Climate-resilient agriculture and multilateral trade rules

27 November 2014

How supportive are multilateral trade rules of climate change adaptation measures? The interface between climate adaptation and trade rules looks like a good topic for UNFCCC work on agriculture. 

A considerable amount of analytical work has been taking place on climate mitigation and adaptation measures in response to the projected impacts of climate change. This research is being undertaken by international and regional agencies, think tanks, researchers, and governments through national adaptation action plans.

In this context, the work on climate adaptation in agriculture initiated by the UN Framework Convention on Climate Change (UNFCCC) and one of its technical bodies, the Subsidiary Body for Scientific and Technological Advice (SBSTA), is most welcome. While the agriculture sector is responsible for almost a third of global greenhouse gas emissions, it also stands to be among the areas most affected by far-ranging climate change impacts, with vulnerabilities caused by extreme weather, floods and droughts, or changing environmental conditions.

To be effective, climate adaptation needs to be mainstreamed into overall national development frameworks, drawing on a range of policy tools. Trade rules might be an important area where synergies could be usefully deployed to address climate adaptation in agriculture.

Climate adaptation approaches and measures

Following in-session discussions and a workshop in earlier SBSTA sessions, it was concluded at the SBSTA 40 held in Bonn, Germany in June, that the body would undertake scientific and technical work in four areas of climate adaptation in agriculture.

In abridged form, these are: the development of early warning systems and contingency plans in relation to extreme weather events; assessment of risk and vulnerability of agricultural systems to different climate change scenarios; identification of adaptation measures, taking into account the diversity of the agricultural systems, as well as possible co-benefits and sharing experiences in research and development; and identification and assessment of agricultural practices and technologies to enhance productivity in a sustainable manner.

In the meantime, SBSTA invited UNFCCC parties and observers to submit their views on these issues by March 2015 on the first two areas, and by March 2016 on the second two. The submissions are to be considered at SBSTA in-session workshops in June 2015 and June 2016 respectively.

An excellent source for details on various adaptation measures is the national adaptation programmes of action (NAPAs), a UNFCCC-supported and country-led process for least developed countries (LDCs), geared towards identifying priority activities that respond to this group’s immediate climate adaptation needs. As of November 2013, NAPAs were prepared for 50 LDCs, with total priority projects numbering close to 500. The UNFCCC secretariat website houses a NAPA priorities database, with full details on suggested projects and cost estimates.

A paper by the UN Food and Agriculture Organization (FAO) has reviewed this NAPA database and found that 20 percent of all potential projects are categorised as related to food security, followed by terrestrial ecosystems at 16 percent, and water or irrigation at 15 percent. [Ref 1]

Other prominent areas include early warning systems, coastal management, education and capacity building, infrastructure, and cross-sectoral resilience. Furthermore a reclassification by the authors of all these measures produced the following five categories: cross-sectoral resilience projects; management of ecosystems; water management; crop production and livestock; and diversification and income.

This paper takes a look at the four areas outlined by the SBSTA agriculture work programme for the coming years, together with speculation as to the possible adaptation measures these might encompass, and their intersection with trade policy. The basic question asked in each instance is whether one or more trade rules are supportive of a potential adaptation area or measure. It is important to note, however, that this short paper is primarily aimed at flagging possible issues at stake rather than diving into detailed analysis.

Climate disasters

All writings on adaptation stress the importance of developing early warning systems (EWSs) for responding to extreme weather events. This is also one of the four areas of SBSTA’s agriculture work programme given the sector’s particular vulnerability in this respect. Several such systems operate for agriculture generally, for example, FAO’s global information and EWS (or GIEWS), Famine EWS (FEWS), Livestock EWS (LEWS), and the FAO’s programme for EWS of transboundary animal diseases.

