India and China joint proposal on elimination of $160 billion of trade-distorting farm subsidies in the US and EU has come as a game changer in global farm trade negotiations at the WTO
China and India have called for the elimination of what is called the Aggregate Measurement of Support (AMS) or ‘the most trade distorting element in the global trade in agriculture’. Photo: Bloomberg
Geneva: China and India have jointly proposed the elimination of $160 billion of trade-distorting farm subsidies in the US, European Union and other wealthy nations, a move that has come as a game changer in global farm trade negotiations at the World Trade Organization, say trade envoys familiar with the development.
As the WTO’s 164 members prepare for the crucial eleventh ministerial meeting in Buenos Aires starting on 10 December, China and India have turned the tables by calling for the elimination of what is called the Aggregate Measurement of Support (AMS) or “the most trade distorting element in the global trade in agriculture.”
The US which has consistently blocked reforms in global farm subsidies during the current Doha Round of trade negotiations, particularly since 2008, wants to eliminate the special and differential flexibilities availed by developing countries in agriculture, particularly investment and input subsidies made available to hundreds of millions of the world’s poorest farmers, according to a trade envoy who asked not to be quoted.
In the proposal, floated last month, the two largest developing countries argued that AMS have to be eliminated before any other reform in the global farm trade can be taken up for consideration. The proposal suggested that the US, the EU, Canada, Japan, Switzerland, and Norway continued to distort global farm trade by safeguarding their exclusive entitlements on AMS which they had secured in the previous Uruguay Round of trade negotiations.
The six industrialized countries (the EU is regarded as a single unit, although it is made up of 28 countries) are entitled to providing farm support through de minimis. In addition the US and EU provide more than $150 billion through what are called the green box subsidies that are also found to be trade-distorting.
“In contrast most developing Members have access only to de minimis [support] resulting in a major asymmetry in the rules on agricultural trade,” China and India argued in their proposal, and reviewed by Mint.
While most developing countries, including China and India, cannot provide product-specific amber box (most trade-distorting) subsidies, the industrialized countries are able to provide product-specific subsidies on any product as high as their scheduled AMS commitment. “This provides significant flexibilities to these six industrialized] members to provide support to their agriculture, thereby distorting production and trade.”
The US has continued to provide product-specific support to the tune of 10% of the value of product for 30 products for at least one year during the period 1995-2014. It provided subsidies exceeding 50% of value of production for dry peas (57%), rice (82%), canola (61%), flaxseed (69%), sunflower (65%) , sugar (66%), cotton (74%), mohair (141%), and wool (215%).
The EU provided more than 50% of product-specific support for several products.
Dairy producers in the US received more than 50% of the product-specific support in seven out of 20 years (1995-2014). The US also provided more than 90% for dairy and sugar products in certain years, China and India maintained.
The products for which the EU concentrated its trade-distorting support include butter (71%), skimmed milk powder (67%), apples (68%), courgettes (51%), cucumber (86%), lemon (60%), pear for processing (82%), tinned pineapples (108%), tomatoes for processing (61%), rice (66%), olive oil (76%), white sugar (120%), tobacco (155%), and silkworms (167%). “Barley (ten years), common wheat (9 years), and tobacco (9 years) are products that have consistently benefited from very high level of subsidies as a percentage of value of production” in the European Union, according to China and India.
Canada, which is also mentioned in the joint proposal, provided 10% of the value of production to seven products during the period 1995-2013. Canada’s farm subsidies are mostly concentrated for products such as milk (14 years), sheep meat (nine years) and corn (five years).
In effect, “the imbalances in the existing Agreement on Agriculture where only some Members [the US, the EU, Canada, Japan, Norway, and Switzerland] have access to bound AMS [entitlements] allows them much more policy space,” the two Asian giants argued.
Despite availing these entitlements for the past 20 years and continuing to insulate them from any further reform, the US along with the EU and other industrialized countries are working hard to cap/reduce the de minimis support for developing countries, including China and India, according to the joint proposal.
Brazil, which created the G20 group of developing countries along with India and China for bringing development-friendly reforms in global agriculture, has now joined hands with the European Union for demanding the capping/reduction of the de minimis rather than elimination.
Against this backdrop and “in order to achieve the long outstanding reforms in agricultural subsidies, the AMS entitlements of developed members must be eliminated as prerequisite for consideration of other reforms in domestic support negotiations,” China and India argued. “Only in this way will it help reduce some of the inequities built into the WTO rules in favour of developed members.”