South faces uphill fight on food security, commitments on Bali decisions

Original Publication Date: 
9 April, 2015

TWN Info Service on WTO and Trade Issues (Apr15/03)
20 April 2015
Third World Network

Published in SUNS #7998 dated 9 April 2015

Geneva, 8 Apr (Chakravarthi Raghavan*) - Having given away 'for free' the Trade Facilitation Agreement (TFA), the only leverage they had over the US and the EU, to ensure good faith negotiations by the two and reaching agreements on the Doha Development Round, developing countries are facing an uphill battle at the WTO to ensure a permanent solution to food security issues and translate into binding commitments the 'best endeavour' decisions of the 2013 Bali Ministerial Conference.

If the developing nations do not take care and stand united to take a firm stand NOW, they face the prospect, as at Bali, of being fooled into accepting another empty bundle of accords, with the United States getting more concessions and benefits, in a compromise package 'mediated' by WTO Director-General Roberto Azevedo.

As drafted and approved, the TFA requires no change in law or regulations of the developed countries, but only in developing countries who in addition have to incur some infrastructure costs - with no benefit to them.

(See 'Uncertain gains from Trade Facilitation', SUNS #7713 dated 9 December 2013; and 'Trade Facilitation may result in trade hallucination', SUNS #7837 dated 4 July 2014, articles by Jeronim Capaldo).

The former Director-General of the WTO, Mr. Pascal Lamy, has estimated in remarks he made in Australia last year (report by Peter Martin in 'The Age' of 28 May 2014), that the gain to the developed countries as a result of the TFA on the markets of developing countries would be the equivalent of a ten percent tariff cut by developing countries.

The WTO General Council, at its Special Session on 27 November 2014, took three decisions:

* adopted a Protocol of Amendment for including the Trade Facilitation Agreement (TFA) in Annex 1A of the WTO treaty;

* decided that the Bali decision on public stockholding for food security purposes is to remain in place until a permanent solution is agreed and adopted, and for WTO Members to engage constructively to negotiate and make all concerted efforts to agree and adopt by 31 December 2015 a permanent solution on the issue of public stockholding for food security purposes;

* agreed to work on a priority basis for legally binding outcomes on the other nine Bali ministerial 'best endeavour' decisions. These nine cover four in agriculture relating to tariff-rate quota administration, export competition and phasing out of cotton subsidies, and five in the Doha Development dossier including preferential access for services suppliers in least-developed countries (LDCs), and duty-free, quota-free market access for LDC products; and

* agreed to prepare a clearly defined work programme on the remaining Doha Development Agenda (DDA) issues, and setting a deadline of July 2015 for agreeing on this work programme.

(See SUNS #7923 dated 25 November 2014 and #7925 dated 27 November 2014 for the full texts of the three decisions, and #7927 dated 1 December 2014 for a report on the General Council meeting and decisions.)

After the Bali Ministerial Conference, an impasse had developed at the WTO, when members, in particular India, discovered that in negotiating at Bali (not directly, but through the intermediation of the DG, as was subsequently learnt), they had agreed to a package on the basis of a purported US agreement to the package, on Food Security for e.g., that in fact proved to be incorrect.

As a result, in further work at Geneva after Bali, these countries did not agree to move forward to accept the TFA and a Protocol for including it in Annex 1A of the WTO Treaty.

After some futile attempts to browbeat them into submission, and some direct negotiations between parties, the decisions adopted at the General Council in November 2014 was evolved.

(The entire episode, including comments and arguments of civil society, trade lawyers and some developing country trade experts has thrown up a range of issues, debated piecemeal and within closed groups. These issues however require wider debate and consideration, in more open fora, than the WTO).

On 25 January this year, at the usual meeting of some invited trade ministers (hosted by Switzerland) on the sidelines of the World Economic Forum (WEF) meeting in Davos, there was a reiteration by the ministers of their resolve to engage seriously and reach accords.

Since then, WTO Members have been meeting in various Committees and negotiating bodies, and going through the motions of discussions and negotiations, including on some new informal proposals (non-papers in WTO jargon) on the hard issues of agri-subsidies, and market access issues in trade in goods (agriculture and non- agriculture or NAMA) and services.

However, there has been very little progress.

