No deal yet in Africa’s quest for removal of export subsidies

The quest by African countries to get subsidies on agricultural exports by developed countries removed is unlikely to be realised at the World Trade Organisation Ministerial Conference in Nairobi, after an informal session of delegates failed to close ranks on the matter.

Export subsidies — including finance (credit, guarantees and insurance), food aid and state trading agencies — were seen as one of the difficult-to-negotiate areas at the December 15-18 meeting and members at the informal session in Geneva last week confirmed the sharp differences.

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“Three new proposals were submitted. Two were on export competition, pushed by several developed nations, and one on special safeguard measures for poor farmers made by the G-33 group, which includes India. But there was no convergence of views on these new proposals,” a WTO official in Geneva said.

The European Union, Brazil and other countries tabled new proposals on export competition that included new flexibilities aimed at appeasing the United States.

In the new proposals, the EU is willing to be flexible on issues like export credits and food aid disciplines in order to reach an export competition deal in Nairobi, but for Africa and other developing countries to benefit, the US now needs to make concessions on those issues as well.

“Two aspects of the proposal that the US is unwilling to accept are its requirements that the maximum loan repayment for export financing for agricultural products be limited to nine months, and restrictions on the so-called monetisation of food aid,” said the WTO official.

Monetisation is when in-kind food aid is sold within the country receiving the aid.

With respect to monetisation, the US proposal demands that members “monetise international food aid only where there is a demonstrable need for monetisation for the purpose of transport and delivery of the food assistance, or the monetisation of food aid is used to redress short andor long-term food deficit requirements or insufficient agricultural production situations that give rise to chronic hunger and malnutrition in least-developed and net food-importing developing countries.”

It adds that members “… ensure that the monetisation of international food aid results in minimal interruption of established commercial markets.”

“The other countries are of the opinion that if they adhere to the US’s proposal, it would limit the amount of monetisation, but would not place a hard cap on how much monetisation can occur,” noted the official.

By contrast, the proposal by the EU, Brazil and others would cap the amount of monetisation that can occur at an unspecified percentage of a country’s total in-kind food donations.

Vangalis Vitalis, WTO chairperson of the agriculture negotiations, said in a statement that if member states are keen on a breakthrough on agriculture in the Nairobi meeting, a high level of engagement from everyone is needed.

“There is still much to do and very little time to conclude it,” said Mr Vitalis.

According to the WTO Framework on Agriculture, all direct export subsidies will be eliminated.

“While greater gains are expected to accrue from reform of domestic subsidies and improvements in market access, export subsidies have long been condemned as greatly distorting world markets and detrimental to competitive exporters and import competing producers,” said Joshua Mugodo, director of economic affairs at Kenya’s Ministry of Foreign Affairs and International Trade.

“As export subsidies complement policies such as high internal prices, their elimination will prevent the re-emergence of some distorting forms of producer support. WTO members would benefit from being flexible about the details of the transition period if necessary to ensure achievement of this long-term goal.”

He said that food aid can act as an implicit export subsidy in some situations. However, disciplines on the subsidy component of food aid must preserve it humanitarian and developmental roles.

The G-33, a group of developing countries pressing for flexibilities for developing countries to undertake limited market opening in agriculture, introduced a revised proposal on special safeguards that would allow developing countries to raise import tariffs on agricultural products in cases of import gluts or price declines.

Countries in support of agricultural trade liberalisation voiced their concerns about the proposal, noting that a special safeguard mechanism without tariff reductions would allow countries to raise tariffs above existing bound levels and that this would be a step in the wrong direction.

A few members reiterated their position that all three pillars of the negotiations are interlinked, and asked members not to cherry pick at one pillar.