A.Background to the Issue
An important issue for the WTO’s Bali Ministerial
meeting relates to one signifi cant aspect
of food security for developing countries,
which is brought up in a proposal by the Group
of 33 (G-33) developing countries within the
framework of the Doha Round multilateral
trade negotiations.
According to the WTO Agreement on Agriculture
which was negotiated during Uruguay
Round and currently in force, public stockholding
for food security purposes is included
as one of the items under Green Box, with
certain conditions. The Green Box
sets out domestic support measures that are
considered minimally or non-trade distorting,
and WTO Members are allowed to take recourse
to these measures without limitations. In fact,
government spending under these measures
can be increased to any extent. However in the
case of public stockholding, a signifi cant condition,
causing enormous problems to Developing
Countries, has been attached.
One condition is that food purchases by the
government shall be made at current market
prices and sale from public stockholding shall
be made at prices not lower than current
domestic market price. It is also stipulated in
this context that the difference between the
procurement price and external reference price
should be accounted for in the calculation of
Aggregate Measurement of Support (AMS), or
so-called “trade distorting domestic support”.
This stipulation negates the objective of including
“public stockholding for Food Security purposes”
in the Green Box, since effectively the
difference between procurement price and the
external reference price is treated as a subsidy
to the farmer and included in the AMS. This is
especially because the external reference price
has been defi ned as the international price
prevalent on average in 1986-88. Food prices
internationally, as well as domestically, have
increased very signifi cantly since then. Thus,
this stipulation limits the ability of developing
countries to implement schemes to assist their
small farmers.
The main element of the G-33 proposal is
that acquisition of stocks of foodstuff by developing
countries with the objective of supporting
low-income or resource-poor producers
should not be included in the calculation of
AMS. The G-33 proposal if adopted would thus
enable developing countries to formulate or
implement such schemes to help their poor
producers or families without the present
restraints placed by the WTO agriculture rules.
It would advance the cause of national food security,
promotion of small farmers’ livelihoods
as well as fulfi lling the Millennium Development
Goals of reducing hunger and poverty.
We thus consider this proposal to be worthy
of support and of great importance in contributing
to the success of the WTO’s 9th Ministerial
Conference and to the reputation of the
WTO as an organisation that is concerned with
development and poverty reduction.
B. The Importance of Public Stockholding
Programmes in Developing Countries
This issue is of major importance not only in
terms of trade but also the livelihoods of
millions of small farmers and the food security
of people in developing countries. The acquisition
of food stocks has always been an important
instrument for development and was also
used by many developed countries during their
development process. It remains an important
policy tool for developing countries for the
following reasons:
(1) In the face of volatility of food stocks on the
global market today and fl uctuations in
global food prices, building national
reserves has been widely acknowledged to
be a critical part of developing countries’
food security strategy. Today’s global foodmarket is structurally different from the
market when the Uruguay Round was completed.
In the 1990s and early 2000s, food
on the global market was cheap and stocks
were plentiful. It is no longer so.
(2) Acquiring surpluses from some regions of
the country and sending these supplies to
other regions of the country that are food
defi cit has been and remains an important
food security instrument for developing
countries.
(3) Many developing countries continue to
struggle with widespread rural poverty. At
least 1.5 billion individuals depend on smallscale
farming for their livelihoods.1 This
remains a major issue especially when the
share of the population engaged in agriculture
continues to be signifi cant and the industrial
or services sectors cannot provide
suffi cient employment. For broad-based development
to take place, countries must ensure
that the living standards and purchasing
power of the majority can be increased.
Governments’ programmes acquiring foodstuffs
at administered prices are therefore
an important avenue whereby resourcepoor
farmers’ incomes can be stabilised and
even guaranteed.
(4) Article 11 of the International Covenant on
Economic, Social and Cultural Rights imposes
on States three levels of obligations in
the realisation of such right: to respect existing
access to adequate food, to protect and to
fulfi l the right to food; they “must facilitate
it by proactively strengthening people’s
access to and utilisation of resources and
means to ensure their livelihood, including
food security”.2 The adoption of the G-33 proposal
will be instrumental to the realisation
of the human right to food. Preserving the
current situation under the Agreement on
Agriculture might, in fact, force WTO members
to violate their human rights obligations.