The discussions have brought out that the only interest the US seems to have at the WTO is to get all Members to accept the Protocol on the TFA and bring it into force. This requires as of now 108 acceptances (WTO membership is 161), for the agreement to come into force and be binding on those accepting the Protocol.

By the very nature of needed national processes and procedures, ratifications take time and despite the spin by the WTO at media briefings, at the present rate of progress, it seems unlikely that this can be achieved by the time of the Nairobi Ministerial Conference in December 2015.

At the 25 January meeting in Davos of some trade ministers, the Kenyan Foreign Minister, Amina Mohammed, according to reports in the Washington Trade Daily (WTD) of 26 and 27 January, voiced the hope that by the time of the Nairobi Ministerial Conference, the WTO members would have ratified and brought the TFA into force, and also complete the Doha Development Agenda.

She had also told the WTD that she expects that all issues will be addressed, including a permanent solution to public stockholding programmes for food security purposes, so that the WTO would become relevant again as a trade negotiating forum.

[Also, according to a report in Mint, New Delhi, over a dinner meeting in January, on the margins of the WEF meeting in Davos, trade ministers of the US, the European Union, New Zealand, South Africa, and WTO Director-General Roberto Azevedo, among others, broadly agreed to scale down expectations to conclude the Doha negotiations at the WTO's 10th ministerial conference in Nairobi, Kenya.]

Renewed engagement in trade negotiations, with the WTO as the forum for negotiations, is undoubtedly of great importance to the WTO secretariat and its officials, trade diplomats accredited to the WTO and trade establishments in countries around the world.

However, merely as a process and negotiating forum, it has no value for the people, and more so for people in developing countries, if the WTO process cannot deliver some meaningful development outcomes that will better the lot of developing countries, and ensure that the built-in inequities of the WTO multilateral trading system are remedied.

In particular, this development outcome and removal of inequities has to be achieved by ensuring that the major developed countries and trading entities like the US and EU deliver on their promises and commitments at Marrakesh (for which the developing countries have already paid a heavy advance price), and that the US and EU are NOT allowed to resile from their commitments, on the specious argument of "changed circumstances and new trade realities" - the so-called global 'value chains', a trade narration propagated by the WTO, and so ardently embraced by neo-liberal economists ensconced in developing countries.

The 'global value chains' trade narration is nothing more than a futile effort to sell to developing countries and their public demanding social equity, the discredited trickle-down theories to enable a US-EU transnational corporate stranglehold over markets of developing countries. (See 'WTO catching up on two-century-old manufacturing model', Raghavan 2014, 'Third World in the Third Millennium CE: The WTO towards Multilateral Trade or Global Corporatism', TWN, Penang, pp351-357)

Meanwhile, WTO Director-General Roberto Azevedo appears to have renewed his efforts to find some compromises acceptable to the US for converting the Bali 'best endeavour' accords into commitments (as required by the General Council decision of 27 November last, see SUNS #7927 dated 1 December 2014) and wrap up the Development Round, so that the WTO could move on to 'new issues', promoted by the United States and the European Union.

Towards this end, the DG has held two rounds of meetings with the former US chief agriculture negotiator Dr Joseph Glauber during the last fortnight, in what appears to be a desperate attempt to find out the comfortable "parameters" that Washington can live with in the domestic support pillar of the post-Bali work programme on agriculture.

At least since the launch of the Doha negotiations in 2001, and more so since President Barack Obama entered the White House, a harsh US political reality facing trade negotiations has been that no trade agreement needing Congressional approval and changes to US domestic law can succeed.

The US administration and Congress have been at logger-heads; there has been increasing and vociferous Congressional opposition, in particular from the Democratic Party, to giving the administration any authority to negotiate and reach trade agreements, with an advance commitment by Congress that it will vote 'yes' or 'no' to such agreements, but not change them.

And without such Congressional 'fast track' authority, and assurances to trade partners that any agreement would be accepted or rejected but not changed by Congress, no real progress or success can be expected, whether in multilateral or regional negotiations - like the US-promoted TPP (Trans-Pacific Partnership) Free Trade Agreement, involving countries in the Pacific region excluding China, or the TTIP (Transatlantic Trade and Investment Partnership) Free Trade Agreement.

Meanwhile, Kenya, which is hosting the WTO's tenth Ministerial Conference in December, has planned a one-day informal meeting on 22 April in Nairobi and had recently invited about 30 key trade ministers and the WTO Director-General.

