Friday, April 12, 2024

Behemoths face off in WTO subsidy talks

Avatar photo
India meets opposition as it seeks to have temporary dispensation set in stone.
Reading Time: 3 minutes

Both sides in talks to tackle nearly a trillion dollars in trade-distorting agricultural subsidies were digging in their heels at the halfway mark of a meeting of global trade ministers. 

New Zealand is represented by Trade Minister Todd McClay at the week-long biennial meeting of 164 World Trade Organisation ministers in Abu Dhabi, scheduled to finish up on Friday.

WTO director-general Ngozi Okonjo-Iweala heralded the consolidation of competing proposals for the agricultural talks into a single negotiating text as a significant step towards an agreement to tackle subsidies and tariffs on global agricultural trade. 

However, the head of the organisation’s agricultural division, Edwini Kessie, on Tuesday said significant obstacles to progress in the talks remained.

Foremost among these was India’s request for a permanent dispensation for subsidies paid to its farmers. 

In 2013 India was granted a temporary pass by WTO countries, and was demanding this be made permanent at the meeting in Abu Dhabi. 

The temporary dispensation was to help India build up food reserves available to be released during times of shortages in the country. 

But opponents argue this has led to excess production being exported and has depressed international prices for some commodities, among them rice.

Stephen Jacobi, the executive director of the International Business Forum, or IBF, which includes New Zealand exporting heavyweights Fonterra, Silver Fern Farms and Zespri, among others, said making the dispensation permanent risked undermining an earlier WTO ban on export subsidies and emboldening agricultural protectionists around the world.  

“Other countries that would love to get back into the export subsidies game might see this as an opportunity,” Jacobi said.

According to the OECD, governments around the world already pay their farmers $817 billion in subsidies annually. 

The Dairy Companies Association of NZ released research last week showing prices on international dairy markets stand to gain 8% if European agricultural subsidies are reduced by half. 

However, a former head of the Centre for WTO studies in New Delhi, Abhijit Das, who was attending the talks in Abu Dhabi, said subsidies are crucial to the livelihoods of Indian farmers and the welfare of the wider population. 

He said the extra subsidies allowed by the temporary dispensation meant enough rice and wheat had been produced for state reserves to feed 800 million people during the height of the Covid pandemic.

“If that had not been in place then the public stockholding would have unravelled and the Indian government would not have had the stocks to feed the people,” he said.

Das rejected the claim that subsidies paid to Indian farmers are undermining global export markets.

The subsidies are designed to build up domestic reserves and are not aimed at production for export. Where the Indian government has exported surpluses in the past it has done so at prices 30% to 50% above the international price, Das said.

He said if other WTO countries agree to the dispensation being made permanent it could unlock progress in other parts of the talks.

However, with the United States and the 19 agricultural exporting powerhouse countries of the Cairns Group, including NZ, opposing the Indian proposal, the chances of a broader breakthrough seemed slim.

The IBF’s Jacobi said while it was positive that competing proposals in the agricultural negotiations have been consolidated into a single document, there remain plenty of brackets in the text indicating disagreement between countries over the final wording.

“What that says is that while they are working on the same text they are not changing their views very much.”

Jacobi said the best outcome from the meeting would be an agreement for countries to keep talking with the hope that differences could be bridged by the time of the next WTO ministerial meeting in two years’ time.

“All of these matters are incredibly important for NZ and we have to keep working on them even if the going seems tough.”

People are also reading