WTO to eliminate agriculture export subsidies

by World Grain Staff
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ROME, ITALY — The World Trade Organization (WTO) issued a declaration on Dec. 19 at the conclusion of the 10th WTO Ministerial Conference in Nairobi, Kenya includes a number of decisions in relation to the Agreement on Agriculture.

In particular, four ministerial decisions were adopted, addressing the following: export competitiveness through the elimination of many export subsidies by all countries by 2018; allowing developing countries to continue, for the time being, public stockpiling for food security; the Special Safeguard Mechanism (SSM) for developing countries to make recourse to when facing a surge of imports, and; a commitment by developed countries to provide duty-free and quota-free access to cotton exporters from less developed countries from 2016, provided that this is compatible with existing agreements.

The Food and Agriculture Organization of the United Nations (FAO) announced that it welcomes the agreement by WTO member states through the recently adopted "Nairobi Package" to move towards eliminating export subsidies involving agricultural products. However, it also noted that differences remain over other measures aimed at creating fairer global trading conditions, in particular for developing countries.

While welcoming the Nairobi agreement, FAO Director General José Graziano da Silva stressed the need for a global trade framework in which countries can balance the pursuit of their national food security and development objectives without harming their trading partners.

"The continued uncertainty on how to negotiate such a framework is worrying in a world in which global agricultural trade is likely to grow in importance in the coming decades as patterns of consumption and production continue to evolve," the FAO director-general said.

"Greater participation in global trade is therefore inevitable for most countries, however, the process of opening further to trade, and its consequences, will need to be well managed if trade is to improve food security," he said.

Graziano da Silva also referred to FAO's recently released The State of Agricultural Commodity Markets (SOCO) 2015-16, which stresses how trade affects all four dimensions of food security: food availability, access, utilization and stability.

The American Soybean Association (ASA) announced on Dec. 22 that is disappointed that the agreement on export competition reached will allow developing countries to use marketing, processing, and transportation subsidies for exported commodities under Article 9.4 until 2023 – practices that undercut U.S. exports and distort trade. ASA supported the position of the U.S. and many others that the ability of developing countries to utilize Article 9.4 export subsidies expired in 2004, at the end of the implementation period of the Uruguay Round commitments.

“The Nairobi agreement effectively raises these subsidies from the dead and legitimizes their use without any meaningful discipline until 2023,” said ASA President Richard Wilkins. “It will be important for the U.S. Trade Representative to work to ensure that countries do not attempt to shield these programs by shifting their subsidies under Article 9.4.”

“In addition, we saw India hold the Doha negotiations hostage in Bali and now again in Nairobi. India’s continued efforts to roll back previous commitments and to block meaningful trade liberalization by developing countries going forward makes us concerned about future talks,” said Wilkins. “We appreciate Ambassador Froman’s statement that the Doha Round is effectively over and that future negotiations must take place under a new architecture. Simply put, we believe the United States should only engage in future WTO negotiations it they occur under a markedly different framework than the flawed Doha mandate.”

The agreement also notes how trade and related policies affect the different dimensions of food security in ways that vary across and even within countries, and how these change over time as countries develop. Balancing short-run and long-run objectives is becoming vitally important considering that the nature of disruptions varies enormously and that market shocks will likely become more frequent due to geopolitical, weather and policy-induced uncertainties.

While efforts to intervene and shield domestic markets from global price volatility could in fact lead to increased domestic price volatility, agricultural incentives play an important role in in boosting agricultural production and efficiency and fostering broader economic growth, the report said.

Trade and food security concerns can be better reconciled in the multilateral trading system by improving the WTO's Agreement on Agriculture. Striking the right balance between better trade policy disciplines and the policy space sought by developing countries has however proved difficult.

In the new edition of SOCO, FAO argues that stepping back to resolve underlying national concerns and priorities may well offer the best way forward. It notes how policy coherence for food security needs to be strengthened, thus enabling governments to better design trade policies, while improving compliance with regional and global trade frameworks.

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