WTO Agricultural Negotiations – Update
You may recall an article in the December 2001 “Rural Bulletin” summarising the outcomes of the Fourth WTO Ministerial Conference in Doha. A subsequent May 2002 “Rural Bulletin” article discussed how the agricultural negotiations were going to be conducted.
This article brings you up to date with the first series of meetings – concerning export competition – of the WTO Committee of Agriculture (CoA) in special (negotiating) sessions on 3/4 and 17/18 June.
The Doha Ministerial mandate requires that the agricultural negotiations should aim at “reductions of, with a view to phasing out all forms of export subsidies”. NZ has no export subsidies, but the export subsidies of other countries reduce the prices we receive for our products sold overseas. The latest meetings covered direct export subsidies (an example would be paying exporters $200 for every tonne of wheat exported), and other export competition issues such as subsidised export credit programmes and state trading enterprises (see below). Other types of measures affecting export competition are also discussed because of the fear that if and when direct export subsidies are disciplined, countries will simply shift to other forms of export subsidies.
The Doha mandate also requires that the special situation of developing countries be taken into account. At the meeting, issues such as longer time periods for the implementation of new rules, and lower levels of cuts for developing countries were also discussed.
What are the Main Issues?
Export Subsidies. NZ and the rest of the Cairns Group of countries (see below) has always argued that export subsidies are one of the most trade distorting measures used by governments, and that they hurt efficient agricultural producers. The main user of export subsidies is the European Union (for example, in 2000 it spent about $NZ2 billion on subsidising the export of dairy products alone). Although it acknowledges the export subsidies will one day have to be done away with, it wants the longest time frame possible. Specific discussions at the CoA looked at:
- how export subsidies were defined (do we stick with the old rules or develop new ones?);
- whether all products should be treated in the same way (as occurs now) or whether different product groups should have different treatment. There is a danger in allowing different treatment of different product groups because it might mean that products such as dairy (regarded as “sensitive”) could be left out or given unfavourable treatment;
- where do reductions start from (current levels of export subsidies or at countries’ commitment levels, which may be higher than what they are actually providing)?; and
- how much should export subsidies be reduced by and over what timeframe?
The Cairns Group called for export subsidies to be eliminated over a 3-5 year period.
Formed in 1986, the Cairns Group is a coalition of 17 agricultural exporting countries who account for one-third of the world’s agricultural exports. Members of the Group are: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, NZ, Paraguay, the Philippines, South Africa, Thailand and Uruguay. The Group’s main aim is to push for improved trade access for agricultural exports that is free from “distorting” and protectionist measures like tariffs, domestic subsidies, and export subsidies. |
Export Credit, Insurance and Guarantee Programmes. These programmes are used by governments to provide exporters with financing for various purposes or guarantees where normal financial services are not adequate. The main issue is where governments provide these services at terms that are considerably more favourable than those being offered by commercial banks. This allows other countries to undercut NZ’s exports on the world market.
NZ has been arguing for very strong rules that restrain the terms and conditions that can apply to all forms of export credit type programmes, thereby ensuring that no subsidies are provided through the schemes. The meetings focused on:
- whether all types of export credits should be covered by any new rules; and
- specific details such as how long loans can be for.
One of the difficulties in making progress is that there is little information on how current export credit schemes work, and so it is hard to assess how strict new rules have to be. An information gathering exercise is now underway (although we already know that the US is the biggest provider of export credits).
Food Aid. Food aid isn’t something that normally produces a lot of debate in the WTO – other international agencies cover the issue in a humanitarian sense. Regarding the agricultural negotiations, however, the concern is that some countries are using so-called food aid simply as a means of disposing of surplus agricultural product without the interests of the recipient countries in mind. There is evidence that food aid increases when world commodity prices fall; in other words, some governments may be using food aid as a guise to provide extra support to farmers in times of low prices. These governments usually procure surplus production for food aid purposes at a higher price than the producer would actually get in the open market. This hurts developing countries because farmers receive lower prices for their products.
NZ has argued that without limiting the amount of food aid available, stronger rules are needed to ensure that food aid is not used for surplus disposal.
Export Taxes and Restrictions. Governments use export taxes and restrictions to limit the volume of commodities exported. It is often used in times of high world demand to shelter a domestic economy from high prices. Although it is not a major concern for NZ, it is of concern to developing countries, particularly those who are net food importers and who cannot afford to pay very high prices for essential food. A notable example was at the beginning of the 1990s when the world wheat harvest was poor and the price of wheat skyrocketed. The EU and others restricted the volume of wheat that could be exported through a tax. Because there were adequate supplies within Europe, European consumers paid less than the world price, but poor countries dependent on wheat to feed their populations could not afford to do so, and had to rely on food aid.
State Trading Enterprises. State trading enterprises (equivalent to the producer boards used in NZ for many years) can be a problem for other nations if they have preferential access to government funds or privileged treatment that other ordinary exporters do not receive. NZ isn’t opposed to STEs (after all, we had them for years) but we do want new, stricter rules to ensure that any subsidies such entities receive from their governments are brought under control.
What Was Achieved?
Although specific suggestions were made under each topic, many countries were restrained in what they said. This is not surprising. Negotiations aren’t easy because of the wide range of views and interests among member governments, and different perceptions about what the problems are. Also, in a complex negotiating situation such as this, no country wants to lay all its cards on the table too early.
Because this was the first set of issues to be discussed, with two other sets of issues to come (market access and domestic support), member governments are likely to take a “wait and see” approach for a while. When they can see what direction these other discussions will take they are likely to be more forthcoming about how much they are willing to make changes in the export subsidy area.
That said, in a number of areas, the options have been narrowed to two or three choices. However, there are also other areas where some member governments have indicated they will not move from current positions at this stage. For example, Canada does not believe that state trading enterprises should be disciplined.
This is the start of a complex negotiating process that will continue for some time. Before the end of this year, NZ will be involved in meetings on market access, domestic support and other subjects. We’ll bring you up to date with the results of these meetings in due course.
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 00 83 33
Fax: +64 4 894 0720
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