Bridges Weekly Trade News DigestVolume 15Number 40 • 23rd November 2011

WTO Debates Food Security as Import Bills Soar


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Food import bills are set to reach a new height of US$1.29 trillion this year, a specialised UN agency told WTO members at a meeting of the global trade body last week.

The new figure is due to represent a record high, as well as a record increase, the UN’s Food and Agriculture Organisation (FAO) said at a 17 November session of the WTO’s Committee on Agriculture devoted to discussing the situation of poor food-deficit countries.

Spending on grain-based products and vegetable oils accounted for over one-third of the entire cost of importing food this year, the agency said in a paper (G/AG/GEN/98) submitted ahead of the meeting. However, import costs had also risen by 23 percent for sugar and beverages, and by an average of 19 percent for livestock products (including both meat and dairy).

The agency’s assessment was echoed by the World Bank, which said its commodity price index had been stable since March 2011, but at a higher level than its previous peak.

Higher prices, and not greater volumes of trade, were behind the import bills’ increase, the FAO said - pointing out that the amount of sugar traded had even declined during the year.

However, low and stable international freight costs for much of the year had helped contain price increases, the agency said. Higher domestic production and the downgrading of economic growth in several important markets had also played a role.

Marrakesh Decision

The agencies’ analysis was presented at a meeting to review follow-up actions to the Marrakesh Ministerial Decision - an accord that was struck at the end of the Uruguay Round of trade talks. The Marrakesh Decision was aimed at preventing agricultural trade reforms from undermining food security in the least developed and net food-importing developing countries (known as LDCs and NFIDCs in the WTO’s jargon).

The decision aimed to ensure that trade liberalisation did not lead to adverse effects in poor food-importing countries, and included clauses on food aid, agricultural productivity and financing arrangements. However, food-deficit developing countries have complained for years that the decision has not been implemented effectively.

This year’s discussion took place against the backdrop of preparations for the 15-17 December WTO Ministerial Conference - and a communication (see Bridges Weekly, 2 November 2011) from the NFIDCs calling for ministers to agree upon a work programme to address the specific food security challenges that they and the LDCs now face.

The draft text calls for a comprehensive work programme to ensure that NFIDCs and LDCs can access adequate supplies of basic foodstuffs; to “explore the possibility” of developing rules to exempt countries in these two groups from export restrictions imposed by other WTO members that are major exporters of these foodstuffs; and to help NFIDCs and LDCs access trade financing on concessional terms, possibly through a fund that would be set up for this purpose.

The work programme proposal was debated on 16 November in an informal session of the agriculture committee specially convened for the purpose. Trade sources told Bridges that while members seemed broadly to share the view that a work programme was desirable, they disagreed on its scope and focus.

Some members argued that the focus of any such work programme ought to include other countries with food security concerns, but which did not fall into the existing categories of net food-importing countries or least developed countries. Indonesia and Nigeria were reportedly amongst the countries expressing this view.

A number of countries in the Cairns Group of agricultural exporters emphasised that it was important to consider the range of trade policies that can affect food security - including market access measures and trade-distorting subsidies - in addition to the question of agricultural export restrictions that the NFIDCs had raised.

Argentina had a particularly strong reaction to the World Bank’s advice that, “to minimise the impact of future food price spikes, clear commitments to avoiding the use of export restrictions on food will be needed.” Argentina, a Cairns member and major agricultural exporter, has historically applied export restrictions, ostensibly to raise government revenue and promote value addition in the agricultural sector.

Some countries, such as Bolivia and Venezuela, reportedly cautioned that they may find it difficult to accept disciplines affecting their ability to impose export restrictions, due to clauses in their national constitutions that enshrine an obligation to guarantee food for their populations.

Other WTO members took issue with the NFIDC’s proposal to consider setting up a fund to provide concessional financing to countries facing difficulties in paying for imports of basic foodstuffs. Similar proposals had been discussed extensively in recent years, without bearing any fruit, some members noted; meanwhile, others argued that other global bodies were better suited to providing financing of this nature.

Trade sources told Bridges that the proposal was now expected to be considered at the General Council, due to meet informally tomorrow, 24 November, and in a formal session next week on 30 November and 1 December.

Trade negotiations: no consensus on cotton

At a separate meeting of the ‘special session’ of the committee on agriculture last Friday, WTO members formally elected New Zealand ambassador John Adank as the new committee chair, who reported back to them on consultations he had held recently on cotton.

The so-called ‘C-4′ group of West African cotton producers - Benin, Burkina Faso, Chad, and Mali - had recently submitted a new proposal (see Bridges Weekly, 16 November 2011) for a ministerial decision, calling for a freeze on current cotton subsidy spending, amongst other things. However, Adank told members that no consensus had been reached, just one day ahead of a deadline for proposing to the General Council items for inclusion on the WTO ministerial agenda.

C-4 countries have consistently been frustrated in their attempts to pursue cuts to US cotton subsidies, which Washington has variously linked to progress on Doha Round agriculture negotiations more generally, the upcoming domestic Farm Bill process, and the subsidies of larger developing countries such as China and India. Some African countries speaking at the meeting argued that the onus was still on the US to produce a counter-proposal responding to C-4 demands in this area.

Trade delegates told Bridges that they expected to have a clearer idea of the agenda for the ministerial conference following next week’s General Council meeting.

More information

Analysis by the FAO (G/AG/GEN/98 and G/AG/GEN/98/Corr.1) and World Bank (G/AG/GEN/96) is available online at docsonline.wto.org.

ICTSD reporting.

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