WTO 10 Ministerial logoThe World Trade Organization (WTO) 10th Ministerial Conference was held, for the first time in WTO history, in Africa – Nairobi, Kenya. Scheduled for December 15-18, 2015, extending discussions for a fifth day allowed the Ministers to reach consensus on the Nairobi Package.

In the Ministerial Declaration, WTO members reaffirmed the pre-eminence of the WTO as the global forum for negotiating trade rules and for trade governance and pledged to strengthen the multilateral trading system in a manner inclusive of prosperity and welfare for all Members. They also directly addressed the divergence of views on how to conduct the current round of trade negotiations while, essentially, endorsing the very incremental progress made to date.

Launched in 2001, the Doha Development Round was intended to negotiate new rules on a wide range of trade activities as part of a single undertaking – one package of trade rules to which everyone agrees at the end of the Round. However, the single undertaking has eluded the Members who have been unable to even agree on what they mean by the term “Development.” Agriculture trade rules have been at the heart of this impasse.

Director General Azevêdo, beginning with his first Ministerial in this role, has been identifying those portions of the Doha negotiating issues that can be agreed to in mini-packages. The highlight of the Bali Package from the 9th Ministerial in 2013 was the Trade Facilitation Agreement to expedite movement of goods across borders. The Nairobi Package contains Members’ consensus around the sticky Agriculture issues.

Nairobi Package on Agriculture:

Export Competition – This Decision introduces new rules to reform provision of financial support by WTO members for the export of their agricultural products.

  • All export subsidies are to be immediately eliminated by developed countries. Developing country members have until the end of 2018 to do so or in the case of cotton products by January 1, 2017, with exceptions with respect to support for producers of basic agricultural products until the end of 2023. For least developed countries (LDCs) and the thirty-one net-food importing developing countries these exceptions remain in place until the end of 2030. Developing countries are nevertheless required to ensure that their programs are not used to circumvent their obligations under this Decision.
  • Financial support in the form of export credits (but not working capital for suppliers), export credit guarantees and insurance programs can be provided for no more than eighteen (18) months and must be self-financing (covering long-term operating costs and losses), charging risk-based premiums. Developed countries must comply by the end of 2017. Developing country Member providers of export financing receive a four-year phase-in period (36-month term as of 2016, 27-month term by 2018) to achieve the 18-month term by the end of 2020. LDCs and net-food importing developing countries can receive payment terms of up to 54 months for procurement of basic foods, with extensions permitted under exceptional circumstances. Existing contracts that do not conform can be allowed to run their course, so long as they are not modified and are notified to the WTO Committee on Agriculture.
  • Agricultural Exporting State Trading Enterprises (STEs) must comply with these rules and refrain from using their monopoly powers to displace or impede the exports of other Members. STEs are governmental or non-governmental enterprises authorized to engage in trade with exclusive or special rights that allow them to influence the level or direction of imports or exports. STEs are prevalent in China and also function as marketing boards for specific products in many developing countries.
  • While reaffirming commitment to maintain adequate levels of International Food Aid, Members must ensure that such aid is needs-driven, provided as grants only, and is tied neither to the commercial exports or the market development objectives of the donors. Agricultural products provided as food aid are not, as a general rule, to be re-exported and must take into account local market conditions for the same or similar product – procuring locally or regionally where possible. Members are encouraged to provide cash-based food aid. Monetization of food aid – food exported and sold on the local market of the receiving country to support other projects – should be a last resort and be related to delivery of the aid or to address chronic hunger or malnutrition in LDCs and net food importing developing countries.
  • Notifications to the WTO on Members’ programs and activities in these areas were required by a Decision put in place at the Bali Ministerial in 2013. Members are required to continue to annually provide information on export subsidies, export financing, STEs, and provision of food aid using the structure provided in the Annex to the Decision.

Special Safeguard Mechanism for Developing Country Members – The Ministers again agreed, in principle, that developing country members have the right to a safeguard mechanism (SSM) on Agriculture. The SSM would allow developing countries to raise tariffs beyond negotiated levels to respond to a surge in agricultural imports or price drops. This principle was first agreed to at the 6th WTO (Hong Kong) Ministerial Conference in 2005 when negotiations for the Doha Round were still underway in earnest. However, negotiations around this specific issue have in the past broken down over the question of how high would a country being affected be able to raise tariffs on the relevant product. This Decision essentially sends members back to the negotiating table – but perhaps this time with a stronger mandate to resolve the tough questions by the next Ministerial Conference in 2017.

Public Stockholding for Food Security Purposes – The Ministers reaffirmed a 2014 decision on this issue and directed that negotiations continue in a concerted effort to arrive at a permanent solution. This highly technical – and politically challenging – issue revolves around rules for government subsidies to their farmers. An interim solution agreed to as part of the 2013 Bali Package instituted a “peace clause” for developing countries so that they would be shielded from trade challenges even if their programs negatively impacted other countries’ trade. After a year-long controversy on interpretation of the interim agreement, Ministers agreed in 2014 to keep the peace clause in place until a permanent solution is agreed to in 2015. This Decision directs the members to keep working on the issue in 2016.

Decision on Cotton

As of January 1, 2016, developed and developing country Members shall, if permitted by their trade regimes, provide duty‑free and quota‑free market access for cotton and cotton products produced and exported by LDCs. This Decision also reinforces the one on Export Competition with regards to cotton. It responds to the issues raised in the Cotton Initiative by four cotton-producing LDCs in Africa. In 2003, Benin, Burkina Faso, Mali and Chad —the “Cotton Four” – proposed that the WTO address the trade-distorting practices of WTO members in the cotton sector. They seek reforms to market access and to Members’ support for domestic production and the export of cotton in order to level the playing field for cotton exporters in the poorest countries.

Other components of the Nairobi Package will be discussed in our next post.