Washington Insider- Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

U.S. Appeals WTO's Ruling on County of Origin Labeling for Meat

The United States has filed an appeal with the World Trade Organization over the trade body's ruling that the U.S. country of origin labeling regulation put in place in May 2013 does not bring the U.S. program into compliance with an earlier WTO ruling. The administration did not outline the grounds upon which the appeal was being filed.

Failing a reversal of the earlier decision, the two plaintiffs –– Mexico and Canada –– could notify the WTO of their intent to impose retaliatory measures on U.S. products. Before that could take place, the WTO would have to decide on the amount the two countries could seek. Canada estimates that the U.S. program has cost Canadian farmers and meat processors to $1 billion per year in lost sales and lower prices, while Mexico has indicated would pursue sanctions worth "hundreds of millions" of dollars in the event the United States does not alter its COOL program.

Agriculture Secretary Tom Vilsack has said the agency's review of the program has revealed that officials there don't believe there is a regulatory fix for the problem. That will shift attention to Congress where action is not likely in the lame-duck session of Congress that lawmakers want to wrap up by Dec. 12.

The decision to appeal the latest WTO ruling now pushes resolution of this issue well into 2015 and perhaps even beyond. It also shifts attention to the retaliation side and the level of sanctions that the WTO believes would be justified should the United States fail to alter the law.

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Breakthrough WTO Deal Offers New Hope for Doha Round

The World Trade Organization last week gave itself another seven months to finalize a work program for the Doha Round. The organization was able to breathe some life back into Doha only after members agreed to the wording of the terms under which India and other developing countries would be permitted to institute food stockholding programs.

The most important part of last week's agreement was a step toward the ratification of the proposed Trade Facilitation Agreement (TFA) which aims to reduce bureaucratic and infrastructural obstacles to international trade. Proponents claim that the TFA –– which is in fact the first global trade agreement to be actually agreed by the WTO since its inception in 1995 –– could deliver a $1 trillion boost to the global economy.

But unblocking the logjam also will give new momentum to the multilateral negotiating process, and offers the prospect of at least a timetable for reaching a new deal to curb farm subsidies and liberalize agricultural trade by the middle of next year. Whether Congress can be persuaded to agree to this timetable remains to be seen. Support for trade agreements often softens as additional details become known. (Also see longer item below.)

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Washington Insider: WTO Surprise

Suddenly last week, the World Trade Organization announced a “breakthrough agreement” on its all-but-abandoned trade talks in Geneva. The deal came together over the work plan concerning the package agreed to last December at the ministerial meeting in Bali, Indonesia to which the WTO membership has now re-committed.

The new package is limited in its scope. Its most important element is the ratification of the Trade Facilitation Agreement which will reduce bureaucratic and infrastructural obstacles to international trade — and, which could reduce costs by perhaps $1 trillion annually. However, the agreement also is important because it is the first global trade deal by the WTO since its beginning in 1995.

In addition, the new package includes more details of the terms under which India and other developing countries may pursue food stockholding programs. These had been the subject of a protracted stand-off between India and the United States earlier this year and had held up negotiations until a bilateral deal was struck between the two sides late last month.

The deal also emphasizes the fact that trade negotiators are an optimistic lot and now have begun talking about new momentum for the multilateral negotiating process, as well as the prospect of at least a timetable for a new deal to curb farm subsidies and liberalize agricultural trade in the near future. And, at least some observers say they think the “breakthrough” may have averted the collapse of the WTO. “The WTO is back in business," proclaimed Cecilia Malmström, the European Union’s trade commissioner.

The food stockholding agreement, which has now been approved multilaterally by the WTO membership, provides guarantees that programs created for food security purposes will be exempt from challenge under the WTO dispute settlement procedure, even if the government in question buys the food from its own farmers at below market prices. The new agreement underlines that this “peace clause” will apply until a permanent solution is agreed, even if this takes longer than the 2017 deadline for a resolution which was set in Bali.

The peace clause language has also been strengthened slightly, with text now saying that members will "not" challenge such programs under the WTO Agreement on Agriculture. Previously the commitment was to "refrain from" making such challenges.

The Bali deal also provides a basis for action on several technical issues which affect agricultural trade, including a modest expansion of the policy measures which may be counted as “green box' (non-trade-distorting) policies not subject to WTO disciplines; rules to improve the administration of tariff rate quotas; and a renewed commitment to work towards the abolition of export subsides

However, more significant in the longer-term may be the fact that a return to work on the substantive issues of the Doha Round, including multilateral reductions in agricultural import tariffs and tighter disciplines on domestic agricultural subsidization, are now a realistic prospect for first time since 2008.

The revival of the WTO multilateral negotiations is especially important because they provide a much broader framework for trade policy rules than do free trade agreements, which primarily focus on trade measures like tariffs. Multilateral deals also focus on tariffs, but include limits on other types of interventions such as subsidies and sanitary-phytosanitary measures among many other aspects of trade policy and infrastructure.

Observers suggest that without multilateral negotiations across the whole policy structure of centrally planned economies, it would have been much more difficult, if not impossible to include them in the modern global trade network.

However, it also is important to note that the current agreement concerns a work plan for future talks, not a trade deal — and that many of the past disagreements between developed and developing countries remain, as do disagreements over a broad range of economic and trade policy elements. So there is much more work to be done before real, new benefits from the long WTO process can be realized.

Still, something good seems to have happened just now, and it could be important to the outlook for agricultural trade, Washington Insider believes.

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(GH/CZ)

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