Draft Bali decision on ag export subsidy cuts tabled

17 June 2013

Developed countries should halve ceilings for budgetary spending on farm export subsidies in a decision at the WTO's ministerial meeting in the Indonesian resort of Bali this December, the G-20 group of developing countries has said.

The group, which seeks farm policy reform in the developed world, has said that the move would be a token step towards ending the controversial payments - widely seen as the most trade-distorting type of support to producers. Quantity commitment levels should also be cut to actual average levels in a 2003-05 base period, the G-20 also said.

WTO ministers agreed that farm export subsidies would be eliminated by 2013 when they met in Hong Kong nearly eight years ago - alongside parallel moves to curb other forms of "export competition." But slow progress on the broader Doha Round of trade talks, launched in 2001, has stymied efforts to phase the payments out. Ministers agreed that the Doha negotiations were at an "impasse" when they met in Geneva eighteen months ago, and said they would focus instead on small steps that could be fast-tracked as the basis for a broader accord.

"Another milestone missed"

The G-20 non-paper, which was submitted on May 23, said that the group regretted that the 2013 deadline for ending farm export subsidies "is yet another Doha Round milestone to be missed." The group's proposal should therefore be seen as part of an "incremental approach" to achieving the more ambitious goal, according to a copy of the submission seen by Bridges. While the latest version of the draft Doha accord "continues to deserve the unwavering support of the G-20," the group was nonetheless willing to propose agreement on "intermediate" commitments for Bali, "in a spirit of flexibility and pragmatism."

Export credits: "intermediate" targets

The proposal therefore sets targets in a number of areas that are less ambitious than those included in the draft Doha "modalities" text, the most recent version of which dates from December 2008. Developed countries should immediately set maximum repayment terms at 540 days, the group proposed, while developing countries would have to do so no later than three years after implementation.

The original Doha accord would instead have set a maximum of 180 days for subsidised export credit repayments. However, the non-paper's sponsors do not set out in detail new disciplines for addressing any trade-distorting effects arising from the activities of exporting state trading enterprises or the provision of international food aid. In 2005, WTO members had agreed to address these in the Doha talks in parallel to negotiations on export subsidies and export credits.

"Overloaded" boat for Bali?

Trade sources said that the EU and US immediately opposed the G-20 non-paper. Some members of the G-10 group of countries with highly-protected and subsidised farm sectors were also reported to have expressed concerns: "The boat is already overloaded," warned one negotiator who expressed misgivings about the G-20 proposal." If you add one extra issue, you make things much harder," the source explained. Many trade officials have cautioned against adding too many items to the global trade body's agenda ahead of the ministerial conference, fearing that another high-profile failure could potentially deal a death-blow to the faltering Doha Round talks.

However, others cautioned against setting the bar for ambition too low: "This year, we're supposed to be eliminating fully export subsidies," another trade source said. Actual spending on agricultural export subsidies and export credits has dropped substantially from the levels seen in the 1980's and 1990's, when the European Community and US used these programmes to keep producer prices high at home by shifting surplus production off of domestic markets.

Trade facilitation: finding the balance

Some developing countries have argued that a Bali deal on trade facilitation - seen by many as a potential centerpiece of the ministerial gathering - would have to be complemented by action in other areas, such as agriculture, if it is to generate consensus amongst the organisation's membership. A proposal last year from the G-20 on tariff rate quotas was aimed at establishing this "balance," as was another submission on food stockholding and domestic food aid from the G-33 group of developing countries with large populations of smallholder farmers.

Trade sources told Bridges that countries such as India are making progress on trade facilitation conditional on corresponding action on their priorities - such as increased flexibility for developing countries to purchase food at administered prices when building food stocks or providing domestic food aid. Others reported that the US was also proving reluctant to entertain new proposals on other issues in the absence of faster traction on trade facilitation.

G-33 proposal: some convergence?

The chair of the agriculture negotiations, New Zealand ambassador John Adank, told a meeting open to all negotiators on 23 May that "elements of potential convergence have begun to surface" in two areas on consultations on the G-33 proposal. Countries might be willing to explore whether WTO members could agree to exempt a set of developing country farm programmes from subsidy limits, so long as these cause no more than minimal trade distortion, the chair said. They may be also be willing to agree not to bring legal challenges to minimally trade-distorting support programmes under a possible "peace clause," perhaps along the lines of similar commitments made in the past.

However, members are "still very much divided" over any possible amendment to the Agreement on Agriculture, or an agreed interpretation of its provisions, in the run-up to the Bali ministerial. They were also divided over the utility of setting up some kind of case-by-case mechanism that could allow members with specific concerns to seek additional flexibility. "I know that some delegations will be disappointed that I am not able to report rather more definitive progress," Adank acknowledged. However, he proposed to continue holding further informal consultations "to identify more clearly the range of potential landing zones."

OECD meeting: negotiators look for a signal

Several trade officials told Bridges that they were hopeful that ministers meeting in the sidelines of an OECD event in Paris on 30-31 May might be able to provide some sort of signal on how to move forward in the talks. A number of ambassadors, including Adank, were due to attend, sources said. Both OECD members and some other countries would be there. "Maybe right now it's too early to make a compromise," mused one negotiator. Another concurred, telling Bridges that "the deal is always going to get done closer to the time." Negotiators will "have a better idea" of prospects for the ministerial by September, the source said.

ICTSD reporting.

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