C. The G-33 Proposal to Correct the Present
Treatment of Public Stockholding
At present “Public Stockholding for Food
Security Purposes” is included in the Green Box,
the category of subsidies that are minimally or
non-trade distorting. There are many other
items also in this Green Box, including measures
to protect the environment and subsidies
to farmers that are not directly tied to production,
most of which are used by the developed
countries, which provide very large amounts of
subsidies under this Box. WTO member countries
are allowed to provide all these other
Green Box subsidies without limit. However
only in the case of the Public Stockholding for
Food Security Purposes does the Agriculture
Agreement place the condition that the difference
between the acquisition price and the
external reference price should be accounted
for in the AMS.This treatment of the developing countries’
support for public stockholding is discriminatory
and there is thus much logic in the G-33
proposal not to count this expenditure as
part of the trade distorting subsidy which goes
into the calculation of AMS. Just like the treatment
for other Green Box measures such as
decoupled supports, insurance, environmental
protection and other support instruments
provided by developed countries under the
“Green Box”, Public Stockholding for Food
Security Purposes should all the more be
treated as a Green Box measure without any
conditions attached to it.
It is important and pertinent to note that the
G-33’s proposal (JOB AG/22 13 November 2012)
is not a new proposal only recently formulated
by the group. In fact the proposal reproduces a
part of the last version of the WTO’s Doha agriculture
modalities text of 6 December 2008
(TN/AG/W/4/Rev.4, Annex B). The text on this
issue had been included by the Chair of the
Agriculture negotiations in this modalities draft,
without square brackets, denoting that it enjoyed
consensus and that the text on this issue
had there was already ‘stabilised’.
The G-33 proposal therefore is being put
forward as a text that had already been
agreed to by the membership, and that should
be part of an “early harvest” of the Doha
work programme.
The proposal is also in line with the 2001
Doha Ministerial mandate and the subsequent
mandate from the 2005 Hong Kong Ministerial
recognising the need of developing countries to
safeguard food security, rural livelihoods and
rural employment
The G-33 proposal would also provide a
solution for the discrimination in the way the
Agreement on Agriculture rules stipulate how
the AMS is to be calculated when developing
countries undertake public stockholding programmes.
The present formula in the Agreement
leads to an artifi cial and infl ated fi gure,
making it very diffi cult for developing countries
to provide for or to implement these
programmes in an adequate manner or to an
adequate extent. The reasons for this problem
is that prices of agricultural commodities,
especially staple foods, and including vegetables
and meats, have increased manifold, in some
cases by three or four or more times, compared
to the period when the Uruguay Round was
negotiated. Yet the benchmark used to calculate
the AMS supports as stipulated by the
Agreement is still the prices of 1986-88. Thus
there would be a very signifi cant difference
between the prices at which the government
presently purchases food items from the farmers
or the traders, and the reference prices
which are based on 1986-88 levels. Such large
price differences would be used to count the
amount of subsidies. With this type of calculation,
which is clearly unfair, the government
schemes could easily exceed the maximum
level of AMS or any de minimis that the developing
countries could have.This is especially because most developing
countries declared zero or low amounts of AMS
in their Uruguay Round schedules, as they
were too poor to provide subsidies in the past
periods and their negative support was not refl
ected in their AMS schedules. Thus many of
them have to rely on the de minimis subsidies
(which are limited only to 10% of the production
value for the majority of developing countries,
and 8% in the case of China). The G-33
proposal sidesteps these problems by making
developing countries’ public stockholding programmes
a Green Box measure without any
conditions thereby bringing this Green Box
measure in line with other Green Box measures
largely used by Developed Countries. This implies
that the Developing Countries will not
have to restrict their Public Stockholding programmes
fearing that they may breach their
10% de minimis.
D. Need to Correct Imbalance
in The Treatment of Subsidies
At a systemic level, the proposal in its original
form, if accepted, would have injected a small
dose of “equity” in the Agreement on Agriculture.
A major and glaring loophole created in the
Uruguay Round’s Agreement on Agriculture to
the benefi t of the developed countries was the
“Green Box” (or Annex 2 of the Agreement on
Agriculture). The Green Box allows countries
to provide a range of support programmes in
agriculture, and these supports can be provided
without limits. However, the programmes elaborated
upon under the Green Box (Annex 2) are
those provided by developed countries. They
include direct payments to producers, decoupled
income support (supports given to landowners
whether or not they produce as these subsidies
are not tied to production); insurance payments
of various forms and structural adjustment
assistance to retiring producers or resource
retirement programmes. The programmes that
developing countries provide – government
purchases from producers at administered prices
– though included in the Green Box, has to be
“counted” under a country’s AMS (footnote 5 of
Annex 2), if the administered price is more than
the external reference price, determined on the
basis of 1986-88 prices.
