But we also know, as a result of the extensive consultations by FAO and the CFS-led negotiation process, that there is a lot of buy-in and support for the guidelines.”

Critics have also noted that ensuring the implementation of the guidelines could be difficult, given their voluntary nature. Others, however, have stressed that the guidelines are an important first step, in the absence of a binding agreement.

The guidelines have been garnering additional support in recent weeks, with a confidential report by international agencies for the leaders of the G-20 group of major economies urging their adoption (see Bridges Weekly, 9 May 2012). The report was prepared jointly by twelve organisations ahead of a meeting of deputy G-20 agriculture ministers in the Mexican resort of Los Cabos being held this week.

The FAO has committed to developing a series of technical handbooks designed to help countries adapt the guidelines to their local contexts and aid their implementation. The organisation has also pledged to extend targeted technical assistance to governments.

Investment principles next on agenda

Seeking to build on the voluntary guidelines - which state that potential investments should respect existing land rights and not jeopardise food security - the CFS will focus on what principles are necessary for “responsible agricultural investment.” The year-long consultative process is set to start in October, which could see a set of recommended principles being developed by late-2013.

ICTSD reporting; “UN says nations endorse anti-land grab policy,” ASSOCIATED PRESS, 12 May 2012; “UN adopts historic ‘land grab’ guidelines,” BBC NEWS, 11 May 2012; “Global UN-backed land use guidelines approved,” REUTERS AFRICA, 12 May 2012.

EU Commissioner for Agriculture & Rural Development Dacian Cioloş said that he wants to “open the inter-institutional debate to all stakeholders thus creating the opportunity to explore new ways in which to adjust the EU’s organic policy and legal framework and paving the way towards further improving the development of organic agriculture and production in the European Union.”

With this report, the Commission aims at providing “factual elements” which can guide a constructive debate on the Regulation and lay the groundwork for legal proposals at a later stage.

The Commission limited the report to four issue areas regarding the current regulation: scope, co-existence with genetically modified organisms (GMOs), control systems, and import-related issues.

On the issue of the scope of the regulation and the possibility of extending it to other agricultural products, the study found that there is no objective need to broaden the scope of the regulation to textiles, cosmetics or organic food produced by mass caterers. Instead, the report says priority should be given to deepening the regulatory and control aspects for agricultural products rather than to expand the scope to more products and sectors.

The report also finds that preventive measures and harmonised actions on GMO production and feasible measures for limiting co-existence are currently preferred to a specific GMO threshold for organic products.

The section of the report looking at the regulation’s system of controls and its impact on the functioning of the internal market - paying particular attention to the possibility of any unfair competition or barriers to the production and marketing of organic products - found that the control system as applied in 2009 and 2010 did not cause significant problems to the smooth functioning of the internal market for organic products. However, there are still some weaknesses in its application. For example, the varied reading and interpreting of the EU legislation by the 199 Control Authorities and Control Bodies in the EU reveal a need for harmonisation and simplification of the actual implementation of the rules.

Finally, the study looks at the two features of the organic product import regime - the equivalence regime and the compliance regime - finding that while progress has been made in the implementation of the equivalence regime, some streamlining is desirable. The report finds that the usefulness of activating the compliance regime is not clear.

The equivalence regime is a mutual recognition of organic standards between EU and another country, thereby reducing transaction cost because exporters will require certification of organic standards in only one of the two parties.

ICTSD Reporting.

The draft has been prepared jointly by twelve organisations ahead of a meeting of deputy G-20 agriculture ministers in the Mexican resort of Los Cabos scheduled for next week. It makes ten recommendations for sustainably improving agricultural productivity growth, especially on small family farms.

The vice-ministers - or their senior officials - are due to discuss the recommendations and negotiate language that will be passed to ‘sherpas’, who will prepare the 18-19 June summit of G-20 leaders.

Recommendations in the final draft, dated 27 April and seen by Bridges, are broadly similar to those in an earlier version that was prepared ahead of the last deputy G-20 agriculture ministers’ meeting in April.

“Huge” yield gap

“We’re trying to highlight the fact there’s a huge yield gap in developing countries,” said one official who helped draft the document. Increasing productivity will require “long-term commitment” from G-20 governments, the source said.

