See also
the previous meeting, an explanation of the issue
and the WTO website’s news story on the whole meeting
Agriculture negotiators discuss new proposals submitted by WTO members
By Peter Ungphakorn
POSTED OCTOBER 21, 2023 | UPDATED NOVEMBER 4, 2023
India has accused its critics in the World Trade Organization (WTO) of “arrogance” and contempt in opposing its position on developing countries using subsidies to purchase rice and other produce into food security stocks.
In a meeting of the WTO’s agriculture negotiations on October 19, 2023, India said, “gone are the days when we were the discipline taker and we had no knowledge and wisdom to talk about a subject that concerns us,” according to a trade official in Geneva.
India’s heightened rhetoric came four days before senior officials from capitals were due to meet in Geneva on October 23–24. The officials will attempt to develop meaningful outcomes for the next WTO Ministerial Conference in Abu Dhabi, February 2024, including on agriculture and food security.
India said that unless its critics change their “mindset”, they will prevent an agreement being reached at the Ministerial Conference.
As in the previous meeting on October 2, this session of the agriculture negotiations focused mainly on the use of government-supported prices to buy into food security stocks.
The issue is nicknamed “public stockholding” (PSH). But the name is misleading because WTO rules do not prevent stockholding. They only discipline subsidised procurement. Even that is allowed, so long as the developing country stays within its subsidy limit, usually 10% of the value of production.
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Deadlock | Transparency and consultation | Special safeguard mechanism
India says about 80 WTO members (about half of the membership) share its view, citing a confidential paper JOB/AG/229 from May 2022 (available here). The paper is sponsored by the G33, African and African-Caribbean-Pacific groups, all developing countries..
They are calling for a “permanent” agreement on domestic support in stockholding to be at the heart of a decision on food security at next February’s Ministerial Conference.
“PSH”: A MISLEADING NAME
Subsidising purchases into food security stocks is nicknamed “public stockholding for food security in developing countries” or just “public stockholding” (PSH) for short.
The name is misleading because WTO rules do not prevent stockholding. They only discipline subsidised procurement. Even that is allowed, so long as the developing country stays within its subsidy limit, usually 10% of the value of production, which can be a large amount.
This could be described as something like “over-the-limit subsidies used to procure food security stocks”.
The practice is not widespread. A 2022 paper by a Canada-led group found tentatively that since 2013 “only five members notified expenditures […] for stocks acquired at [a supported] price at least once” and only nine since 2001.
Only one country — India — has exceeded its domestic support limit when using subsidies to buy into stocks, and for only one product: rice. For 2021–22, the fourth successive year of the breach, India’s subsidy was calculated at $7.55bn, exceeding its $5.0bn limit by 52%. (The following year the excess subsidy fell back to 20%.)
An “interim” 2013 WTO ministerial decision modified by another decision in 2014 — called a “peace clause” — has protected India from facing a legal challenge despite breaching its WTO commitment.
One problem is that the peace clause is only available to countries with “existing” programmes in December 2013. The few covered include China, India, Indonesia, Pakistan, Philippines and Taiwan, according to a November 2023 WTO Secretariat summary.
The present deadlock is over an unresolved permanent solution originally intended to replace the interim one in 2017. Details are here.
(Updated April 22, 2024)
Deadlock
The chance of the 80 persuading other members to agree by consensus remains slim if not impossible.
Several WTO members — including developing countries such as Brazil, Costa Rica, Paraguay, Thailand and Uruguay, who are in the Cairns Group — have for decades opposed unconstrained use of subsidies in building up stocks.
Developed countries in the Cairns Group, notably Australia, Canada and New Zealand, share that view, as do the US and EU.
Brazil’s 2022 counterproposal would take subsidised procurement for stockholding out of domestic support limits completely but only when the country depends on imports of the product.
In a paper circulated in 2022, Canada, Chile, Colombia, Paraguay, the US, Uruguay and Thailand said that they were only prepared to negotiate a permanent solution that “does not lead to distortions or uncertainty in international agriculture markets, and that does not adversely affect the food security of other members, including developing country members.”
India’s critics all stress that they have no objection to stockholding.