Thus, the current Agreement on Agriculture
imposes a triple jeopardy on developing countries.
First, a subsidy is alleged when foodstuffs
are procured from low-income or resource-poor
producers at an administered price by artifi -
cially comparing this price with 1986-88 prices.
This is most inappropriate. Second, in some
cases, the subsidy is calculated on the total
production and not on the quantity actually
procured, which also inappropriately magnifi
es the amount of the alleged subsidy. Third,
this alleged subsidy is required to be counted
as a trade distorting subsidy, whereas huge and
real subsidies given by developed countries
to their farmers under similar or equivalent
programmes are not to be counted as a trade
distorting subsidy.This inequity in the rules is further
compounded by the fact that most developing
countries bound themselves at zero AMS in
the Uruguay Round (this was the case for 61
out of 71 developing countries when the WTO
came into effect). Since then, most acceding
developing countries have also had to bind
their AMS at zero. Those developing countries
which have declared providing some AMS in
fact only provided very small amounts due
to their fi scal limitations. As a result, developing
countries effectively bound themselves to
not being able to provide “trade-distorting”
(AMS) domestic supports aside from the
“de minimis” amount.
In stark contrast, developed countries in the
Uruguay Round declared high levels of AMS.
Their Uruguay Round commitment was a
reduction of AMS supports by only 20%, over
the implementation period of 6 years 1995-2001.
Since 2001, there is no commitment for them
to reduce their AMS. After reductions, at the
end of its Uruguay Round implementation, the
US has a bound AMS ceiling of $19 billion. The
European Union (EU) (27) has a bound AMS
ceiling of 72 billion euros.
Since the understanding in the Uruguay
Round is that the developed countries would
have to progressively reduce their AMS, there has
been a move by the major developed economies
to shift more of the supports to the Green Box,
while maintaining very high levels of their
overall subsidies. WTO data show that the total
domestic support of the United States grew
from $61 billion in 1995 (of which $46 billion
was in the Green Box) to $130 billion in 2010
($120 billion in the Green Box). The European
Union’s domestic support went down from 90
billion euro in 1995 (19 billion in the Green
Box) to 75 billion euro in 2002 and then went
up again to 90 billion in 2006 and 79 billion in
2009 (of which 64 billion euro was in the Green
Box). A broader measure of farm protection,
known as total support estimate, which is used
by the Organisation for Economic Cooperation
and Development (OECD) in its reports on agricultural
sub sidies, shows the OECD countries’
agriculture subsidies soared from $350 billion
in 1996 to $406 billion in 2011.
In sum, while those developing countries
declaring zero trade distorting domestic supports
were locked into providing zero amounts
of supports apart from the 10% de minimis
product-specifi c AMS), developed countries
providing large amounts of AMS could still continue
doing so with a 20% reduction, whilealso moving large parts of the subsidies to the
Green Box.
During the negotiations at the WTO, several
WTO members, mostly developed countries,
have argued against the G-33 proposal, with
some stating that it might lead to a distortion of
trade. They have sought to drastically narrow
the scope of the proposal, and to attach many
conditions. One of the suggestion is to provide
an interim measure, in particular a peace
clause (i e, that there be no dispute settlement
cases taken against a country undertaking
public stocktaking) for a limited period, e g,
two or three years.
The prevention of a permanent solution
along the lines of the G-33’s original proposal
would lead to a lost opportunity to attaining
some small amount of rebalancing to an iniquitous
Agreement. If such an interim ‘peace
clause’ solution is accepted, it should only
expire upon the conclusion of the agricultural
negotiations mandated under Art. 20 of Agreement
on Agriculture in accordance with para
13 of the Doha Ministerial Declaration and
a permanent solution along the lines of the
original G-33 proposal has been found. It should
also not be accompanied by cumbersome conditions
that would reduce its usefulness when
it is put into operation. In addition, the Peace
Clause should cover any dispute arising fromthe Agreement on Agriculture as well as the
Agreement on Subsidies and Countervailing
Measures (ASCM).
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