Other officials told Bridges that the document, although finalised, is awaiting endorsement from governments before being circulated. Mexico, which holds the G-20 presidency this year, requested the draft, which was coordinated by the UN Food and Agriculture Organization (FAO) and the Organisation for Economic Co-operation and Development (OECD).

The WTO and nine other agencies also contributed - many of which also collaborated on a similar project during the French G-20 presidency last year (see Bridges Weekly, 11 May 2011).

Alongside trade reform, the document urges governments to catalyse farm productivity by increasing responsible investment, strengthening development co-operation, supporting innovation, and improving water efficiency.

“Much more consensus”

One official told Bridges that there had been “much more consensus” this year over the draft document.

G-20 discussions last year on food price volatility had ignited “heated debate” over questions such as whether speculation or biofuel subsidies had triggered price spikes on commodity markets, and - if so - how best to remedy them.

However, one UN official argued that the absence of more controversial issues had led to a fairly bland draft from the international organisations involved, with few specific proposals that were new.

Silence on Doha

Indeed, the report’s recommendations reiterate the negotiating mandate of the WTO Doha Round - to substantially reduce trade-distorting domestic support, substantially improve market access, and eliminate export subsidies - in words that are scarcely changed from last year’s report from international organisations to the G-20.

The most notable difference is any reference to whether concluding the eleven-year trade talks might help boost farm productivity.

One official from an international organisation cautioned against reading too much into the subtle change of language, suggesting that the conclusions on agricultural trade and farm productivity remain valid “whether Doha exists or not.”

Trade ministers agreed last December that the talks were in an ‘impasse’, despite repeated efforts to break the deadlock (see Bridges Daily Update #1, 14 December 2011).

Export restriction discussions “to continue”?

The final draft now includes a summary of main points from the G-20’s June 2011 Action Plan - including a controversial agreement to refrain from imposing export restrictions on World Food Programme purchases of humanitarian food aid. A bid to extend the accord to all WTO members fell flat when some G-20 governments opposed the move (see Bridges Weekly, 2 November 2011).

Trade sources privately told Bridges that they see little prospect of movement on this topic in the near future. The draft report nonetheless indicates that “discussions on this issue continue in the WTO.”

Although last year’s report had urged G-20 governments to define a ‘critical food shortage situation’ that could justify food export restrictions, the recommendation was dropped this year.

Instead, one official said, “the novelty this year” in the trade section was the emphasis on reducing production losses in developing countries by improving farmers’ ability to meet rules on food safety and plant and animal health. Also new was emphasis in the draft on the need to improve transparency on trade policies, support ‘aid for trade’, and strengthen trade facilitation initiatives.

“Market-smart” input subsidies

G-20 governments could help address what the agencies call Africa’s “fertiliser crisis” by supporting developing countries as they monitor and evaluate “market-smart” input subsidy programmes that target smallholders through vouchers and grants, the report suggests.

About ten African countries now provide input subsidies of the type discussed in the draft, following a move to do so by Malawi.

The report urges G-20 governments to help developing countries improve ways of targeting subsidies at small family farms and graduating away from support afterwards.

“You subsidise an input: it’s then very difficult to remove the subsidy,” one official explained, suggesting that “starter packs” - providing farmers with fertilisers, seeds, and training for a set period - could be one way to do so.

The agencies also call for competition in the fertiliser industry to be strengthened, and for fertilisers to be made available at more competitive prices, especially in sub-Saharan Africa.

Sustainable agricultural intensification?

Expanding reliance on non-organic fertilisers sits oddly with the report’s focus on sustainable agricultural intensification, some critics observed.

“The strong push to scale up fertiliser use is hardly a climate-smart solution,” Romain Benicchio, policy advisor at Oxfam, told Bridges.

However, the draft also calls for governments to review policies that might generate perverse incentives for sustainability and encourage unsustainable use of natural resources.

Innovation and intellectual property rights

The report also discusses the role of agricultural innovation in boosting farm yields, and the controversial issue of whether and how protection for intellectual property rights - such as patents and plant breeders’ rights - could contribute to spurring innovation.

The draft recommends that the G-20 help developing countries to “establish and enforce appropriate [intellectual property rights] systems consistent with international obligations.” WTO rules on intellectual property rights has prompted extensive debate over the effects of patents involving genetic material on follow-up innovation, with some questioning whether such developments constitute inventions at all.

