News and Analysis • Volume 13 • Number 1 • March 2009

WTO Agriculture Discussions Revert Back to Basics

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With the Doha Round negotiations effectively in mothballs, WTO Members have returned with renewed vigour to examining how present agricultural subsidy commitments are kept and notified.

At a 12 March regular meeting of the WTO Committee on Agriculture, several delegations raised concerns about the routine lateness of government notifications of subsidy disbursements, as well as the way support is classified in such statements.

US Questioned on Subsidies, Farm Bill

Catching up on paperwork that had lagged several years behind schedule, the US notified its domestic support in 2006 and 2007 in January 2009. The figures show that overall trade-distorting support (OTDS) was at a historic low - only US$7.9 billion in 2006 and US$6.5 billion in 2007 - far below the current ceiling of around US$48 billion, and also lower than the proposed limit of around US$14.4 billion that would result from the cuts proposed in the latest draft Doha negotiating text. Unusually high prices during the notification period had meant that US farmers had not benefited from ‘countercyclical’ support that is normally activated by low prices, but some delegates expressed concern that the fall in commodity prices following the global economic downturn could reverse this trend.

OTDS covers the most-distorting support classified under the Amber Box, as well as so-called ‘de minimis’ payments and Blue Box subsidies intended to limit overproduction. Virtually all US trade-distorting support was disbursed under the Amber Box (US$7.7 billion in 2006 and US$6.25 billion in 2007). However, ‘minimally trade-distorting’ Green Box subsidies, which are free of reduction commitments, stood at US$76 billion in both years.

Australia, Brazil and Japan queried why certain US direct payments were still notified under the Green Box, when a WTO dispute panel had found that some of them did in fact distort trade. Canada and Brazil have claimed that the misclassification of such support has put the US in breach of its maximum permitted levels of Amber Box support (US$19.1 billion per annum) in several of the previous years. The US maintained that the payments were unrelated to production levels because they were based on fixed and unchanging historical base periods.

Australia, Brazil and Japan also asked why US countercyclical payments were notified as non-product-specific support, when dispute settlement rulings had found them to support cotton specifically (see related story on page 9). The US denied that the payments provided support that was specific to any one product.

The 2008 US farm bill also sparked a number of questions from exporters, with Argentina, Australia and Canada asking questions about the functioning and appropriate WTO classification of the Average Crop Revenue Election Programme (ACRE). Canada reportedly cited research showing that this programme could potentially push subsidy levels to new highs, depending on how it was implemented. The US countered that it was too soon to be able to say how ACRE payments would be notified.

China Blasts US Poultry Ban

China objected strongly to a clause - inscribed in section 727 of the federal budget signed into law on 11 March - that prohibits the use of federal funds “to establish or implement a rule allowing poultry products to be imported into the United States from the People’s Republic of China.” China said the provision unfairly singled out its exports. The US suggested that the matter should be discussed in the Committee on Sanitary and Phytosanitary Measures, but the Chinese delegate said the SPS agreement was ‘irrelevant’ to the clause in question.

Concern over EU Export Subsidies

Exporters expressed disappointment at the reintroduction of export subsidies for EU dairy products. Widely seen as amongst the most harmful and distorting of trade measures, Members had agreed under the current Doha Round that developed countries would eliminate export subsidies by the end of 2013, but that decision is contingent on the round’s conclusion and such payments are still technically allowed. No end-point for the subsidies has been set, the EU said, although the measure is supposed to be ‘temporary’.

Argentina requested data on the value of production used to calculate the EU’s Blue Box payments. The EU said it would try to provide the information.

Negotiations at a Standstill, Chair to Leave

The chair of the agriculture negotiations, Ambassador Crawford Falconer, told the membership in February that he would embark on a series of consultations to explore perceptions of the overall balance in his draft text released in December 2008 (Bridges Year 12 No.6 page 5). However, delegates say those discussions have been treading water in the absence of a clear signal from the Obama administration on how it proposes to take the negotiations forward. Many hope that some indications will be forthcoming in the next few weeks now that Ron Kirk has been confirmed as the US Trade Representative, but there are also concerns that the US will take a tougher line in the Doha Round. The administration’s trade policy agenda released in March called for correcting ‘imbalances’ in the negotiations, implying that ‘flexibilities available to others’ made it difficult to assess the value of the deal on the table for American workers, farmers and businesses (see page 17).

A number of negotiators have expressed regret over the news that Ambassador Falconer will leave Geneva in April to take up the post of Deputy Secretary at the country’s foreign affairs and trade ministry. Mr Falconer’s term had been temporarily extended to allow him to remain at the helm of the negotiations at a delicate stage. Many delegates see his return to Wellington as a tacit acknowledgement that there is no serious chance of the talks gathering momentum in the foreseeable future. His successor David Walker stands ready to take up the chairmanship if WT