WTO Remains a Work in Progress

Victory on Export Subsidies Reflects Glacial Pace and Death of Doha Talks

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The U.S. and others wanted transportation and market subsidies to end immediately, but they ended up with a five-year phase-out in developing countries. (DTN photo by Elaine Shein)

OMAHA (DTN) -- While there was some praise about the actions taken in the World Trade Organization's ministerial conference announcements over the weekend in Nairobi, Kenya, the end result of the WTO talks is that the now-infamous Doha round talks have died after 14 years of fits and starts.

To hang its hat on an item, trade officials touted that after 20 years of talks, the group was able to achieve an end to agricultural export subsidies sometime in the next two to six years. The WTO called the ag-export agreement, "the most significant outcome on agriculture" since the WTO came together in 1995.

For U.S. farmers, phasing out export subsidies by some competitors should be considered a significant win, said Dave Salmonsen, senior director for congressional relations at the American Farm Bureau Federation. Elimination of export subsidies has been at the top of the agenda in the Doha talks for several years. The U.S. doesn't use export subsidies, nor does the European Union for the most part. Dealing with exports will allow WTO negotiators to finally move on to other agricultural issues such as levels of domestic support and market access, where little ground has been gained since 2008.

"It's very trade-distorting when a government buys a product at one level and then subsidizes it for export so it can be competitive," Salmonsen said. "That's really about the most trade-distorting thing you can do."

The language in the agreement lays out the ground rules for developing countries to end export subsidies by 2018, though there are caveats that could allow some developing countries to continue with such subsidies through 2022. The agreement also limits the terms of financing for export credit, for instance. The U.S. already falls in line with where the WTO countries agreed to land in that regard.

"What was agreed to there was in line with what we are trying to do in our farm bill in regards to payment terms -- 18 months for payments and in terms of fees," Salmonsen said.

The U.S. Wheat Associates praised the terms reached on export subsidies as well. "While authorized subsidies are rarely used anymore, agreeing to eliminate them is no small matter," the wheat association stated. "For example, while the European Union, collectively the world's largest wheat producer, no longer uses export subsidies it still has standby authority to do so. Other countries are using unauthorized export subsidies and should be challenged to prevent continued violations of current disciplines. Certainly, eliminating export subsidy authority at once for developed countries and by the end of 2018 for developing countries is a major step forward for world wheat trade."

The U.S. Trade Representative's Office spotlighted that the agreement means the eventual end of Canadian dairy export subsidies and subsidies for Indian sugar exports.

The talks and tone of the WTO's final Nairobi Ministerial Declaration recognized that there was no consensus to continue sticking with the Doha development agenda after 14 years of talks. Major global powers, including the U.S., "believe new approaches are necessary to achieve meaningful outcomes in multilateral negotiations."

U.S. Trade Representative Michael Froman declared that global trade talks have now reached a turning point in the World Trade Organization's evolution. He also indicated that countries would not have to be shackled to the ground rules used under the Doha talks.

"In the midst of feverish work this week on the Nairobi Package, members engaged in honest and focused conversations on the limitations of the Doha Development Agenda framework. While opinions remain divided among the WTO membership, it is clear that the road to a new era for the WTO began in Nairobi."

Though competing export subsidies could go away, the U.S. Wheat Associates was among those who complained that the Nairobi talks ended up allowing processing and transportation subsidies for agricultural products to continue until the end of 2022. Some countries, notably India, help subsidize trucking to move products to market. It makes a product a lot easier to export if the government is going to cover the transportation costs. The U.S. and others wanted these transportation and market subsidies to end immediately, but they ended up with a five-year phase-out in developing countries. Under some circumstances, a country can continue paying such subsidies for as long as eight years.

House Agriculture Committee Chairman Michael Conaway, R-Texas, highlighted the long phase-out time of transportation and marketing subsidies in a statement expressing frustration over the glacial pace of reforms.

"We need to ensure that these kinds of export subsidies are no longer permitted to harm U.S. farmers and ranchers," Conaway said. "The agreement reached in Nairobi at least assigns a definitive date to ending these subsidies. But, the success of this aspect of the agreement will ultimately be measured by its rigorous and full enforcement."

Conaway also complained that the WTO did not do anything to recognize problems created in the global cotton trade because of domestic policies in China and India.

National Cotton Council Chairman Sledge Taylor noted there were further attempts in Nairobi to seek more concessions from the U.S. on cotton, but the U.S. resisted such attempts.

"While the overall outcome of the Ministerial is generally positive, there continues to be unwarranted pressure and focus on U.S. cotton policy by some WTO members," Taylor stated. Taylor added, "Over the past decade, U.S. cotton farmers have experienced a decline in their safety net, while the surge in Asian polyester production has reshaped global fiber markets."

Salmonsen pointed out there remain a lot of overlapping issues, though, as major agricultural exporters such Brazil and India continue receiving the designation as "developing" countries for agricultural despite being global export powers.

"For some U.N. definitions they may still be developing, but they are just as good of competitors for agricultural international trade markets as we are," Salmonsen said.

What's the real gain for U.S. farmers? "It's still a work in progress," Salmonsen said. "This is trying to end something that was sitting like a weight on WTO. This effort was really a push by the U.S. and others to take some of that weight off so they could be an effective negotiating body again related to these ag issues."

Chris Clayton can be reached at Chris.Clayton@dtn.com

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(ES/AG)

Chris Clayton