The draft nonetheless refers to the importance of the FAO’s International Treaty on Plant Genetic Resources for Food and Agriculture - an accord that recognises farmers’ rights, allows plant material from a list of selected crops to be pooled for common benefit, and prohibits governments from granting monopoly rights over these resources.

However, experts note that the report might overestimate the role of intellectual property when it comes to promoting agricultural productivity and investment. The draft also seems to “ignore that IP systems are strongly context-dependent,” Carlos Correa, director of the Centre for Interdisciplinary Studies on Industrial Property and Economics Law at the University of Buenos Aires, commented.

“The report also overlooks the barriers generated by the proliferation of patents with low inventive step and the possible negative impact of broad IP protection on food security,” he said.

Social ‘safety nets’

Governments should also support gender-sensitive social safety-nets to meet the immediate food and nutrition needs of smallholders and their households, the report says.

“We need to take people out of food security traps” one source familiar with the report told Bridges, who emphasised the need to target assistance to women and small children.

Cash transfers to food insecure households could be one tool to do so, the report said.

In the hands of G-20 leaders

“It’s now out of our hands,” sighed one official who had helped contribute to the report. Back in Geneva, trade negotiators were unclear on whether, or how, the proposal could affect them.

“I don’t know if there’ll be an impact on the WTO,” said one, who wondered whether or not the leaders would “address a particular message to us.”

ICTSD reporting.

“We have lifted the suspension of fresh registrations for exports,” Commerce and Industry Minister Anand Sharma said on 30 April. Following the news, new export permits immediately began to be issued; however, the possibility of future restrictions remains open. The export situation will be reviewed every two weeks.

The decision followed an escalation of Agriculture Minister Sharad Pawar’s campaign to reform the country’s export policies with regard to cotton, sugar, and milk. This included a letter of complaint sent from Pawar to Prime Minister Manmohan Singh.

The reversal came directly out of a meeting between top Indian government ministers, including Finance Minister Pranab Mukherjee, Sharma, and Pawar. After announcing a repeal of the ban, Sharma told reporters that “we have to see that demand of domestic industry for cotton is met” and that the ministers will undertake a new assessment of the situation in three weeks.

Indian cotton exporters will now only be allowed to apply for one permit at a time, for a maximum of either 10,000 bales or the actual amount shipped during the current season, depending on which number is lower.

Exporters must also use at least half of their allocated quota before applying for a new permit. The new restrictions are designed to put a cap on the quantity that can be exported at one time, and undercut the advantages of large exporters.

Shifting policy

The reversal of the ban comes two months after India originally announced the export prohibition. The ban, enacted on 5 March, was followed by a series of abrupt changes in India’s cotton export policy. This included a partial repeal days after the ban was announced, followed by a full repeal, before the government decided to instead instate only a partial reversal of the prohibition. (See Bridges Weekly, 14 March 2012)

India had previously introduced full bans of cotton exports both in 2010 and 2012.

Analysts predict that the re-entry of India, the world’s second largest cotton exporter, into the world market means that the current global cotton glut could be exacerbated. “The opening of exports of cotton from India will add to the already ample supplies in the cotton market and push down prices on the international market,” Chen Jing of CITICS Futures Company commented, according to the Global Times, a China-based newspaper.

Some have speculated, however, that frequent alterations in Indian export policies may have already prompted international buyers to seek alternative sources. Referring to potential purchases made by China, agricultural expert Hu Biliang of the Chinese Academy of Social Sciences told the Global Times that “the US and Bangladesh are likely to be priority suppliers due to their steady supply and stable policies”.

“India Lifts Ban on Cotton Exports,” BBC, 30 April 2012; “India Lifts Cotton Export Ban,” GLOBAL TIMES, 2 May 2012; “Centre Sews up Loose Ends in Cotton Export Permits,” THE HINDU BUSINESS LINE, 7 May 2012; “Govt Lifts Curbs on Export Registrations for Cotton,” THE HINDU BUSINESS LINE, 30 April 2012; “Removal of Export Ban Weighs on Cotton Futures,” LUBBOCK AVALANCHE-JOURNAL, 6 May 2012.