Those invited included ministers from the US, EU, China, India, South Africa, Indonesia, Brazil, Japan, Canada, Australia, New Zealand, Norway, Switzerland, Mexico, Chile, Colombia, Barbados, Lesotho, and Egypt.

The proposed meeting has been described as a "brainstorming" one to discuss and prepare the post-Bali work programme for concluding the Doha trade negotiations by the end of the year.

At Davos in January earlier this year, the Kenyan Foreign Minister, Ms. Amina Mohammed, had voiced the hope that the Doha trade negotiations could be concluded by the end of 2015.

However, Kenya is reported to have been privately advised by several trade envoys of the invited countries that it is too early to discuss the post-Bali work programme at this juncture when there is a lack of clarity on several issues in the domestic support and market access pillars of the Doha agriculture dossier, and key members remain sharply divided on how to proceed in this area.

As a result, Kenya is said to be considering a postponement of the informal meeting.

The WTO Director-General, in his renewed efforts, appears to have specifically discussed with Dr Glauber about the 2008 revised draft modalities in agriculture (Rev.4 text) and its implications for the US farm bill enacted into law last year.

At issue is whether the new payment programmes in the current US law will overshoot the limits set out in the 2008 revised draft modalities. The limit for the overall trade-distorting domestic support (OTDS) for the US in the 2008 draft modalities was agreed at US$14.5 billion.

But the current farm bill will need a cap much higher than the limit decided in the Rev. 4 text, according to several trade analysts.

Azevedo has also sought Dr Glauber's assessment on how to proceed in the market access pillar in which the Rev. 4 text had proposed a tiered formula with flexibilities for developing countries such as on special products and sensitive products.

It had also proposed a special safeguard mechanism for developing countries to ward off unforeseen surges in imports.

Against this backdrop, the Director-General's exclusive meetings with Dr Glauber have assumed considerable importance, trade envoys told SUNS.

Citing a news story that appeared in Washington Trade Daily on 1 April, one trade envoy from a developing country expressed concern that while members are kept in the dark, the Director-General is discussing crucial details with the US and its former officials at this juncture.

According to the WTD report, Dr Glauber has maintained that "the 2008 revised draft modalities text is 'complicated' with many 'flexibilities' in the market access pillar."

The former US official has said that developing countries want "many of the flexibilities to be confirmed and that is very difficult."

Azevedo is working on these issues because members have suggested a "simplified" approach, according to Dr Glauber.

Dr Glauber welcomed the request-and-offer approach in market access. "One nice thing is the request and offer approach [which] would provide greater clarity as countries would know about sensitive and special products," he added.

[Argentina and Paraguay have recently put forward unofficially proposals (non-papers) involving a request-offer approach. The Argentina proposal is to be applicable to all market access negotiations - in agriculture, NAMA or non-agricultural market access, and in services. Paraguay's non-paper of 17 March, revised on 18 March, is on agriculture, and involves cuts based on a formula, and "offers" to be tabled on that basis, with a specific request-offer approach to reach agreements. It provides for cuts in Uruguay Round (UR) bound tariffs which are above 10%.

[The 18 March Paraguay proposal lowers the level of ambition for developed countries and increases the level of ambition for developing countries, a reverse S&D as India has called it, in rejecting it. It does this in several ways:

[1. In the Rev. 4 text, developed countries are asked to do a ‘minimum' average cut of 54%. Paraguay's proposal says 'average cut' of 54%. In Rev. 4, developing countries are to do a 'maximum' average cut of 36%. Paraguay's proposal says 'average cut' of 36%.

[2. Paraguay's 18 March modality implies an average cut of 27% for developed countries, while developing countries are asked to make an initial offer that will be close to the 36% average cut. This is because cuts are not made to tariffs below 10% (para. 2) and developed countries have more tariffs bound at below 10% than developing countries.

[3. The minimum cut under the general formula represents a 40% level of ambition for developing countries compared to Rev. 4 and 34% level of ambition for developed countries and RAMs (Recently Acceded Members) compared to the level of ambition in Rev. 4.

