WTO Public Forum 2013

A look into the Bali Ministerial Conference

The right to food through food security stocks: a development-oriented outcome at Bali?

Jacques Berthelot Solidarité, www.solidarite.asso.fr

October 3, 2013

Outlook

The G-33 proposal on food security stocks

What is the core issue?

Absurdity to put in the AMS the gap between

administered prices and 1986-88 border prices

The AoA allows to adjust the AMS from inflation

The National Food Security Bill of 5 July 2013

Comparing the US and Indian domestic food aid

Conclusions and recommandations

On 13 November 2012, the G-33 proposed an early

agreement at Bali to modify the footnote 5 of the AoA

Annex II as follows : “Acquisition of stocks of foodstuffs

by developing country Members with the objective of

supporting low-income or resource-poor producers

shall not be required to be accounted for in the AMS”.

This implies that "the difference between the acquisition

price and the external reference price” of food security

stocks released at subsidized prices to poor consumers

would no longer "be accounted for in the AMS”.

The G-33 proposal on food security stocks

For the AoA the AMS (Aggregate Measurement of Support)

covers all domestic subsidies other than those of the Blue

box and Green box exempted from reduction commitments.

What is the core issue?

The core issue is to allow WTO Members the policy space

to feed their poorest population whilst paying a fair price to

their farmers providing that food. This is a particular concern

in the largest DCs where the population would rise from 2010

to 2050 by 414 M in India, 281 M in Nigeria, 98 M in Pakistan,

82 M in Indonesia, 64 M in the Phillipines, 51 M in Bangladesh.

China’s population would rise by 93 M in 2030, then decrease.

Already one-third of India’s population, i.e. 400 M,

live below the poverty line of US1.25/day and

59% of rural children under five are stunted.

1206

1360

506

160

312 241

173 151 93

1453 1620

1385

512 440 401

321 271

202 157

-100

100

300

500

700

900

1100

1300

1500

1700The demographic challenge up to 2050

2010 2030 2050

Million inhabitants

Because an administered price alone cannot support

the domestic market price unless other most powerful

mechanisms are at play: high import protection,

subsidies to exported products, production quotas,

land set aside, domestic and foreign food aid.

This fake market price support has allowed the US

and EU massive box shifting from the amber box

(AMS) to the blue box and the green box without

reducing their actual level of agricultural subsidies.

How many WTO Members know that, in the 1995-00 base

period for the UR commitments, the EU actual average

subsidy represented only 11.5% of notified AMS of €48.4 bn,

the proportion being of 44% for the US $10.4 bn AMS ? And

these shares did not change significantly up to now.

Absurdity to put in the AMS the gap between

administered prices and 1986-88 border prices

22245

10401

14413

9637

6950

11629

12938

7742

6260

6255

4170

4120

6956

5914

5826

5771

5758

5866

5908

6154

6238

4060

4068

4103

14387

4591

8587

3866

1192

5763

7030

1588

22

2195

102

17

0 5000 10000 15000 20000 25000

1986-88

1995-00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

The overwelming weight of the fake market price support since 2006 in the US AMS, $M

Actual subsidies Fake market price support Total

59120

48425

43909

39391

28598

30880

31214

28427

26632

12354

11796

8764

52452

42859

31038

32561

23242

24971

25594

24619

24213

11612

8722

7316

6668

5576

12871

6830

5394

5920

5620

3825

3959

1038

3074

1448

0 10000 20000 30000 40000 50000 60000 70000

1986/88

1995/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

The overwhelming weight of the fake market price support in the EU AMS, in €M

Actual subsidies Fake market price support Total

The inconsistency of putting the gap between administered

prices and the 1986-88 reference prices in the AMS has been

underscored by many trade experts (OECD, World Bank,

FAO, W.K. Cline, H. de Gorter, Tim Josling).

Taking 1986-88 border prices as reference prices is absurd

The very low level of 1986-88 world prices, e.g. for wheat,

is clearly due to the EU+US huge combined dumping rate

of 101%, of which 88% for the US and 130% for the EU,

both making 53.2% of global exports, knowing that the

US is price maker for wheat as for most other grains.

