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WTO members achieve breakthrough, but the tough part is what happens next | Have we just seen the funeral of the WTO ‘single undertaking’? | Our scorecards
By Peter Ungphakorn
POSTED JULY 4, 2022 | UPDATED JULY 10, 2022
The June 12–17 Ministerial Conference has been hailed as a rare success for the World Trade Organization (WTO) because it produced a package of new agreements and consensus statements on a range of issues, including fisheries conservation, health, electronic commerce and food insecurity.
Less attention has been paid to the Geneva meeting’s big failure. There was no outcome on agriculture. That should not be overlooked. It has implications not only for agriculture, but for members’ ability to reach consensus on really tough issues.
Expectations on agriculture were already low. The draft document presented to ministers seemed innocuous. It consisted entirely of plans for the talks after the conference, with no commitments on what the results would look like.
The present chair, Costa Rica’s ambassador Gloria Abraham Peralta, had drafted and redrafted it for almost two years, since she took over in July 2020. And still the differences were so big that the ministers gave up trying. The text was binned.
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Why was it binned? | ‘Interim’ versus ‘permanent’ | It matters
Why was it binned?
CONFUSING MESSAGES FROM INDIA
The speculation before the conference was that India would insist on movement on domestic support in public stockholding (“PSH”) for food security), to replace the present — and unsatisfactory, according to India — interim solution, with a better permanent one. The fear was that India would block all other issues unless this was achieved.
Then, as the final package was being gavelled on June 17, Commerce Minister Piyush Goyal announced that India was completely satisfied with all the outcomes, including on agriculture.
“Today as we return [to] India there is no issue on which we have to be the least concerned, whether it is related to agriculture such as MSP [minimum support prices, ie, domestic support], reinforcing the relevance of the public stockholding programme towards fulfilling the National Food Safety Programme,” he told journalists.
And yet tearing up the agriculture draft meant sticking with the status quo, quite the opposite of what Goyal himself said only five days earlier on the first day of the conference.
In his official statement (text and video) on June 12, he demanded that a “permanent solution on the issue of public foodstocks, which has already been delayed, should be the topmost priority for MC12 [this Ministerial Conference], before we move to new areas. Nothing is more important than this for the people of the world.”
No doubt that statement was written by his officials, either in New Delhi or Geneva. What he said to the Indian press was his own. Did this reflect a disconnect between the minister at the political level, and his officials? Or did he say one thing in the negotiations and another to Indian journalists?
We don’t know. But it does raise questions about how effective this in-person meeting was for encouraging engagement by at least some ministers and their staff.
Two of three agricultural issues did eventually win consensus backing at the Ministerial Conference. (Another declaration related to agriculture was also agreed, on strengthening rules for measures on food safety and animal and plant health.)
The first of the two agriculture texts was a decision — to exempt World Food Programme purchases from export restrictions. A new paragraph 2 had been added just before the meeting. It seemed to water down the decision’s legal force, but at least ministers have sent a consensus political signal that countries are expected to explain themselves if they impose an export restriction on the purchases.
The other was a non-binding declaration on food insecurity, including pledges to keep trade flowing and to minimise the trade-distorting effects of emergency measures.
Other countries seem to have resisted India’s push for stronger wording on its pet subject: domestic support (through price intervention) in food security stocks in developing countries.
Instead, the declaration simply recognises broadly that stocks are important for food security. It completely avoids any reference to the use of domestic support.
The policies that interest India and its allies are usually abbreviated misleadingly to “public stockholding for food security (PSH)”, as if the stockholding itself were the problem. It isn’t. The problem only arises when domestic support is used to buy produce into the stocks.
Perhaps the trade-off for leaving the issue out of the food insecurity declaration was India being happy for the text on the agriculture negotiations to be scrapped.
We don’t know enough of the bargaining inside the Ministerial Conference to say for sure when and how that happened, but clearly deadlock over the domestic support content of stockholding played a big part in the failure, perhaps the only part.
For months the talks had shown that members were too far apart on this topic for agreement to be possible at this conference. The problem was underscored when two widely different rival proposals were circulated just days before the meeting started.
Abraham Peralta’s draft seemed to cover all bases. It did not propose any solutions, only a commitment to try to settle this by the next ministerial conference, including a list of issues that India and its allies wanted tackling.
It’s unclear what more India had demanded, but it seems it was so hard-line that ministers gave up trying to negotiate a new compromise.
And then at the end, India’s minister, Piyush Goyal seemed to contradict his country’s official position by declaring he was happy with the outcome, even though it means staying with the status quo (see box).
Strictly speaking he was right. The status quo does allow India to use unlimited price support in stockholding programmes. But the conference made no difference, and crucially this was not a position India had defended. Rather, India had been insisting on a new, “permanent” solution.
‘Interim’ versus ‘permanent’
The status quo is an “interim” solution from 2014. It shields countries from legal challenge if the domestic support in their stockholding programmes exceeds their entitled limits. Agreement not to go to dispute settlement is sometimes called a “peace clause”.
The interim solution will stay in effect until it is replaced by a “permanent” one.
India started to breach its entitlements for rice in marketing years 2018–19. It invoked the 2014 peace clause to avoid litigation.
On the other side, a range of developing and developed countries had argued that the excess domestic support could distort markets by depressing international prices and affecting the food security of other countries.