[Under this approach in the Paraguay non-paper: developed countries members shall initially offer potential final Doha Round (DR) bound tariffs, with average cut of [54] per cent, with a minimum cut of [20] percent per tariff line; developing countries members shall initially offer potential final DR bound tariffs with average cut of [36] per cent, minimum cut of [15] percent per tariff line; RAMs shall initially offer potential final DR bound tariffs with average cut of [30] per cent, minimum cut of [10] percent per tariff line; all Members are encouraged to offer cuts in those UR Bound tariffs below [10] percent. If any cut is made, it will count towards the average reduction.

[However, when all the details of the Paraguay proposal (such as no cut required for UR bound tariff lines below 10%) are taken into account, the South Centre research work shows that on a conservative estimate, developed countries as a group would only be required to cut by 27% in their initial offer as per this modality (instead of minimum overall cut of 54% in Rev. 4). This is because around half of their ad valorem tariff lines are below 10% (no cut required) and the other half are either ad valorem tariffs at rates higher than 10% or non ad valorem tariffs (which are assumed to be higher than 10% ad valorem equivalent). In comparison, developing countries are asked to initially cut 36% on average.]

But the G-33 group led by Indonesia has already dismissed the "simplified" approach on the ground that such an approach would undermine all the flexibilities. China and India have denounced the Paraguayan proposal in market access that suggested average and minimum cuts.

During a Room D meeting over a week ago, which some 30 countries attended, China severely criticised Paraguay for proposing a simplified approach - saying that the proposal was a front for some industrialised countries.

The G-33 group also dismissed the Argentinean request-and-offer proposal, saying that it is aimed at undermining the modalities in the Rev. 4 text.

The US wants market access only in three countries - China, India, and Indonesia. Japan and the EU are not important for the US because they are being covered in the free trade agreements, according to a farm analyst.

"The US wants to remove the flexibilities such as special products and special safeguard mechanism because it would remove uncertainty for their growing soya and cotton exports," the analyst said.

As regards the disciplines in the domestic support pillar, Dr Glauber, the former US official, had acknowledged the growing concern among countries about Washington's "exposure" in the farm bill to disciplines in the domestic support pillar as proposed in the 2008 revised draft text.

Although "the farm bill is broadly consistent with the Doha limits [as laid out in the Rev. 4 text], there are some additional exposures due to very low prices [prevailing in the international market]," Dr Glauber had suggested.

Dr Glauber had indicated that the US$14.5 billion target for the overall trade-distorting domestic support (OTDS) which was negotiated in 2008 may have implications if current international prices "were to go lower."

"We don't know yet all the implications," said Dr Glauber, according to WTD.

The US farm bill provides two options in the commodity programme for its farmers to choose in the domestic payments.

One option is that they can seek "price coverage" under which if international prices go down below a threshold then they would get compensated. The second option is 'revenue coverage' or minimum revenue protection.

"Farmers will have to sign up by April 7 whether they opt for price or revenue coverage," Dr Glauber maintained.

In his address as discussant on the US trade policy review at the WTO last December, the current New Zealand Ambassador John Adank had raised several concerns about the US' farm bill.

Ambassador Adank had said that although the US had eliminated the decoupled direct payments, which had come under criticism, they have provided a range of new policies "that generally involve deficiency-type payments aimed at compensating farmers for reduced returns when prices or yields go down."

"However, naturally, the larger question that looms is how does the new Farm Bill position the US for its further participation, in terms of both its offensive and defensive interests, in the still to be completed Doha Round negotiations?" Adank had asked.

"Instead of holding constant discussions with key members to arrive at acceptable outcomes based on Rev. 4, the Director-General wants first to find out what the US can live with in the post-Bali work programme," said a trade envoy from a developing country.

"This is not the way negotiations ought to be conducted," the envoy said.

"You cannot have negotiations which delivers only to a strong power, this is ridiculous," said another envoy.

Negotiations, the envoy said, are for reforming the trade-distorting farm programmes so that there is a level playing field for all members.

"If a strong power is unwilling to reform its agriculture, then, it is important that pressure is brought on the member to change instead of acquiescing to that member," the envoy added.

The underlying rationale of new disciplines is that they enable countries to change after a period of five years and that is how the implementation period of five years is suggested, according to the envoy.

"It is clear that to achieve success ala Bali, the Director-General will do things only after he gets clearance from the US," the envoy added.

[* Chakravarthi Raghavan, Editor-Emeritus of the SUNS, contributed this comment, with inputs from Ravi Kanth and reports in WTD and Mint, New Delhi --;]