An earlier proposal by the administration of US President Barack Obama had outlined a US$30 billion cut; shortly thereafter, a budget proposal from the House Budget Committee had suggested a US$33 billion cut. (See Bridges Weekly, 21 March 2012)

The Senate Agriculture Committee’s bill, or the Agriculture Reform, Food and Jobs Act of 2012, eliminates direct and countercyclical payments, making crop insurance the biggest budget item. Among the commodities, wheat, cotton, and feed grains would see the largest decrease in government payments. Although overall spending is widely expected to be lower, it is likely to become more trade distorting - moving away from direct payments to support that may influence planting decisions.

The proposed legislation also outlines reductions in outlays for direct payments and for nutrition and conservation programmes, while mandating increases in crop insurance, extension, and horticulture over a period of ten years.

To become law, a similar bill must also emerge from the Agriculture Committee of the US House of Representatives and then be reconciled with the Senate version before being put up for a vote in both chambers. The bill will then require presidential approval to become law; the 2008 Farm Bill was vetoed by then-President George W. Bush, only for Congress to override the veto.

In recent weeks, the House Agriculture Committee has been holding hearings on its version of the bill in Washington and across the country. Cuts in spending on food stamps, or the Supplemental Nutrition Assistance Program (SNAP), are expected to be a key difference between the House and Senate versions of the legislation. The Republican Chair of the House Agriculture Committee, Frank Lucas of Oklahoma, has recently put forth what he calls a “common sense” proposal that achieves savings by reducing costs and closing loopholes.

A finalised bill from the House will likely emerge in the coming weeks as legislators and the farm lobbies push to conclude a bill in both chambers before the current Farm Bill expires on 30 September.

Trade minimally important, observers say

According to some observers, discussions on trade negotiations, particularly at the WTO, have not played a significant role in the Farm Bill debate to date. In Senate testimonies earlier this year, trade or WTO commitments were only mentioned by commodity-specific lobbies and the American Farm Bureau Federation.

The Secretary of Agriculture, Tom Vilsack, referred to record exports of US$137 billion in 2011 and a historical record of 50 years of trade surpluses to underscore the importance of farming to the country’s trade position. A representative of the Rice Federation observed that increased spending in some developing countries will uncover “violations of WTO commitments,” while the National Cotton Council made the case that its proposals would resolve the US’ WTO dispute with Brazil. More recent testimonies from the House were no different.

Urban Lehner, Vice President of DTN Progressive Farmer, summed up the attitude of legislators towards the WTO as being one of “who cares.” Representative Collin Peterson, a Democrat from the US state of Minnesota, is quoted as saying that the “WTO is irrelevant” to the Farm Bill if the US is within its commitments at the global trade body. Peterson added that the Doha Round of trade talks would likely be a failure if, as a “development round,” it encourages developing economies to view it as all take and no give.

Brazil weary of NCC proposal

The most discussed trade issue in the Farm Bill debate is perhaps a resolution to the United States - Upland Cotton dispute with Brazil. The high-profile dispute was put on hold in 2010, after the US agreed to pay Brazil US$147 million annually in exchange for the South American country refraining from putting into effect promised retaliation. Both countries also agreed that US farm legislation would be modified to resolve the dispute.

A Brazilian official, speaking on condition of anonymity, observed that the National Cotton Council’s STAX proposal will likely “not be accepted as a solution” to the US-Brazil cotton dispute. “We were disappointed with the markup from the Senate,” he added.

STAX is the Stacked Income Protection Plan for producers of upland cotton, a programme meant to make up for losses beyond what is covered under ordinary crop insurance. Ambassador Roberto Azevedo, Brazil’s representative to the WTO, had earlier written to Congressional agriculture committees describing how STAX and other proposals would be trade distorting.

The final Senate Bill is “very close” to the Council’s proposal, Mario Jales, a cotton expert at Cornell University, told Bridges. A minimum price, generally considered more trade distorting, is now absent from the bill and was present prior to the markup process. He added that the draft legislation does “very little” to reform the marketing loan rate program. The marketing loan provision was found to be the “most trade distorting” element in the United States - Upland Cotton case, according to Jales.

In the absence of a satisfactory resolution to the dispute, three members of the House, led by Ron Kind, a Democrat from Wisconsin, have sponsored legislation to end the US$147 million in annual payments to the Brazilian Cotton Institute. Critical of the STAX programme, Kind warned that it “will surely be challenged again by Brazil at the WTO.”

ICTSD reporting; “Trade Is Traded Off in the Farm Bill Debate,” THE PROGRESSIVE FARMER, 27 April 2012.