Some recent research focusing on EWS in the context of climate resilient development and adaptation has been undertaken by the UN Development Programme. In the WTO agriculture rules, the phrase “early warning system” appears in the Agreement on Agriculture (AoA)’s green box paragraph 2(b) in the context of pest and disease control, but this measure could equally fall under “advisory services” in paragraph 2(d). National EWSs have not been an issue at the WTO, in the sense of being incompatible with global trade rules.

Moreover because climate change and extreme events have proximate and large impacts on water-related hazards such as droughts and floods, irrigation projects are a prominent adaptation response, an issue highlighted by the SBSTA. In the NAPAs submitted so far some 20 percent of all response projects belong to this category.

Regarding the interface with trade rules irrigation is considered to fall under the green box’s paragraph 2(g), “infrastructural services,” which lists services such as dams and drainage schemes, roads, market, and port facilities.

Strangely, despite its central importance, the word “irrigation” itself does not appear anywhere in the green box, although some of the language is clearly relevant. It should be noted that government outlay on irrigation has not yet been questioned at the WTO and is seemingly fully accepted as green box.

Green box paragraphs 7 and 8 have provisions for subsidised insurance and payments for relief from natural disasters that fall under the first two areas of future SBSTA agriculture work. There are eligibility conditions; for example, income loss should exceed 30 percent of the average of the losses in previous years, while the payments should compensate for less than 70 percent of the loss, and payment is to be related solely to income and not to the type or volume of production. In practice very few WTO members have notified having used these provisions. One reason may be that the criteria are restrictive for typical subsidised insurance schemes because these tend to be specific to crops or livestock.

A key question to ask moving forward is whether the green box insurance provisions should be made more accommodating to such climate adaptation requirements? In the 2008 Doha draft AoA modalities, some amendments along these lines were introduced to green box paragraph 8 – “relief from natural disasters” – but none to paragraph 7. Therefore some fresh assessment might be needed around these provisions from a climate perspective, especially since the demand for subsidised insurance will only grow in parallel with more extreme weather events and elevated uncertainties, another issue the SBSTA should reflect upon.

AoA green box’s paragraph 12 focuses on payments under environmental programmes. Several recent papers find this provision relevant for climate adaptation, assuming that the term “environmental” is inclusive of climate. There are two provision-specific criteria, meaning the payments must be firstly assigned for clearly-defined government environmental or conservation programmes, and secondly limited to the extra cost of compliance or loss of income.

Some studies maintain that it is fair that the payment is limited to the cost of compliance of adaptation. Others argue that the payment has to be attractive enough to induce adoption and so cannot be limited to the compliance cost. Indeed, it is argued that payment should exceed the compliance cost, because a climate measure may also generate negative externalities for which farmers need to be compensated.

Paragraph 12 has not been amended in the Doha draft modalities of 2008, but it could be with climate adaptation in mind by adding the word “climate” to that paragraph, and allowing the payment to exceed the cost of compliance so as to make a measure more attractive.

Finally, most adaptation measures discussed tend to be national or local in nature. But extreme climate events often have global repercussions, notably, through trade and food prices. This adds to adaptation costs in other countries. This was the case during the food price crises of 2008 and 2011. While climate shocks were the initial cause trade policy, namely export restrictions, magnified the crises.

With projections of more frequent extreme climate events becoming increasingly certain, food importers – the vast majority of countries – are worried. WTO rules on food export restrictions are weak and need strengthening, which should reduce the overall global cost of climate adaptation. Several good analyses have been published since 2008 on how the WTO rules might be strengthened. [Ref 2] Reflecting on work undertaken in SBSTA in this area could be a useful way to foster the necessary synergies between the trade and climate communities.

Research is key

The STBSTA’s fourth targeted area of work could include research for climate-tolerant crop varieties and animal breeds. This might include investigation into the use of genetic resources to breed new varieties – for example, short-cycle crops, drought-, flood- and salinity-tolerant crops – improved farming practices for sustainable intensification and increased resilience to variability, drought or salinity, and increased resilience of livestock and pastoral systems.

