Cotton field, a large cotton farm,the cotton is harvested and baled for export to overseas countries.
Commentary

What to Expect at MC12 From the Negotiations on Agriculture?

As the World Trade Organization’s 12th Ministerial Conference approaches, reaching a consensus on seven key agriculture topics—from domestic support to export restrictions—is proving difficult. IISD’s Facundo Calvo discusses some of the likely outcomes and scenarios we can expect to see.
By Facundo Calvo on November 25, 2021

In July, Ambassador Gloria Abraham Peralta, president of the Committee on Agriculture in Special Session, circulated a draft negotiating text to facilitate consensus among World Trade Organization (WTO) members at the 12th Ministerial Conference (MC12). The draft text presents “suggested” ministerial decisions on seven agriculture negotiation areas: domestic support, market access, export competition, export restrictions, cotton, public stockholding for food security purposes (PSH), and the special safeguard mechanism (SSM). It also contains a suggested ministerial decision on transparency, a cross-cutting issue that has been the subject of debate among WTO members.

The positions of WTO members on the seven agriculture negotiation areas remain far apart.

The positions of WTO members on the seven agriculture negotiation areas remain far apart. As underlined by Ambassador Abraham Peralta in mid-October, WTO members are reaching the point where they have two choices: find a way to address the remaining gaps in their negotiating positions or adjust their level of ambition. If they maintain different positions on these negotiation areas, MC12 will yield a modest outcome on agriculture, focused on issues where WTO members have less-entrenched views. This would lead to a scenario where some of the negotiation areas produce work programs to guide post-MC12 agriculture talks.

Still, a positive outcome in at least one negotiation area seems possible. WTO members can deliver progress on export restrictions by deciding not to impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme (WFP). Such restrictions could have affected WFP procurement to developing countries, meaning longer lead times, higher transport costs, and, in the case of export prohibitions, meals losses and higher procurement prices. Given the humanitarian nature of this decision and the work of the WFP, which was awarded the 2020 Nobel Peace Prize for its efforts to combat hunger and its contributions to peace in conflict-affected areas, a positive outcome appears achievable.

However, WTO members must agree on language that accommodates the interests and concerns of everyone, especially those who have expressed doubts about their own food security, the need for policy space, and the scope of the WFP exemption. A decision on the WFP exemption at MC12 would need to address these concerns (i.e., through an appropriate balance of objectives and carve-outs) without hindering its main purpose: facilitating the WFP’s work.

WTO members can deliver progress on export restrictions by deciding not to impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme.

On domestic support, establishing a work program that outlines some goals, principles, and timelines could lay the groundwork for post-MC12 negotiations on the specific ways trade-distorting domestic support will be reduced—i.e., “modalities.” For some, a work program on domestic support would need WTO members to agree on a reduction target and a timeline to reduce such support. However, as Ambassador Abraham Peralta underscored in her November 1 report, key differences among WTO members persist on these issues. Several say that agreeing on a reduction target is unrealistic, while others are more comfortable with lighter commitments (e.g., “substantial reductions” of trade-distorting domestic support) to be undertaken within a timeframe to be defined later.

WTO members also disagree on what types of domestic support should be reformed. While one group favours reducing all forms of subsidies contemplated under Article 6 of the Agreement on Agriculture (AoA), another group prefers the “boxes” approach that distinguishes between distinct types of subsidies and treats them differently. Many developing WTO members want to preserve the investment subsidies generally available to agriculture and input subsidies generally available to low-income or resource-poor producers in developing countries that fall in the so-called development box (Article 6.2 of the AoA). Another point of significant disagreement is the set of subsidies that a group of 32 WTO members can provide through the aggregate measurement of support beyond the “de minimis” available to all members.

Public stockholding for food security purposes is another negotiation area where strong and diverging views remain.

PSH is another negotiation area where strong and diverging views remain. Proponents of a permanent solution on PSH want to negotiate it as a “stand-alone” issue. Other WTO members prefer to link it to other negotiation areas, notably domestic support. There are important questions to answer on PSH. First, would proponents accept anything less than a permanent solution at MC12, such as a work program? And second, would non-proponents accept an outcome on PSH in exchange for substantive outcomes in other negotiation areas, either in agriculture or elsewhere?

