Doha Round: Farm Exporters Question US Subsidies as Trade Talks Resume

5 February 2015

US farm subsidies could exceed proposed new WTO limits by as much as US$3.6 billion, a new paper from a dozen agricultural exporting countries has said. The paper is the first attempt this year to move negotiators towards a more specific discussion of what they see as desirable and feasible under a possible Doha Round deal on trade.

The countries argue that Washington’s levels of agricultural domestic support could breach proposed ceilings under the global trade body’s long-running Doha talks. The limits are set out in a draft text tabled six years ago, but are now back at the centre of a renewed bid to move the talks forward.

WTO members have given themselves until July to ink a work programme that would outline how to resolve the various outstanding issues in the Doha Round talks, with agriculture, non-agricultural market access, and services at the core. (See Bridges Weekly, 27 November 2014)

The 12 countries that sponsored the paper – all of which are members of the Cairns Group of farm exporters – now say the latest official US figures suggest that the proposed Doha disciplines would be surpassed by “a considerable margin.”

John Adank, the New Zealand ambassador who chairs the WTO agriculture negotiations, welcomed the paper’s focus on specific details. “We have to get very, very concrete,” he told an informal meeting open to all agricultural trade negotiators last Wednesday, at which the paper was discussed.

The paper was tabled by Australia, Canada, Chile, Colombia, Costa Rica, Guatemala, Malaysia, Pakistan, Paraguay, Thailand, Uruguay, and Vietnam. Nine other Cairns Group members did not co-sponsor the original submission, with some sources saying that they had had insufficient time to consult their capitals on the document following a change in last Wednesday’s meeting date.

Focus on six “central” countries

The paper focuses on six members which the sponsors say play a “central role” in the trade talks: Brazil, China, the EU, India, Japan and the US.

Except for the US, the report finds that proposed new disciplines would allow these countries to maintain farm subsidy spending at the most recent level the government reported to the WTO.

The exporters’ paper examines the possible implications of cuts to three categories of trade-distorting domestic support.

Firstly, the drafters examine how cuts could affect countries’ use of “amber box” support – seen as the most heavily trade-distorting under WTO rules.

Secondly, it looks at how proposed reductions might affect “de minimis”support, which although trade-distorting is permitted so long as it does not exceed a certain share of the value of production, which is currently set at five percent for developed countries and ten percent for most developing countries.

Thirdly, it looks at the implications of proposed new rules for “overall trade distorting domestic support” – the sum of amber box, de minimis, and the slightly less trade-distorting “blue box” programmes.

Proposed cuts to countries’ de minimis allowance would mean the US would have to shift US$4.4 billion of agricultural domestic support from that category to the amber box, the sponsors say.

This would push Washington’s spending up to US$11.2 billion – or as much as US$3.6 billion more than the proposed new limit on amber box support.

The paper does not examine subsidies that are exempt from any cap or cuts under WTO rules – such as green box payments, which are required not to cause more than minimal trade distortion, and input and investment subsidies in developing countries, which are allowed without any upper limit under a special provision in the Agreement on Agriculture.

“This is really new territory for us to venture into, but it’s necessary that we start this exploration,” said Adank.

Farm Bill: falling prices could push support higher

In comments to Bridges, trade sources observed that the paper also does not account for new farm subsidy schemes introduced under the 2014 Agriculture Act, known as the Farm Bill, which some experts expect could increase levels of trade-distorting support if prices for agricultural goods continue to fall from their peaks in 2011. (See Bridges Weekly, 15 January 2015)

Officials told Bridges that the falling prices for farm goods meant they were now constantly worried that Washington’s farm subsidy levels could increase further.

Delegates disagree on data

However, in a reference to controversy over different ways of calculating farm subsidy levels, the sponsors of the new paper caution that their use of official data does not “constitute an endorsement” of governments’ reporting practices.

In recent years, WTO members have increasingly disagreed over methodological questions such as whether agricultural domestic support data can be reported in local currencies or US dollars, whether and how inflation can be taken into account, and whether calculations of market price support should be benchmarked against total production or just the amount that is actually purchased by the government.

Delays in reporting farm support have also repeatedly bedevilled attempts to understand how proposed new rules could affect countries’ farm subsidy payments. Last September, India filled a seven-year backlog in notifications by reporting farm subsidy data up to 2010-11, but – despite fast-growing farm support – the new paper’s figures for China only go up to 2008. (See Bridges Weekly, 18 September 2014 and 19 October 2011, respectively)

A previous paper on domestic support, issued by the Cairns Group nearly a year ago, riled India and China by using a new measure of “total trade distorting support” to calculate subsidy levels. This measure included other forms of farm support that are exempt from WTO limits, such as input and investment subsidies in developing countries. (See Bridges Weekly, 27 March 2014)

Other countries react

One risk, a developing country observed, is that “the only one that will really benefit from this paper is the United States.”

Some negotiators also told Bridges that there was a risk that other countries would now be asked to make further concessions in the talks, despite the fact that the US had done little to reform farm support programmes to reduce their trade-distorting effects.

Sources said that the US had reacted by saying the new paper showed that the current Doha draft was unbalanced. Some developing countries responded by arguing that this was a consequence of having to address the imbalances that had been inherited from past negotiating rounds.

Some delegates said the exporters’ findings seemed to suggest that WTO members should lower the “level of ambition” for the talks in order to strike a deal by the end of the year. But others told Bridges they felt uncomfortable with this approach.

“We will not tailor the negotiations for the United States,” said one.

Adank encouraged members to continue focusing on specific details in order to advance the talks further. “My really strong advice to you all as we leave this meeting is please get more concrete with each other, because if we stay in this sea of generalities we’re probably not going to get that far.”

ICTSD reporting.

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