As a result, the interim solution includes conditions. In return for avoiding legal challenge, the country exceeding its domestic support limits has to provide more information and be prepared to discuss the implications with fellow WTO members. India and its allies say this is too burdensome.
India’s group want a permanent solution that redefines the scale of domestic support. They say the present formula is out of date because it takes as its baseline, prices from 1986–88, with no account of inflation.
They have proposed a number of ways of dealing with this. The result would give developing countries more room to include domestic support in their stockholding programmes, either by producing a lower calculation of domestic support or increasing the entitlement.
Countries on the other side of the argument are concerned that this could still open the door to market distortions. How far apart the two sides are can be seen from the two proposals circulated just before the Ministerial Conference.
It matters
This matters because progress in the agriculture negotiations needs political flexibility on all sides, not just from India. The point of gathering ministers together is to give them an opportunity to listen to each other so they can build bridges and explore political compromise.
The Ministerial Conference confirmed there is little sign of that happening in agriculture. And that raises questions about tough bargaining that lies ahead more generally in the WTO.
UNDERVALUED RESULT
The significance of the 2015 agreement to outlaw agricultural export subsidies is lost on many present-day observers.
For example, Inside US Trade wrote on July 7, 2022 that “members have made little progress [in the agriculture negotiations] since the launching of the WTO.”
But back in 2000 when the agriculture negotiations began, the export subsidy “pillar” was the priority for some, above the two other “pillars” in WTO agriculture: domestic support and market access.
The Cairns Group of major agricultural exporters called export subsidies “the most trade-distorting agricultural policies [which] damage both developed and developing countries”.
The fact that 15 years later elimination was agreed easily simply reflects members’ recognition that time was up for export subsidies. Most had phased them out in anticipation.
Agriculture is a more complicated negotiation than the ones that did produce outcomes at the conference.
It is likely that in order to reach agreements, countries will need to make trade-offs, to bargain one set of interests against another: “if you give me this, I’ll give you that.”
They need to bargain within each topic (“cut your tariffs on dairy products and I’ll cut mine on fruit”) or between topics (“lower your domestic support entitlements and I’ll open my markets more”) or even between agriculture and other issues. See Robert Wolfe’s “Have we just seen the funeral of the WTO ‘single undertaking’?”.
Instead, the agriculture negotiations lack direction with no clear view of where compromises and trade-offs might be achieved.
Also lost is a heading in Abraham Peralta’s text that receives too little attention — improving transparency.
It would not create new rights and obligations for countries’ agricultural trade policies, but it would improve WTO members’ ability to monitor how others are abiding by their rights and obligations. It would also help them to be better informed in the agriculture negotiations.
What negotiators have now is little better than in 2015 when they agreed to ban export subsidies (see box).
In the two big remaining areas — domestic support and market access — it is not much better than after the last big push in 2008.
ARTICLE 20
CONTINUATION OF THE REFORM PROCESS
Recognizing that the long-term objective of substantial progressive reductions in support and protection resulting in fundamental reform is an ongoing process, Members agree that negotiations for continuing the process will be initiated one year before the end of the implementation period, taking into account:
(a) the experience to that date from implementing the reduction commitments;
(b) the effects of the reduction commitments on world trade in agriculture;
(c) non-trade concerns, special and differential treatment to developing country Members, and the objective to establish a fair and market-oriented agricultural trading system, and the other objectives and concerns mentioned in the preamble to this Agreement; and
(d) what further commitments are necessary to achieve the above mentioned long-term objectives.
— WTO Agriculture Agreement
Optimists go further. They comfort themselves by saying members are still working under the negotiations’ original mandate, Article 20 of the 1994 Agriculture Agreement (see box).
But Article 20 is broad and short. It doesn’t really give the talks any sense of direction, and it hides what is really absent: a willingness to move away from the uncompromising red lines that doomed the farm talks in the now defunct Doha Round negotiations.
In domestic support, there are major inequalities in countries’ entitlements (and therefore their ability to distort markets and hurt other countries) and more recent concern about market distortions caused by new major exporters among emerging economies.
For some years now, the discussion has been about rethinking how domestic support might be tackled. This is like restarting from scratch but at least with the benefit of a more mature conceptual framework and better information from technical work. Members are nowhere near consensus even on the best approach to take.
In market access. still on the table is a sophisticated structure for cutting tariffs and widening quotas.
It includes numerical formulas designed to ensure the highest trade barriers see the steepest reductions. It’s complicated by negotiators’ attempts to recognise that some countries are more vulnerable than others and that some products in some countries are politically sensitive — and therefore both should be shielded from too much competition from imports.
The result is so horrendously complicated (the proposed provisions on market access alone run to 79 pages) that negotiators seem to be reluctant to return to it.
All of which means the challenge for WTO members is not just moving on to other important topics.
It’s also about how to change their approach so that consensus of some kind can be reached on the issues that need to be tackled urgently, such as reviving appeals in dispute settlement, adapting the rules to take account of shifting levels of development among the membership, and incorporating into the body of WTO agreements the deals that are being negotiated among only part of the membership.
As these scorecards show, the Geneva Ministerial Conference was a good start on some subjects but not on agriculture and the other really difficult ones. That is the next challenge for the WTO.
Thanks to Robert Wolfe for useful comments on this
Updates:
July 10, 2022 — adding the sidebar box on the importance of scrapping agricultural export subsidies
Image credits:
WTO Council Room building under a stormy sky | WTO
Piyush Goyal | WTO/Jay Louvion
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