World Trade Organization Agriculture Negotiations at MC13: What does the lack of outcomes mean for least developed countries and other vulnerable economies?

The role of the World Trade Organization’s agriculture negotiations in promoting more sustainable food systems

The multilateral rules that govern agricultural trade need to evolve to promote more sustainable food systems. Better rules could contribute to removing harmful subsidies, increasing availability and access to food, facilitating trade in healthy and nutritious foods, and mitigating the negative effects of export restrictions on food security. Since the World Trade Organization (WTO) was established, governments have tried to make progress on new multilateral trade rules that would correct and prevent distortions and restrictions on world agricultural markets, as envisaged in the preamble to the WTO Agriculture Agreement, while speeding up progress on key sustainability issues.

Over the last two decades, however, with the sole exception of the 2015 Nairobi Ministerial Decision on Export Competition, WTO agriculture negotiations have done little to address the triple challenge that our food systems face: delivering food security and nutrition to a growing global population, providing livelihoods to those along the food supply chain, and contributing to environmental sustainability. Hunger is still prevalent in many parts of the world, particularly in least developed countries (LDCs) and other vulnerable economies, and about 23% of total anthropogenic greenhouse gas emissions derive from the agriculture, forestry and other land use sector.

The WTO’s Ministerial Conferences provide an opportunity for WTO members to negotiate new trade rules and agree on steps to be taken in the negotiations. While no major outcomes were expected at the Thirteenth Ministerial Conference of the WTO (MC13), it is disappointing that trade ministers could not even agree on a roadmap or work program with clearly defined timelines for WTO agriculture negotiations after MC13.

The Draft Text submitted by the chair of the WTO Committee on Agriculture in Special Session (CoASS), Türkiye’s Ambassador Alparslan Acarsoy, a few weeks before MC13, was in itself a welcome development, however. It is the first formal text in the WTO agriculture negotiations for many years and articulates the decisions the chair proposed on the seven key negotiating issues:

• domestic support;
• a permanent solution to public stockholding of food at “administered” or “fixed” prices by governments in developing economies;
• market access for agricultural products;
• a special safeguard mechanism (SSM) for developing countries;
• export prohibitions and restrictions;
• cotton, including trade-distorting domestic support to cotton farmers; and
• export competition.

The Draft Text and its revised version set out a roadmap for WTO agriculture negotiations after MC13. The fact that members could not even agree on an agenda for future work reflects entrenched positions on two negotiation issues: public stockholding at “administered” or “fixed” prices and domestic support more broadly.

Disagreement over public stockholding and domestic support 

WTO members could not agree on the basic elements of a permanent solution for public stockholding of food at “administered” or “fixed” prices by governments in developing economies. Large developing countries such as India and China and negotiating blocs like the G33, the African Group, and the Africa, Caribbean, and Pacific Group want to make permanent and extend the 2013 Bali interim solution to new public stockholding programs implemented after December 2013 by all developing countries (country coverage) and to a wider category of agricultural products beyond the so-called “traditional staple food crops” (product coverage). These countries would also like to update the way trade-distorting domestic support is calculated under the WTO Agriculture Agreement, which limits their ability to implement public stockholding programs at “administered” or “fixed” prices. On the other hand, the United States, the European Union, and the Cairns Group of agricultural exporters, which includes large agricultural powerhouses such as Australia, Canada, Brazil, and Argentina, consider that any permanent solution to this issue should be linked to disciplines to reduce trade-distorting domestic support as a whole.

When it comes to LDCs and other vulnerable economies, what was on the Draft Text before MC13 and could have been agreed upon was an extension of the 2013 Bali interim solution to the new public stockholding programs of LDCs at “administered” or “fixed” prices implemented after December 2013. This extension would have shielded the new public stockholding programs of LDCs from being legally challenged even if they had breached the limits of trade-distorting domestic support that LDCs are allowed under the WTO Agriculture Agreement.

While an extension of the 2013 Bali interim solution would have enabled LDCs to implement new public stockholding programs at “administered” or “fixed” prices without concern for trade-distorting domestic support ceilings, LDCs do not generally have the fiscal capacity to implement large public stockholding programs. This extension would therefore have had limited practical value for LDCs. Furthermore, it would not have satisfied larger developing countries seeking a permanent solution, especially those at risk of breaching their trade-distorting domestic support ceilings.

WTO members could not agree on a framework for reducing trade-distorting domestic support either. This is something that could have been done by setting an overall cap (say, around USD 1 trillion of potential trade-distorting domestic support among all WTO members) and reducing it gradually to a target level to be reached on an exact date to be determined by WTO members (e.g., 2030, 2035, or 2040). In that connection, an unresolved issue at MC13 that is particularly problematic for LDCs and other vulnerable economies is trade-distorting domestic support to cotton farmers. Domestic support for cotton reached USD 8 billion in 2022/2023, up by 66% from the previous season. India, China, and the United States are, by far, the largest subsidizers in absolute terms with USD 2.9 billion, USD 2.4 billion, and USD 1.6 billion, respectively, so any solution to trade-distorting domestic support to cotton farmers will require substantial subsidy cuts in these three WTO members. In the past, cotton subsidies have proven to be particularly harmful to LDCs and other vulnerable economies in West and Central Africa, including Benin, Burkina Faso, Côte d’Ivoire, Chad, and Mali. In 2005, the Hong Kong Ministerial Declaration recalled a previous mandate to address cotton ambitiously, expeditiously, and specifically. Almost two decades down the road, negotiations to reduce trade-distorting domestic support to cotton farmers have not produced any concrete outcome. MC13 has been no exception.

