WTO Members Mull Schedule Changes To Implement Export Subsidies Deal

In the wake of their December agreement in Nairobi to eliminate agricultural export subsidies, World Trade Organization members are engaged in a debate internally and in Geneva about how they will implement that commitment, with some saying they will do so by modifying their export subsidy schedules and others such as the United States stopping short of such a step.

This question is important because modifying the export subsidy entitlements contained in Part IV of a member's tariff schedule under the General Agreement on Tariffs and Trade (GATT) is the only way the commitment in the Nairobi export competition decision to eliminate export subsidies could be made subject to WTO dispute settlement.

This is because the Nairobi decision, while politically binding, is not itself a "covered agreement" under the WTO that is directly subject to dispute settlement, sources said.

The Nairobi decision generally requires export subsidies to be eliminated by developed countries immediately and by developing countries by the end of 2018, but allows these deadlines to be extended under certain conditions.

Other aspects of the Nairobi export competition decision do not deal with scheduled commitments, specifically the obligation for developing countries to eliminate by 2023 so-called Article 9.4 export subsidies for marketing and transportation costs, as well as disciplines on export credits. But WTO experts say there may still be a way to subject these commitments to dispute settlement (see related story).

The question of whether WTO members will amend their export subsidy schedules is only relevant for those like the U.S. and European Union that have such entitlements in their GATT schedules. Countries that do not have export subsidy entitlements in their schedules are already prohibited from providing export subsidies, although the Agriculture Agreement made a temporary exception for Article 9.4 subsidies.

Besides the U.S. and EU, the WTO members with scheduled export subsidy commitments are Australia, Brazil, Canada, Colombia, Iceland, Indonesia, Israel, Mexico, Norway, South Africa, Switzerland, Liechtenstein, Turkey, Uruguay and Venezuela.

At a March 9 meeting of the WTO Agriculture Committee, Australia, Canada, Switzerland, Norway, Colombia and Uruguay said they would modify their GATT schedules to eliminate their export subsidy entitlements, according to Geneva sources.

Some sources said that there is no great controversy surrounding the scheduling since the majority of the biggest users of export subsidies had made clear they would alter their schedules.

The U.S., by contrast, signaled at the meeting that it considered the Nairobi decision to be fully binding and would implement it, but did not mention anything about modifying its GATT schedule, they said. The Office of the U.S. Trade Representative did not respond to repeated questions about whether the U.S. would modify its GATT schedule.

Several sources said they believe the only credible interpretation of the Nairobi decision for countries with scheduled export subsidy entitlements is to change their GATT schedules.

"There's nowhere to go, you have to do it," said one former U.S. agriculture trade official. "If they don't change them, that seems to me contrary to both the spirit and letter of the [Nairobi] agreement."

He and another Geneva source argued that if the U.S. fails to modify its schedule, it could create a bad example for other WTO members in terms of implementing both the Nairobi decision and future agreements. The Geneva source speculated that the U.S. would ultimately alter its schedule but was not ready to announce that at the meeting.

Kim Elliott, senior fellow at the Center for Global Development, speculated that the U.S. may be holding back because modifying its GATT schedule may require a greater role for Congress, or have potential political ramifications. But she said she did not think the U.S. was taking this approach in order to avoid its Nairobi obligation to eliminate export subsidies.

The EU took somewhat of a middle road at the Agriculture Committee meeting, saying some modifications to its schedule may be necessary, and that it was ready to look at options to discuss the best approach, sources said.

One source said he expected WTO members to come forward with further clarity about how they will implement their Nairobi commitments on export subsidies at the next Agriculture Committee meeting, which is slated for June.

The debate arises from the fact that the Nairobi decision does not explicitly say that members must modify their GATT schedules in order to implement their commitments to eliminate export subsidy entitlements. This stands in contrast to the approach taken in the expanded Information Technology Agreement (ITA).

The July 2015 declaration by ITA expansion participants states that each party shall modify its GATT schedule to reflect the new tariff rates using the procedure laid out in the Decision of 26 March 1980 on Procedures for Modification and Rectification of Schedules of Tariff Concessions.

Sources said these same procedures would be used for countries to modify Part IV of their GATT schedules containing their export subsidy entitlements. These procedures are used when WTO members are making changes to their schedules that further liberalize trade.

The issue of how the export subsidies commitments would be implemented was not discussed very much in Nairobi. In addition, the fast-changing nature of the negotiations in Nairobi led to several drafting errors or inconsistencies in the text that further cloud the implementation issue.

For instance, Paragraph 6 of the decision states that developed country WTO members "shall immediately eliminate their remaining scheduled export subsidy entitlements as of the date of adoption of this Decision."

Sources pointed out that it would be impossible for members to change their GATT schedules by the same day the decision was agreed. But they chalked this wording up to the fact that the previous draft text circulated on Dec. 17 had originally set the date for elimination as 2020.

Another apparent inconsistency is that Paragraph 7 commits developing countries to "eliminate their export subsidy entitlements by the end of 2018," but does not refer to "scheduled export subsidy entitlements" as does Paragraph 6.

But sources said they do not see countries interpreting this commitment any differently than the one that applies to developed countries. They noted that two developing countries -- Colombia and Uruguay -- have already said they will modify their schedules.

Sources also noted that much of the wording for these commitments was adapted from the 2008 Doha draft agriculture text, which was drafted in a different context with the assumption that the outcome of the negotiations would become part of the WTO agreement rather than a ministerial decision. -- Matthew Schewel

Last modified onThursday, 12 May 2016 15:59
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