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 their efforts to support poor households is limited. The proposals should also offer incentive for countries with less than average agricultural support and protection, including the United States, to re-engage in multilateral reform to achieve results not possible through individual free trade agreements. Reorienting distorting farm support to higher priority environmental ends should also have broader appeal, for example to the United Kingdom as it sets its post-Brexit policies. Low support and protection Cairns Group countries would welcome long awaited market improvements.
The task is daunting and impetus is needed. The Doha standoff is broader than agriculture, but an agriculture restart could build confidence and encourage dialogue on wider systemic issues.
Signals from Washington remain subdued with no new WTO Ambassador nominee in play. Trump era tariffs on Chinese goods as well as the national security justification for their imposition persist with matching retaliatory Chinese tariffs on US imports.
Both major economies have strong interests – economic and geopolitical – in collaborating to re-set the trade rules. Both would need to cede ground. Australia and its Asia Pacific neighbours want to see trade in Washington’s ‘ready to cooperate’ basket. APEC and the G20, where both participate, offer opportunities for conversations.
In parallel, work in Geneva on the detailed issues, and especially agriculture, needs to be activated. We will all be poorer if efforts fail.
Joanna Hewitt is a former senior Australian official with roles including lead WTO negotiator and Agriculture Department secretary. She is a co-author of The New Pathways for Progress in Multilateral Trade Negotiations in Agriculture paper released in May.