In the WTO rules, research falls under green box in the AoA, and all programmes that qualify are exempt from spending limits. It also covers all extension and advisory services. Research is among the least controversial areas in the green box— which may be why no amendment was made to the AoA text while negotiating a new draft under the Doha Round — so this could be a useful positive policy area to invest in.

Access to essential germplasm and other such materials is crucial for such research, especially by scientists in some developing countries. According to one study on access issues, scientists in the Consultative Group on International Agricultural Research (CGIAR) have expressed concerns over the increasing difficulty around accessing such materials unlike in past decades, due to new national and global rules and regulations. [Ref 3]

The role that the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) plays in this regard is not clear, particularly Article 27.3(b) that deals with plant variety, but the topic has attracted some attention including that at the WTO TRIPS Council. It might make sense for SBSTA, among others, to look into this area as well.

Trade to help, not hinder?

Most trade experts support a liberal trade regime for food and agriculture and the conclusion of the Doha Round negotiations as the way forward. There is a consensus that reductions in market access barriers as well as in export and domestic subsidies will benefit agriculture in some developing countries as production shrinks in countries that previously subsidised heavily, mainly rich countries, thus creating fresh opportunities for certain poor countries to raise production for import substitution and exports.

A significant portion of developing countries are also located in warm and tropical areas where climate change is projected to hit hardest. As mentioned, the Doha negotiations on agriculture essentially missed out on the climate-trade interface, but there are growing calls for revisiting the current drafts to make trade rules more climate-friendly.

One recent paper argued for returning to the rules on food stockholding in the AoA green box. [Ref 4] Given the experiences of 2008 and 2011 and projected further tightening of the global food markets, more so with climate change, many food importing developing countries are scaling up public stockholding of foods as an adaptation response.

The words “climate change” do not appear anywhere in the WTO agricultural agreement. If there was a will to do so, it would be relatively easy to insert these words in the AoA’s green box in particular, and would impart an important message.

For inspiration on mainstreaming climate issues in multilateral trade rules, one need look no further than the approach undertaken for food security in the AoA. For seven years of the Doha Round negotiations on AoA, much attention was given to food security as a crucial non-trade concern where trade policy nevertheless had an important role to play, leading to a revised text that is much more food security-friendly, namely the 2008 draft modalities.

Climate change too is an important non-trade concern and multilateral trade rules could have an important impact. In addition, given the rise of mega-regional and plurilateral agreements in the trade landscape, further reflection is perhaps also needed on the areas outlined in this paper in relation to regional trade agreements.

As climate change deepens and extreme events intensify, more effective adaptation measures will be needed, such as rules for food export restrictions and innovative incentive schemes for encouraging the adoption of good practices by private stakeholders.

The SBSTA, among others, is well placed to be looking into these issues as part of its work programme on adaptation and could provide guidance on how trade policy frameworks might foster climate-smart agriculture.

Ramesh Sharma, Economist based in Kathmandu, Nepal, formerly with the UN Food and Agriculture Organization (FAO)

[Ref 1] Meybeck, Alexandre, Nadine Azzu, Michael Doyle and Vincent Gitz (2013), Agriculture in National Adaptation Programmes of Action, UN Food and Agriculture Organization (FAO), Rome.

[Ref 2] Anania, Giovanni (2013), Agricultural export restrictions and the WTO: What options do policy-makers have for promoting food security? International Centre for Trade and Sustainable Development, Geneva.

[Ref 3] López-Noriega I. et al. (2012), Flows under stress: availability of plant genetic resourcesin times of climate and policy change, Working Paper 18, CCAFS, CGIAR, Copenhagen.

[Ref 4] Konandreas, Panos (2014), Challenges Facing Poor Food-Importing Countries: Can WTO Disciplines Help? In Meléndez-Ortiz, R. Christophe Bellmann, Jonathan Hepubrn (eds.), Tackling Agriculture in the Post-Bali Context, International Centre for Trade and Sustainable Development, Geneva.

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