Agri Support Measures on the Mat at WTO

WTO members reviewed the agricultural trade policies of some of the world’s major traders on 25 September 2015 at a meeting of the Committee on Agriculture – the WTO body that oversees agricultural trade issues. The topics discussed included China’s notification of domestic support measures, India’s export subsidy and domestic support programmes, and members’ implementation of their commitments under the Agreement on Agriculture.

Australia, EU Question Sugar Export Subsidy and Cotton Support in India

Australia and the EU repeated their questions about India’s recent increase in its export subsidy for raw sugar at both the federal and state level. In February 2015, India increased the rate of its export subsidy for raw sugar, making the level of subsidy over 25% of the current world benchmark price.

India said the payment is not an export subsidy but part of its product diversification programme. Indian sugar is exported to Sri Lanka, Iraq and the United Arab Emirates.

Colombia and Brazil raised concerns about India’s sugar subsidies and urged India to respect the Bali Ministerial Declaration on Export Competition, which states that WTO members ”shall exercise utmost restraint with regard to any recourse to all forms of export subsidies and all export measures with equivalent effect”.

Separately, the US questioned India on the rise of the minimum support price for cotton.

India said the increase was in response to an increase in the weighted average cost of production, in addition to other factors. The EU and Pakistan also registered their concern with India’s cotton policy. The EU asked India about recent press reports suggesting an increase in minimum support price for wheat in the Punjab region. India replied that the support price is fixed by the government of India, not by regional governments. 

The US and Australia raised or repeated several questions concerning India’s most recent notification for domestic support covering the marketing years 2004-05 to 2010-11 submitted in September 2014. India provided clarification on a number of questions and will provide detailed answers to members electronically.

China – Public Stockholding, Cotton

China responded to questions raised by the United States, the European Union and Canada. The aim of the questions was to clarify the type of domestic support provided by China and the criteria and eligibility for the support programmes, based on the notification China recently submitted on its domestic support programmes for 2009-10 (G/AG/N/CHN/28).

The EU questioned China’s increased spending on public stockholding for food security purposes (AG-IMS ID 78055). China explained that government purchases are made at prices reflecting market conditions, and therefore they satisfied the criteria for the Green Box (minimal trade distorting subsidies).

China was asked by the EU and the US about its cotton policies. China said that support in the cotton sector was intended to guarantee the livelihood of cotton farmers, who mostly live in impoverished border regions, and to contribute to regional stability. China said that its cotton support policies do not affect imports, nor are they linked with the increase in world consumption of polyester.

Sri Lanka – tariff increase for milk powder

Australia and New Zealand raised concerns over Sir Lanka’s tariff increase for milk powder (AG-IMS ID 78022). The Sri Lankan government recently adopted a mixed tariff rate equivalent to 70%, although the country’s bound tariff rate for milk powder is set at 20% according to its WTO commitments. Sri Lanka explained that the temporary tariff hike is to protect the dairy industry, which supports thousands of low-income farmers and to balance trade. Despite the tariff increase, Sri Lanka said that imports of milk products have increased. In response, Australia and New Zealand and the EU recognized the challenges Sri Lanka faces and expressed appreciation for its efforts to engage in bilateral conversations with its trading partners. They were concerned, however, that the tariff hike had persisted for several years and urged Sri Lanka to find a long term solution to this matter.

Russian Federation – domestic support and wheat export tax

Russia’s notification of domestic support measures for 2013 (G/AG/N/RUS/9) prompted Canada, the EU, Australia and Dominican Republic to ask Russia to explain the measures reported under the Green Box (minimally trade distorting subsidies). Russia said that the change was due to its new state agricultural programme, effective from 2013 to 2020. It reassured members that the programmes, including decoupled income support in crop production, support for agricultural income insurance and domestic food aid, are designed in conformity with WTO criteria to ensure that these programmes are minimally trade-distorting.

On a separate matter, the EU asked Russia about a wheat export tax it has reportedly introduced since July 2015 (AG-IMS ID 78021). Russia confirmed the introduction of such export duties on certain grains, asserting that the measure is in conformity with the agreement with the EU and in line with the WTO’s agreements.

European Union – change in dairy policies

In response to a question posed by Australia, the European Union updated members on its recent reforms in the dairy sector (AG-IMS ID 78078). The European Commission recently proposed a support package for the dairy sector, adopting more market-oriented approaches in its agricultural policies. Australia, New Zealand and Argentina welcomed the EU’s agricultural reforms, including the termination of the milk-quota system in March 2015 and appreciated its restraint in the use of export subsidies in line with the Bali ministerial decision.

Switzerland – export subsidies

Australia, New Zealand, the EU, Brazil, Argentina, Colombia, Chile, and Costa Rica repeated their concerns over Switzerland’s decision to increase its export subsidies. Switzerland said the government’s proposal to provide 20 million Swiss francs in additional export subsidies — increasing its outlays by almost a third — was due to exceptional circumstances, in particular the central bank’s decision to end the franc’s peg to the euro. 

Members critical of the move argued that currency fluctuations were no excuse for such a move and that increasing export subsidies ran counter to the Bali Ministerial Declaration on Export Competition, where ministers committed to exercise utmost restraint on all forms of export subsidies.

Outstanding notifications

The Chair reminded members that document G/AG/GEN/86/Rev.22reflects the current status of compliance with notification obligations. He highlighted a few numbers from this report. For the period 1995 to 2013, 9% (54) of notifications in the Market Access series remain outstanding; 35% (685) of notifications on domestic support measures are outstanding; and 33% (732) of export subsidy notifications have still not been received.

The Chair pointed out that the Committee plays an essential role in enhancing transparency of agricultural trade, enabling trading partners to see how rules are implemented. However, transparency can only be achieved when members supply information about their agricultural trade measures in a timely manner. The EU, the US, Russia and Canada urged members that are late with notifications to submit the information soon. The US noted that some countries have already notified for 2013 and 2014, and urged all major agricultural trading members to provide information up to 2012. 

Implementing Bali decisions 

The committee continued its follow-up work on decisions agreed at the WTO Bali Ministerial Conference. The 2013 Bali Ministerial Declaration on Export Competition requires the committee to host dedicated annual reviews on export competition. A recent review was carried out in the June meeting and the Secretariat circulated an updated version of the background document on 27 July 2015 (G/AG/W/125/Rev.3) concluding the second dedicated discussion exercise. The Chair reminded members that the future of such discussions on export competition will depend on the outcome of the 10th Ministerial Conference in Nairobi.

The Bali Ministerial Conference also adopted a decision specifying how “tariff rate quotas” – a special quota where volumes inside the quota have a lower duty - should be shared among importers when the quota is persistently under-filled. The Chair reminded members that, according to the Bali decision, members need to report information on the fill rate of tariff rate quotas, and they may raise concerns when importing countries do not notify fill rates and when the fill rate notified is below 65%.