Author: Joanna Hewitt, Canberra
Political level interest in reforming and restoring the weakened rules-based trading system is overdue, as argued recently on East Asia Forum. Language from the APEC Trade Ministers and G7 Leaders meetings last month is only a start but more than had been possible before President Biden’s ‘America is back’ message displaced his predecessor’s ‘America First’ wrecking ball.
The time is right for serious follow up. Challenges to the trade rules and arbitration system are now existential. The World Trade Organisation (WTO) Doha negotiations remain stalled some 20 years since their launch and entrenched disagreements abound among the membership on old and new issues.
Some of the problems reflect dramatically changed geopolitical and economic weights as well as tensions between the world’s two largest economies, the United States and China. Others reflect failure of the rules to keep up with evolving realities like global value chains and the digital economy. The WTO’s arbitration system has also been unable to function in the face of a US block on Appellate Body appointments. And strong differences simmer over eligibility of some emerging economies for developing country concessions, on transparency around industrial subsidies, on forced technology transfer and on coercive trade practices.
If that weren’t enough for the impressive new WTO Director General, Ngozi Okonjo-Iweala, agricultural negotiations are paralysed. Agriculture is central to progress on Doha as well as contributing to the stalemate. Turned around the other way, movement on agriculture could help boost certainty in global markets and aid in economic recovery from the pandemic.
A detailed proposal aimed at getting parties back to the table on agriculture has been launched by an independent group of international experts. The ‘New Pathways’ group, of which I am a member, comprises former top staff of international organisations and think-tanks, senior trade negotiators and academics. None is bound by any current organisational position.
The proposal aims to shift member countries from rusted on positions and offers solutions to known problems in the 1994 Agreement on Agriculture. The ‘continuation clause’ in the Agreement has fallen foul of the Doha stalemate, leaving countries with high agricultural support and protection free from pressure or incentives to change tack. Moreover, some emerging economies, including China, have also embarked on costly agricultural support programs mimicking those of industrial countries, allowed under current rules.
The New Pathways proposal puts forward rules changes aimed at driving more efficient, and less wasteful, inconsistent and environmentally harmful policies. It takes the 1994 Agreement on Agriculture framework as its starting point and suggests reforms commensurate with the degree of trade distortion engendered by the policy settings of each country as well as their impact in world markets. It is a holistic package covering all three pillars of the Agreement — market access restrictions, domestic support measures and export competition.
Potential gains from proposed new rules would be considerable. They focus reform efforts on policies that cause the most damage to countries’ own economic resource allocation as well as damage to third countries through world markets.
Market access gains would be delivered through ambitious options for tiered tariff reductions. Loopholes in arrangements for safeguards against imports are tightened or removed. Similarly, options for Domestic Supportprograms would require major trimming and reshaping. More scope would be granted for farm payments targeted at environmental challenges like climate change, biodiversity loss and resource depletion. Less scope would be allowed for ongoing income support payments such as Europe’s Blue Box measures. Input subsidies, for example on fertilisers and energy, that encourage harmful intensification, would be constrained. On the other hand, more flexibility would be allowed for programs targeting food security and support for low-income households and for public stockholding of farm goods if purchased at below world price levels.
The pathbreaking 2015 Nairobi Agreement outlawing Export Subsidies would be consolidated and export restrictions limited.
This proposed rebalancing addresses longstanding grievances of developing countries who see continuing high spending (they cannot match) on farm supports in rich countries, and increasingly in some middle-income countries, while…