Assuming that both proponents and non-proponents are prepared to agree on a work program on PSH at MC12, such an arrangement could lay the foundations to address the following issues after the conference: (i) program and product coverage; (ii) how to prevent distortive effects on trade and food security of members through transparency requirements (i.e., notification of PSH programs), anticircumvention mechanisms, and safeguards; and (iii) the legal form of a permanent solution after MC12.

There has been little progress on agricultural market access at the WTO in recent years. Additionally, many members have resorted to free trade agreements to increase market access for their agricultural (and non-agricultural) products. While some elements of a post-MC12 work program on agricultural market access are in the cards, sequencing this agenda with talks on domestic support and linking it to non-agricultural market access negotiations will be major challenges. Similarly, a lack of progress on market access could affect other negotiation areas, notably domestic support and PSH.

If a post-MC12 work program on agricultural market access is agreed, members will also need to decide how detailed it should be. A general call to reinvigorate negotiations on agricultural market access, as proposed by Ambassador Abraham Peralta in her draft text, seems doable. This could be in line with Article 20 of the AoA, which recognizes that the long-term objective of substantial progressive reductions in support and protection resulting in fundamental reform is an ongoing process.

Negotiations on an SSM that could be used by a larger number of developing countries and includes more agricultural products would likely benefit from deeper technical engagement on the triggers and remedies that would apply.

Another area where little progress has been made is the SSM, which would allow developing WTO members to raise tariffs temporarily in case of import surges or price declines. Negotiations on an SSM that could be used by a larger number of developing countries and includes more agricultural products would likely benefit from deeper technical engagement on the triggers and remedies that would apply. However, the lack of technical engagement is not the only challenge to an outcome here. Many WTO members understand that progress in this area is linked to discussions on agricultural market access. Against this background, the SSM (like the other negotiation areas at the Committee on Agriculture in Special Session) will probably produce a work program to guide talks post-MC12.

If MC12 cannot deliver substantive outcomes on domestic support, market access, or PSH beyond a couple of work programs, what outcomes can be expected on other negotiation areas alongside the WFP exemption?

A positive outcome on some transparency elements seems possible. This outcome might take the form of a general ministerial decision complemented by specific elements of transparency in some negotiation areas. On domestic support, WTO members could agree to provide their outstanding notifications and to include data on the production value. Similarly, they could improve transparency on cotton by updating and clarifying the bi-annual cotton questionnaire and the notification requirements for this commodity. Some additional elements of transparency on cotton could include a mention of the work of the Director-General’s Consultative Framework Mechanism on Cotton, which covers the development side of cotton, and the intensification of efforts to assess the impacts of COVID-19 on cotton producers in least-developed countries and Cotton Four members, such as this WTO study here.

A positive outcome on some transparency elements seems possible.

Other transparency elements would need to tackle the concerns of non-proponents before having a fair chance of turning into outcomes—either at MC12 or afterward. On market access, WTO members may agree (on a best-endeavour basis) on best practices to apply changes to most favoured nation applied tariffs. However, this transparency element seems to face important challenges regarding the necessary legislative and logistical adaptations to put it into practice. Similarly, the timeline for advance notice of the export restrictions as per Article 12.1(b) of the AoA might also need to be adopted on a best-endeavour basis, given the divergence of views and the concerns raised by some members to implement such timeline.

Cotton negotiations illustrate how some WTO members perceive transparency: necessary, but not sufficient. Even if welcomed in a challenging pre-MC12 context, isolated improvements in transparency cannot hide the fact that more substantive issues remain unresolved. In the specific case of cotton, the thorny question of how to reduce trade-distorting domestic support ambitiously, expeditiously, and specifically within the agriculture negotiations (as recalled by the Hong Kong Ministerial Declaration of 2005 and mandated by the decision of the General Council on August 1, 2004) will remain unresolved unless WTO members complement their technical engagement in Geneva with sufficient political will. Trade ministers at MC12 will need both.

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