“The United States is not against public stockholding itself. In fact, public stockholding policies implemented in accordance with WTO rules may play an important role in meeting members’ overall food security objectives,” the US said on October 19, according to the official.
“We agree there is an unprecedented food security issue today. And the way to address that is not to roll back the rules but rather to continue to strengthen those rules to boost the resilience of the agricultural trading system.”
These countries’ concern arises when the produce is bought at non-market prices, particularly when the subsidising country is a major exporter. They argue that this distorts markets by giving the subsidising country an unfair competitive advantage in export markets and forces farmers in some countries to compete with cheap imports.
In the October 19 meeting the US said that exceeding its domestic support limit for rice in 2018–19 and 2019–20 contributed to India becoming the world’s largest rice exporter.
For 2019–20, India’s trade-distorting support for rice was calculated at just over $6.3 billion. This overshot India’s $4.6bn limit — 10% of the $46.1bn value of production.
India argued that its policy helped secure food for its population and for people in other countries.
India is the only country to have exceeded its domestic support limit when using subsidies to buy into stocks, and only for rice. An “interim” 2013 WTO ministerial decision modified by another decision in 2014 — called a “peace clause” — has protected India from facing a legal challenge despite breaching its WTO commitment.
Transparency and consultation
But in return for agreeing not to litigate, those on the other side of the argument insisted that if a country like India does exceed its limit, it must supply information so others can see what is happening and it has to agree to discuss the breach with concerned countries.
Nine members — Australia, Brazil, Canada, Japan, New Zealand, Paraguay, Thailand, the US and Uruguay — plus possibly the EU, have asked for consultations. India has refused to meet them as a group, insisting on meeting each individually.
India and its allies argue that being required to supply more information, and to meet concerned countries, is too much of a burden for their bureaucracies. But India’s critics say they will not agree on a new decision without obligations to be transparent, to consult and to avoid causing market distortion.
One of the changes that the India-led group is seeking, is to amend the formula for calculating support so that it no longer compares the latest procured price with base period prices from 1986–88.
Cairns Group members and the US say they can only agree to do that as part of revising all the rules on domestic farm support. Their reference is another paper, JOB/AG/243 by Costa Rica, from June 2023 and available publicly.
UPDATE — A new paper was circulated on November 2, 2023 by the Cairns Group (the text with notes and explanations is here). It revises section B of Costa Rica’s paper, skipping the analysis and leaving the proposed text on how to reduce domestic support as a whole, including provisions that the group advocate as a permanent solution to the “stockholding” deadlock.
Only group members Argentina, Australia, Brazil, Canada, Chile, Colombia, Costa Rica, Malaysia, New Zealand, Paraguay, Peru, Thailand, Uruguay and Vietnam signed it.
Guatemala, Indonesia, Pakistan, Philippines (all of them in the G33) and South Africa (increasingly an ally of India) did not.
In last week’s meeting (October 19), the chair, Ambassador Alparslan Acarsoy of Türkiye, suggested several alternative drafts on transparency and notification. These were barely discussed, as delegates concentrated on bigger picture issues like tackling domestic support as a whole, the official said.
According to the 2022 paper from Canada and some other countries, buying into food security stocks at subsidised prices is rare, and even then countries usually stay within their limits. India is the only exception.
“Only five members notified expenditures […] for stocks acquired at an applied administrative price at least once” since 2013 and only nine since 2001. The paper says more information is needed to assess the proposal properly.
Special safeguard mechanism
Meanwhile the meeting saw no movement on the deadlocked special safeguard mechanism, which would allow developing countries to raise tariffs semi-automatically to deal with import surges or price slumps.
Proponents pushed for the negotiations to be based on a paper from the African Group. Opponents Paraguay and Uruguay said this would be premature as their questions had not been answered, the official said.
Updates:
November 2–, 2023 — adding the update box on the new Cairns Group paper, with links to an article and to the text with notes and explanations
October 25, 2023 — adding the link to the WTO website news story at the top
October 22, 2023 — adding the two paragraphs on Brazil’s counterproposal and the quote from the 2022 paper from Canada etc on what they are prepared to negotiate
Image credits:
White rice grains | Pierre Bamin, Unsplash licence
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