Food security: Public stockholding war begins… again

Food security is at the heart of one of the most difficult negotiations at WTO


Shreerupa Mitra-Jha | April 4, 2015

#food security   #wto   #letter from europe  

The negotiations for finding a permanent solution for public stockpiling for food security in developing countries by July 31 are underway in the Geneva-based World Trade Organisation (WTO) with frenzy and vehemence typical of such a fractious issue. Two dedicated sessions have been held thus far, on January 28 and March 20, and if first indications are anything to go by then it will be a long walk from Bali to Nairobi.

The public stockholding talks have a year-end deadline for producing a permanent deal to replace the interim agreement struck at the December 2013 Bali ministerial conference and was confirmed by the General Council’s decision last year on November 27.

Chairperson John Adank, New Zealand’s ambassador, said, “My consultations between January 28 and now reveal wide gaps. I expected specific inputs to the solution.”

The story of stock-piling

Food stockholding is one of the four main issues under agriculture negotiations, the other three being general services (such as land rehabilitation, resource management, drought management, flood control, rural employment programmes), “export subsidies” and other policies collectively known as export competition, a proposal to deal with the way a specific type of import quota is to be handled when the quota is persistently under-filled. The last is the issue of cotton, of particular importance to the poorest African countries, which have been affected by the trade-distorting subsidies, provided mainly by the US. This issue has remained on the backburner since the 2005 Hong Kong Ministerial discussion.

The main area of concern for India and some other developing countries have been the so-called “Amber Box” domestic support – trade distorting support by affecting market prices and the quantity produced. When governments buy food from farmers at supported prices or so-called “administered prices” to build up stocks, that counts as Amber Box domestic support under WTO disciplines.

The developing countries are allowed a ‘de minimus’ – minimal amounts of domestic support that are allowed even though they distort trade – amount of 10 percent of the value of production. However, the aggregate measure of support (AMS) is still calculated on the basis of the 1986-88 external reference prices (ERM). The reference prices have been a major area of contention, and understandably so, for India stating that the 1986-88 baseline has made it increasingly difficult to keep within the prescribed limits. Food stockpiling that comes under the Amber Box also includes supplying the stocked produce to low-income consumers.

The public stockholding for food security in developing countries has its origin in a proposal submitted by the African Union on November 20, 2002 stating that the Agreement on Agriculture removes reference to AMS calculations, effectively putting the programmes in the unlimited Green Box – the non-trade distorting support. From then on the proposals of developing countries have been various permutations and combinations of these premises.

The so-called G-33 or Group of 33 like-minded developing countries at the WTO, including India, China, Philippines and Indonesia, submitted a proposal, for Bali in November 13, 2012, to put the programmes supporting low-income or resource-poor producers in the Green Box.

In December 2013, the G-33 proposed that for the “interregnum” period until the amendment of the AoA, these options could be considered – either altering the AMS calculation by recalibrating the ERP, or taking inflation into account in the calculations or a third option of a “peace clause”. This is the first time that adjusting reference prices or a “peace clause” appears in a paper. Members would temporarily refrain from lodging a legal complaint (“due restraint”, sometimes also called a “peace clause”) if a developing country exceeded its Amber Box limits as a result of stockholding for food security. Work on finding a longer term solution would continue after the ministerial conference.

Kicking up a storm

The outcomes that accrued from the ninth ministerial meeting in the Indonesian island resort of Bali – referred to as the Bali Ministerial conference – held in December 2013 had a disproportionate emphasis on the Trade Facilitation (TF) text rather than the agriculture and development issues, which are equally part of the Bali package.

The TF text focused on how the developing countries and LDCs shall publish import procedures, duty rates, and classification/valuation rules; shall issue advance customs rulings where requested; shall provide administrative/judicial review of customs rulings; shall create infrastructure and procedures for expedited shipments of goods coming through air cargo (basically for American courier services); shall establish procedures for pre-arrival processing; and shall allow authorised operators to move their goods on a fast track. While the developed countries already had the required infrastructure in place, the developing countries and the LDCs had to put their infrastructure house in order plus make legislative changes to facilitate the TF agreement.

While the section that laid down what the developing countries and LDCs needed to do, was binding; another section where technical and financial support to developing countries by the industrialised ones to put the infrastructure in place, was non-binding. 

In the meanwhile, on the matter of food stockholding, India had proposed in Bali three interim solutions, all of which were rejected by the US. However, an interim solution was agreed upon that legally protected the developing countries in case they exceeded their Amber Box requirements with regard to public stockpiling for food security.

“Members shall refrain from challenging through the WTO Dispute Settlement Mechanism, compliance of a developing Member with its obligations under Articles 6.3 and 7.2 (b) of the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food crops in pursuance of public stockholding programmes for food security purposes existing as of the date of this Decision,” said the interim clause.

However, it was also agreed that a permanent solution would be agreed upon by the 11th ministerial meeting scheduled for the end of this year and would be signed by 2017.

