Nairobi deal ends export subsidies, sets credit, aid rules

By Philip Brasher

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Dec. 21, 2015 -  Countries that are members of the World Trade Organization have agreed to end export subsidies for agriculture and set rules for credit assistance and food aid.

But the agreement announced at the end of the latest Doha Round talks in Nairobi, Kenya, would allow developing countries such as India to continue subsidizing transportation and marketing costs for another eight years, and poorer nations wouldn't have to end the payments until 2030. India subsidizes transportation costs for sugar.

The use of export subsidies has largely been discontinued by developed countries, economists say. 

The curbs on export credits, such as the Agriculture Department's GSM-102 program, largely reflect restrictions that the USDA had already imposed in addressing Brazil's challenge to the U.S. cotton industry's subsidies, experts say. 

Lets Talk Food “A big objective here was to harvest what has been done and put it on paper,” Sharon Sydow, a USDA economist, said of the Nairobi agreement. 

The rules for food aid are intended in part to ensure that donations don't disrupt local markets. 

The agreement encourages countries to “increasingly procure international food aid from local or regional sources to the extent possible.” U.S. farm groups have resisted shifting to local and regional procurement away from reliance on commodities grown and processed in the United States. But the WTO agreement clearly doesn't mandate LRP; it only encourages it. 

The deal also would continue to allow monetization of food aid, the practice of selling some donated commodities to fund other types of assistance. 

The food aid provision “basically leaves our programs to continue as they are,” said David Salmonsen, a trade policy specialist for the American Farm Bureau Federation.

The Doha negotiations were launched in 2001 with the goal of liberalizing trade globally, including in agriculture, but the United States and other countries had largely long given up on the process. The tougher issues in agriculture on market access and domestic subsidies were left out of the agreement announced in Nairobi. 

U.S. Trade Representative Michael Froman said the WTO member countries have been “freed to consider new approaches to pressing unresolved issues and begin evaluating new issues for the organization to consider.” 

Heading into Nairobi, Froman had written that the focus in trade was already shifting to multilateral deals like the recently completed Trans-Pacific Partnership and the bilateral talks under way between the United States and the European Union. 

Still, Froman called the Nairobi agreement a “meaningful package.”

“Our work to secure a global ban on export subsidies will help level the playing field for American farmers and ranchers,” he said. “The WTO's actions in this area will put an end to some of the most trade distorting subsidies in existence and demonstrates what is possible when the multilateral trading system comes together to solve a problem.”

WTO Director-General Roberto Azevedo said the agreement “tackles the issue” of export subsidies “once and for all.”

But in his closing speech in Nairobi he acknowledged the divisions among WTO nations on the path forward. “Members must decide - the world must decide - about the future of this organization. The world must decide what path this organization should take.”

A coalition of U.S. farm groups had urged the Obama administration not to allow the agreement on export subsidies to weaken rules for developing countries, in particular by allowing the continued use of transportation subsidies. “This issue is critically important because we believe certain competitor countries could use the provision as legal cover for programs they are currently using to compete unfairly with U.S. exports,” the groups wrote

In their letter, the groups also raised concerns about Brazil's use of subsidies under its PEP and PEPRO programs, but those payments are reported to the WTO as domestic support, said Sydow. 

Under the Nairobi agreement, the poorest countries are given until 2030 to continue using transportation subsidies, but India and other higher income developing countries are given until 2023 to end them. The United States had taken the position that legal authority for transportation subsidies, known as Article 9.4, expired in 2004. 

House Agriculture Chairman Mike Conaway, R-Texas, said the Nairobi deal “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.”

Farm groups provided mixed assessments of the agreement. 

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Farm Bureau President Bob Stallman said that ending “trade-distorting export subsidies” and imposing restrictions on export credit programs “will lower agricultural trade barriers and strengthen U.S. agriculture's ability to pursue market opportunities in international trade,” he said.

But the American Soybean Association complained that the transportation subsidies were allowed to continue. “The Nairobi agreement effectively raises these subsidies from the dead and legitimizes their use without any meaningful discipline until 2023,” said Richard Wilkins, a Delaware farmer who is president of the group. 

U.S. Wheat Associates, a trade group, said that allowing the transportation subsidies represented a “step backward.” 

The group praised USTR for protecting U.S. food-aid practices and said it was a “positive outcome” of the Nairobi meeting that there was no commitment to continue the Doha Round.

“It is long past time for countries to shelve the failed Doha negotiations and move on to more productive trade liberalization efforts to address the challenges of the 21st century,” the group said.

The National Cotton Council was relieved that the agreement didn't include any restrictions on U.S. cotton programs. “U.S. negotiators held firm with respect to any cotton specific outcomes,” said Sledge Taylor, a Mississippi producer who chairs the group.

(Updated Dec. 22) 

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