Bridges Weekly Trade News Digest • Volume 6 • Number 24 • 26th June 2002

Agriculture: Little Progress In Export Competition Debate

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WTO Members on 18 June wrapped up a two-day informal special (negotiating) session of the Committee on Agriculture (CoA) focusing on export competition without agreement on any of the agenda items, including future disciplines on the use of export subsidies; export credits, guarantees and insurance; food aid, state trading enterprises; and export restrictions and taxes.

Many Members — including WTO newcomer China — orally presented various proposals for modalities, or negotiating formulas, for further export competition commitments. However, key agriculture players such as the EC, US and Australia did not respond with counterproposals, arguing that more information was needed or that they needed to track developments in other agriculture negotiation areas. The fact that current agriculture negotiations are being conducted mainly in oral mode without written proposals or minutes led to an unprecedented event, as a group of Members including Australia, Cuba, Canada, Brazil and India challenged the appropriateness of the Chair’s summary of the informal sessions presented to the subsequent 20 June formal special session. Nevertheless, their demand to amend the Chair’s report was opposed by most of the Members.

In its final observations on the session on export competition, Agriculture Chair Stuart Harbinson (Hong Kong/China) called the work undertaken "focused, business-like and interactive," but further remarked that "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". By that date, Members are striving to forge a draft modalities document based on what countries have put forward during the current phase

Export subsidies

The Cairns Group of agriculture exporting countries reiterated their call to phase out export subsidies within a three-year term (six years for developing countries), with an initial down-payment of 50 percent. This position was supported by many non-Cairns developing countries. To the disappointment of the Group, the US — a former supporter of Cairns positions — proposed a five-year period, but without the down-payment. China aligned itself with the Cairns Group position, but was less clear on the down-payment issue, sources reported. The EC, which is a key user of export subsidies, remained silent on its position but generally questioned whether the Doha mandate envisaged the elimination, or just the reduction, of export subsidies. Switzerland — the only Member tabling a written proposal — suggested the option of modulating reduction commitments by which Members were allowed to cut expenses more moderately for some sensitive products in return for steeper cuts in others — a proposal which was vigorously opposed by the Cairns Group. Japan and Korea did not propose any specific modalities.

On special and differential treatment (S&D), India and Like-Minded Group members such as Pakistan and Sri Lanka called for exemptions for developing countries along the lines of Article 27 and Annex VII of the Agreement on Subsidies and Countervailing Measures (SCM) (which exempts certain developing countries from the general prohibition to use export subsidies). However, this was opposed by Cairns Group developing countries, who said it would worsen distortions and damage South-South trade. Switzerland proposed outlawing all exports supported by export competition to least-developed countries (LDCs) and other vulnerable economies unless such exports were explicitly approved by the importing state. It was further reported that Switzerland showed some flexibility to extend this S&D measure to other developing county Members.

Export credits, etc.

During the negotiations, two general approaches emerged. For its part, the Cairns Group suggested a "rules-based" approach by which "commercial terms" such as duration of credit (e.g. 180 days) and benchmarks for interest rates and appropriate insurance premiums would be defined, with everything else forbidden. In contrast, the EC proposed a "reduction commitment" approach where the subsidy component of credit, insurance and guarantee would be calculated and then treated the same as export subsidies. The US supported the Cairns Group version but insisted that export credits were very different than export subsidies and less trade distortive. Together with Korea, Japan, Malaysia and Cuba, the US further cautioned that export credits were sometimes useful in times of currency reserve crises.

State trading enterprises

Regarding agricultural state trading enterprises (STEs), the debate centred on the question of whether the operation of STEs as such would automatically lead to trade distortions, as argued by the EC, or whether transparency through the notification of purchases and sales prices and transaction costs could appropriately control government- granted agriculture monopolies. Australia, New Zealand and Canada, which all maintain STEs, expressed reservations regarding the EC and US approach on the grounds that private companies (Cargill etc.) were subject to such transparency provisions.

Export restrictions and taxes

Switzerland, which — along with Japan and Korea — considers export restrictions as a food security concern for net food importers, proposed to ‘tariffy’ all export restrictions into export taxes and to subsequently bind and reduce them. Notably, Switzerland inscribed its proposal on export restriction partly in the category "NTC" (non-trade concerns) used in its technical elaboration.

Switzerland was one of the six organisers of the 14 June Ministerial Conference on Non-Trade Concerns (NTC-IV), where supporters of the concept of multifunctionality of agriculture stated that non-trade concerns such as rural development, food security and environment needed to be effectively taken into account in the WTO negotiating modalities (see BRIDGES Weekly, 20 June 2002).

Food aid

At the 17-18 June meeting, Members agreed that food aid provided at the request of relevant international organisations such as the UN Food and Agriculture Organisation (FAO) and the World Food Programme (WFP) should not be subject to new WTO disciplines. Regarding bilateral food aid, some Members said that this was often used to dump surpluses, whereas others argued that individual governments could respond to food emergencies faster than intergovernmental bodies. Nevertheless, most Members said that food aid should only be given in grant form.

Background

Together with the 3-4 June intersessional consultations (see BRIDGES Weekly, 4 June 2002), this negotiating session was the first of a set of three meetings based on the three pillars of the Agreement on Agriculture (export competition, market access, and domestic support). A subsequent meeting in mid-November will provide Members with the opportunity to address so- called inter-pillar issues. In these sessions, Members are required to translate their proposals tabled during phases one (2000-2001) and two (2001-2002) into legal and technical language applicable to modalities. Article 14 of the Doha Declaration provides that modalities are to be established by 31 March 2003.

The agreed timetable for the forthcoming negotiations are: 29-30 July: intersessional consultations on market access; 2-4 September: special sessions on market access; 5-6 September: intersessional consultation on domestic support; and 23-15 and 27 September: special sessions on domestic support.

ICTSD reporting; Geneva Watch, 20 June 2002.