No progress on other issues, including on an exemption from export prohibitions or restrictions for LDCs

The lack of progress on public stockholding and domestic support led to frustration among agriculture negotiators, which in turn led to no progress on other issues highlighted in the Draft Text, such as the proposed SSM to allow developing countries to temporarily raise tariffs on certain agricultural products in cases of import surges or price declines causing damages to their farmers. One of the rationales behind an SSM would be to tackle distortions in agricultural markets, including those caused by harmful agricultural subsidies. 

Regarding export restrictions, MC13 did not enhance transparency, nor did it improve the implementation of disciplines on export prohibitions or restrictions. MC13 also missed the opportunity to deliver one important outcome on agriculture and food security: an exception from export prohibitions or restrictions for LDCs and other vulnerable economies. This would have entailed that WTO members call on most net food exporting countries not to impose export prohibitions or restrictions on foodstuffs imported by LDCs and other vulnerable economies for domestic consumption. This exemption would have allowed LDCs and other vulnerable economies, such as small island developing states, to continue to import food from WTO members that have restricted their exports of food products to all other countries and thereby help shield them from global food price rises resulting from major producers applying export restrictions. Of course, such an exemption would not address the challenge that poorer consumers in LDCs and other vulnerable economies face in being able to afford this imported food. 

What next on public stockholding and domestic support?

The lack of outcomes on public stockholding at “administered” or “fixed” prices highlights the need to update key concepts in the text of the current WTO Agriculture Agreement. Most notably, the notion of trade-distorting domestic support, which uses reference prices for agricultural commodities from the late 1980s. The use of these reference prices was not a problem while food prices were relatively stagnant, which was the case until the early 2000s. This changed when food prices started rising in the late 2000s, reducing the margins of trade-distorting domestic support that WTO members are able to provide under the WTO Agriculture Agreement—including for their public stockholding programs at “administered” or “fixed” prices. Updating the reference prices for agricultural commodities would also be consistent with the text of the WTO Agriculture Agreement, which calls on WTO members to give due consideration to the influence of excessive rates of inflation on the ability of any WTO member to abide by its domestic support commitments. Further technical discussions on this and other key concepts, such as “eligible production,” which is another crucial element in calculating trade-distorting domestic support, could also help.

However, any effort to update reference prices in the context of public stockholding programs at “administered” or “fixed” prices should not be made at the expense of the broader objectives set out under both the preamble and Article 20 of the WTO Agriculture Agreement, which calls for “substantial progressive reductions in [trade-distorting domestic] support.” While it makes sense to preserve the ability of WTO members to provide trade-distorting domestic support for public stockholding programs at “administered” or “fixed” prices amid high inflation rates for food and agricultural products, any update to the current domestic support entitlements of WTO members should not result in an overall increase of trade-distorting domestic support beyond what would be reasonable to account for high inflation rates since the late 2000s. Doing so would be contrary to the above-mentioned objectives of pursuing substantial progressive reductions in trade-distorting domestic support, as well as to the goal of correcting and preventing distortions in world agricultural markets. So the issues of reference prices for public stockholding of food at “administered” or “fixed” prices and trade-distorting domestic support more broadly will likely need to be negotiated together.

Advancing negotiations on domestic support is also crucial from a sustainable development perspective. According to the Organisation for Economic Cooperation and Development, agricultural subsidies reached USD 518 billion per year during the 2020–2022 period, which is a historical high. A significant part of these agricultural subsidies has been found to be economically inefficient and potentially environmentally harmful. Domestic support is not contributing to achieving healthier diets either: the Food and Agriculture Organisation of the United Nations has reported that unhealthy foods, such as sugar, tend to be the most subsidized worldwide, while fruits and vegetables are less supported overall—or even penalized in some low-income countries.

Looking ahead, WTO members will also need to discuss to what extent the current disciplines on domestic support, including those of the Green Box, are relevant to addressing contemporary challenges such as food insecurity, farmers livelihoods, climate change, and biodiversity loss, or whether new subsidies rules would be needed, for instance, through a new Sustainability Box that tolerates a minimum degree of trade distortion to achieve broader sustainability goals. This would be a politically difficult endeavour, as many countries fear that it would unleash disguised protectionism in the form of green subsidies and open the floodgates of a new wave of trade-distorting domestic support in both developed and large developing economies, undermining efforts to correct and prevent distortions in world agricultural markets.

Finding the right balance between addressing contemporary challenges and preventing further distortions of international trade in food and agriculture should be at the core of WTO agriculture negotiations on domestic support going forward.

Photo credit: ©WTO/Prime Vision