WTO agrees to allow subsidies for food production in developing countries

Posted by AFN Staff Writers on 9th December 2013

The World Trade Organisation (WTO) has reached an interim agreement that will shield public stockpiling programs for food security in developing countries from the usual limitations on governments buying food from domestic farmers at supported prices.

The agreement was part of the ‘Bali Package’, which was produced as part of the WTO’s Bali Ministerial Conference, held 4 December 2013 to 6 December 2013 in Bali, Indonesia. The outcome of the consultations was for the interim solution to exist until a permanent one is agreed upon. A work program was set up, aiming to produce a permanent solution in four years.

Stockpiling for food security permitted with ‘due restraint’

When governments buy food from farmers at supported prices to build up stocks, it is called “Amber Box” domestic support. This is considered to distort trade by affecting market prices and the quantities produced.

Amber Box support is meant to be limited. Most developing countries had previously been allowed an amount that is conceptually minimal (“de minimus”) — up to 10 per cent of the value of production. However, a number of developing countries have said that the way the support is calculated means they are finding it increasingly difficult to stay within the limit. They have also said that this is important for them when their stockpiling under the Amber Box is in programs that also include supplying the stocked produce to low-income consumers.

One group, the G-33, which is a coalition of developing countries pressing for flexibility for developing countries to undertake limited market opening in agriculture, circulated a proposal in November 2012 so that support in this form in developing countries — to benefit low-income farmers or those who lack resources — would be considered “Green Box”, and therefore be allowed without limits. This proposal was already in the 2008 draft document covering all the issues in agriculture negotiations.

The WTO said that although members agreed that food security was a “vital issue”, particularly for the poor, some were concerned that this particular way of dealing with food security might weaken the disciplines that are expected under WTO rules to apply to all domestic support.

Details of the interim solution

As the Bali December 2013 conference approached, the WTO said it became clear that amending the Agriculture Agreement on this point was “too controversial” to be agreed in time for the conference. Instead, Chairperson John Adank, New Zealand’s ambassador, began working with members on an interim solution.

Consultations in November 2013 produced a compromise text. Members would temporarily refrain from lodging a complaint (“due restraint”, sometimes also called a “peace clause”) if a developing country exceeded its Amber Box limits as a result of holding food stocks for food security. Countries using these policies would be required to provide up-to-date data and other information on what was involved, in the interests of transparency.

But the WTO said its members disagreed on a number of issues, and the “most difficult” compromises were designed to make these as acceptable as possible. The compromises include: “safeguards” to ensure that the public stockholding programs would not be misused, and the released food would not affect trade. This required additional information and work on the number of eligible products (“traditional staple food crops”), how long the restraint on disputes would last, and other work to be undertaken after the Bali conference.

“After many long hours of negotiation, we the ministers of the WTO, have agreed to provide flexibility for developing countries to implement vital food security programs,” said Mr Gita Wirjawan, Chairman and Indonesia’s Trade Minister.

“We have agreed there is a need to change the WTO’s Agreement on Agriculture, which will take time,” Mr Wirjawan said. “In the interim period, the decision we have taken here in Bali will allow developing countries to avoid disputes over their legitimate food security programs,” he said.

WTO has agreed to allow food stockpiling for food security in developing countries