Since the peace clause was agreed to, India meekly surrendered to the TF agreement.

However, seven months on it was clear as daylight that even though the TF deal had been agreed upon as vital for trade in developed countries, there was no movement on issues crucial for the developing countries for providing food security, bound by law, to its teeming millions. India, which had support from Bolivia, Cuba and Venezuela and a few others, said it had no intention of adopting the trade facilitation package in good faith that food security matters would also be dealt with equal seriousness and alacrity.

According to a trade ministry release, Anjali Prasad, India’s ambassador to the WTO, said, “This is important so that the millions of farmers and the poor families who depend on domestic food stocks do not have to live in constant fear.” She also noted, “My delegation is of the view that the adoption of the [trade facilitation] protocol be postponed till a permanent solution on public stockholding for food security is found.”

India loosened its grip after prime minister Narendra Modi’s travel to the US and on November 27, the WTO General Council adopted decisions that would allow the trade facilitation text to go ahead, clarify the public stockholding proposal and continue working on a permanent solution and also allow a programme for completing the Doha Round negotiations.

Members agreed that a permanent solution should be found through meetings of the agriculture negotiations, in “dedicated sessions” that would be accelerated and separate from the rest of the Doha Round agriculture talks. Negotiations would also “continue to progress” on all three pillars of the agriculture agreement, including domestic support, export subsidies and related issues, and market access.

What now?

The two dedicated sessions that have been held in Geneva since the General Council’s confirming the peace clause agreement have revealed almost irreconcilable differences between the G-33 proposal and the opponents of it.

In the first session held on January 28, the countries that vociferously opposed the G-33 proposal included Australia, Pakistan, the US, Brazil, the EU, Japan, Paraguay, Argentina and Canada. The EU called for “preserving the integrity of the Green Box and keeping the Green Box, Green”.

Chairperson John Adank said there are two broad concerns of the members – the impact on the architecture of the existing agriculture agreement, particularly shifting the market price support programmes into the Green Box, and secondly, the “unintended consequences” of the G-33 proposal on export markets.

Some members said though they agree that food security is a vital issue, particularly for the poor, some are concerned that this particular way of dealing with it “might weaken the disciplines that apply to all domestic support”.

However, the second dedicated session on food stockpiling held on March 20, had a surprise proposal by the US which was distributed right before the meeting began.

There are three key elements to the US proposal that includes reviewing the efficacy and trade effects of existing food security programmes and the extent to which they meet their goals of ensuring food security. The second element comprises the real and potential problems encountered in implementing food security programmes because of constraints in the existing WTO disciplines, and the third is the development of best practices and recommendations based on the member state’s experiences of public stockpiling.

The US proposed that “best practices” would be identified within the WTO as the ones that are the most economical, targeted, and effective in dealing with food security and the ones that are not trade distorting. They would also include a comprehensive list of notifications and enhanced transparency.

Indonesia, speaking on behalf of the G-33 countries, remained sceptical and said though it “needed time to study the proposal”, the initial response was that the clear mandate was to find a solution [to food stockpiling in developing countries] and “not to engage in an academic programme”. Indonesia added members should not to expand discussions to review existing programmes and that the US was trying to lay down a road map to permanent solution but questioned whether working towards developing best practices was the way to go forward.

India opposed the proposal strongly and said the US proposal may result in an outcome where countries are advised as to what kind of food security programmes they should adopt which is not a part of the mandate. China, supporting India, stated that one should be alert against expanding the scope of the discussions – the best way forward was to focus on the discussion as mandated by Bali.

India also suggested a “Friend of the Chair” in this round of meeting to expedite the process of clinching a deal before the 11th ministerial conference.

The meeting also saw its fair share of repartees as is common in most difficult and not-so-difficult WTO meetings.

When India said “time is running out”, Australia retorted that “we have not heard from the G-33” [since the end-January meeting for further discussions on the matter] to which India shot back saying that it is not the G-33’s responsibility to go banging on other people’s doors and asking what is wrong [with the G-33 proposal]. It is not a one-sided thing but a collaborative effort, India stated.

The US said at the beginning that resubmitting the same [G-33] proposal is a fruitless issue and countering India said that its [US] proposal is within the mandate and that no “country has a monopoly of the solution”. The EU stated on the squabble over whose responsibility it was to make efforts to discuss the G-33 proposal, and told the G33 group, “Help us to help you.”

The EU made it clear last week that it will not accept under the Green Box or discuss any alternative in the present form of the G33 proposal. It wants the developing countries with a new proposal stating that the present one was rejected last year.

A retired official, who has been closely associated with WTO negotiations for the past decade, on being asked whether it was possible to find a permanent solution to public stockpiling for food security for developing countries before the Nairobi ministerial conference in December, said, “Not a chance in hell. But I have said that before [about some difficult WTO negotiations] and I have been surprised.”

(The article appears in the April 1-15, 2015, issue)



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