Can progress be made multilaterally on agricultural trade?

Agricultural Trade

The 1994 Agreement on Agriculture (AoA) which was part of the Uruguay Round Agreement setting up the WTO, properly incorporated agriculture into the multilateral trading system for the first time. That this was merely a beginning was recognised in the commitment to continue the reform process.

Although negotiations were launched back in 2001, the process is now more or less stuck and the entire WTO negotiating round known as Doha Development Agenda is in an “impasse”. The inability to conclude a major, new multilateral agreement at the WTO is in part explained by the intractability of the agriculture negotiations. This, and systemic issues such as dispute settlement and the inadequacy of disciplines on subsidies generally, has come to constitute an existential threat to the WTO.

Against this background, a group of academics, former high-level officials of international institutions and former negotiators came together to try to inject some new energy and new ideas into the process, in advance of the 2021 WTO Ministerial Council meeting in November. The “New Pathways” proposal they have designed suggests concrete and practical elements of an updated WTO agreement on agriculture.

The proposal seeks balance in that the effort called for is commensurate with the heft wielded by countries in market and policy terms. It seeks to redress grievances by removing differences in how countries are treated and by clarifying some key technical issues. It recognises the huge geopolitical changes that have taken place in the last thirty years and proposes a “reset” reflecting those changes. It is holistic, covering all aspects of the original agreement on agriculture and adding export restrictions. It recognises social, resource and climate issues and seeks win-win solutions that are effective domestically and that are also good for trade and development.

On market access, a graduated series of options require tariff simplification, either a tiered or swiss formula approach to tariff reductions whereby higher tariffs are reduced the most, the elimination of the special safeguard (SSG) granted to countries that “tarified” during the Uruguay Round, and the creation of a price-based special safeguard measure for developing countries which, in the most stringent option proposed, would be time limited.

Arguably, domestic support has been both the most innovative of the disciplines embodied in the AoA, but also the most intractable in terms of finding ways to continue the reform process. The Pathways proposal starts from an up-to-date picture of the policy and market landscape – breaking away from the confusion caused by, inter alia, continued use of 1986-88 international reference prices as the benchmark for measuring market price support. In pursuit of balance, it abolishes exemptions under the AoA, for example both the blue box cherished by some developed countries, and harmful input subsidies allowed in developing countries. These types of domestic support would be disciplined alongside other distorting interventions. It requires reduction efforts commensurate with current levels of distorting domestic support and seeks to avoid over-concentration of support on specific commodities.

Under the domestic support proposal all countries would ultimately be required to not exceed a benchmark level of distorting domestic support measured relative to the value of agricultural production. Alternative options are suggested ranging from an updated version of the AoA’s market price support indicator to a purely budgetary measure.

On Annex 2 (Green Box), in addition to strengthening its potential to nudge towards beneficial win-win policies for food security, environment and climate, changes are suggested that would, in the most demanding option proposed, put decoupled income payments into an intermediate category requiring them to be transitory in nature and subject to quantitative constraints if not time-limited.

The 2015 Nairobi decision to abolish use of export subsidies in agriculture was an important achievement. The Pathways proposal aims to strengthen transparency provisions governing export subsidies and to take steps to ensure that all sorts of remaining direct and indirect export subsidies are subject to discipline. As experience during the 2009 food price crisis showed, export restrictions can also be extremely disruptive and counter-productive, therefore disciplines analogous to those on import restrictions are proposed.

Issues in relation to domestic food aid, public stockholding for food security and cotton would be largely resolved should these comprehensive proposals be adopted. Specifically, there is no obstacle to targeted distribution of food to poor households, whether directly or through a voucher system. No market price support is measured if procurement prices for food stocks are below the relevant comparable international prices. And it is suggested that the deepest cuts agreed generally should be applied to cotton, in order to accelerate the reform process.

While the Pathways paper does not purport to tackle systemic issues affecting the WTO more broadly, they are clearly important for the agriculture sector. How developing countries are defined would impact a new agreement on agriculture significantly. There are lessons to be learned from how subsidies are disciplined in agriculture which could be applicable to goods, for example reliance on measured levels of subsidy that relate to their potential to distort the functioning of fair markets, and the absence of a requirement to prove “harm” in relation to any specific policy measure or market situation.

For progress to be made, two key elements need to be in place. The first is that the effort to move forward must be evidence based and current. Countries already support the OECD, the FAO and IFPRI in providing much of the information needed, and this could be immediately harnessed. Secondly, countries must abandon long held positions. Every single element of what is proposed here has already been rejected by one or more countries. But a package is proposed that allows for trade-offs and gains either in agriculture itself or in other sectors that are important for trade and development. WTO members also need to be aware that by refusing to come to the table, they are wrecking the multilateral framework which is so important in making sure that all share the gains and that major players do not alone dictate outcomes.

The “New Pathways” work is a collective endeavor, coordinated by Carmel Cahill and Stefan Tangermann, with co-authors Lars Brink, Shenggen Fan, Joseph Glauber, Anàbel Gonzalez, Tim Groser, Ashok Gulati, Joanna Hewitt, Anwarul Hoda, Alan Matthews, and Guillermo Valles Galmes.

The views expressed here are the authors, and do not represent the views of the Institute for International Trade.


Photo by Amanda Easley on Unsplash

Tagged in World Trade System, World Trade Organisation, Opinions, Featured, Preferential Trade Agreements, Australia, Southeast Asia, Sub-Saharan Africa, Europe, China, Asia Pacific, Goods, US

IIT is a global leader in researching, analysing and commenting on International Trade.

Stay informed about our up-and-coming seminars, events, publications, awards, new projects and collaborations, and other exciting news.

Subscribe to IIT news