2485

2382

56

840

5763

5689

0 2000 4000 6000 8000

Export subsidies

Domestic subsidies/exports

Guarantee export subsidies

Food aid

Total subsidies to exports

Export value

The average dumping rate of 101% of the US+EU exports of wheat and flour in 1986-88, $M

594

2092

56

633

3375

3849

0 1000 2000 3000 4000

Export subsidies

Domesticsubsidies/exports

Export guaranteesubsidies

Foreign food aid

Total subsidies/exports

Export value

The average dumping rate of 88% of the US exports of wheat and flour in 1986-88, $M

1891

290

207

2388

1840

0 500 1000 1500 2000 2500

Export subsidies

Domestic subsidies/exports

Foreign food aid

Total subsidies/exports

Export value

The average dumping rate of 130% of the EU12 exports of wheat and flour in 1986-88, $M

22245

10401

14413

9637

6950

11629

12938

7742

6260

6255

4170

4120

9706

1172

24098

49791

50672

58321

64062

67424

71829

76035

76162

86218

103214

120531

0 20000 40000 60000 80000 100000 120000 140000

1986-88

1995-00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

The huge expansion of the US green box linked to its domestic food aid, $M

Green box Blue box Amber box (AMS) Export refunds

19158

35030

33916

38013

42376

45861

50672

54177

54408

60519

78796

94915

4612

4100

5301

6488

5270

6164

6145

6130

5776

6176

5852

4940

10149

12656

15007

15198

16293

14993

15713

15624

19923

18242

19764

0 20000 40000 60000 80000 100000

1986-88

1995-00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

The three components of the US green box: domestic food aid, fixed direct payements, general services

General services Fixed direct payments Domestic food aid

0

10000

20000

30000

40000

50000

60000

70000

5906

3412 3439 3726 3384 3049 2489 1443 925 650 384 179

10894 12262 10431 10477 10226 10655 10236

4957 4517 6356 3930 3354

20888 23046 24949 25633 24782 27237

13445

5697 6154 6320

5851 3348

1449

15948

30369 31414 32794

33825 36830

5555 4363 6099 7141 8816

9924 11328 10869 10527

13982 11483 12292

17127 15253 10359 10116

14079

12320 11942 12529 11785

10356

9201 9001

The EU evolution of agricultural budget according to boxes from 1995-00 to 2011, €M

Red box: export refunds Amber box: interv+DA Blue box: DA

Green box: decoupled DA Green box: rural devpt State aids

Adjusting the AMS taking inflation into account ?

From 1986-88 to 2012 the inflation rate was of 8.03% in

India. As A. Hoda & A. Gulati "do not see any reason for

making less than full adjustment for the rates of inflation"

(ICTSD September 2013), the 1986-88 Indian CIF price of

Rs 3,548 ($264.6) would rise to Rs 22,649 which, converted

at the 2012 average exchange rate of Rs. 55.9/$1, would

be of $405.1, much higher than the minimum support price

(MSP) of wheat of Rs. 12,850 ($230) procured in

2012 so that the AMS was negative.

At most, taking the 2.75% inflation rate of the high income

OECD countries as a floor, the Indian excess rate would be of

5.28% and the 1986-89 Indian notified CIF price of Rs 3,548

($264.6) would jump at Rs 12,198 or $218.2 at the 2012

exchange rate of Rs. 55.9/$1, implying a wheat AMS of $11.8/t

which, multiplied by 17.5 Mt of food aid, was of $206.5 M.

The National Food Security Bill of 5 July 2013

The welcome National Food Security Bill poses new

challenges as the procurement would rise in line with the

extension of beneficiaries to 75% of the rural population

and 50% of the urban one, i.e. at about 800 M people

against around 475 M in 2010, and the total cost for the

Public Distribution System (PDS) might reach $20 bn.

A. Gulati & al. suggest that India should be more

flexible in the working of the PDS and enlarge the

conditional cash transfers, following the Bolsa Familia of

Brazil and the Philippines’ ‘Pantawid Pamilyang Pilipino

Program’, to which we can add the US food stamps.

Comparing the US and Indian domestic food aid

The US is by very far the largest provider of domestic food

aid, at $107 bn in FY 2012 – around $100 bn net of adminis-

tration costs – to about 80 M beneficiaries without double

count, i.e. $1,250/head –, of which SNAP (food stamps) at

$74.9 bn net to 46.6 M beneficiaries ($1,608/head) and

child nutrition at $17.7 bn to 45 M children (overlaps).

The US food aid/head is thus 6.3 times larger than in India

($199), and even 8.1 times larger for SNAP beneficiaries.

100

80

1250

475

199

0 200 400 600 800 1000 1200 1400

Total value, $ bn

Beneficiaries, M

$/beneficiary

The value of US domestic food aid was 10.6 times larger than the Indian one in

2012 and 6.3 times larger per beneficiary

India US

9.4

Around $15.1 bn was devoted to cereals products in 2011-12,

$23.7 bn to meat, fish & eggs and $11 bn to dairy products.

They used 14.6 Mt of cereals, of which 4.6 Mt of wheat

in cereals products, 9 Mt in feed cereals for meat,

dairy & eggs and 1.1 Mt of corn in HFCS for soft drinks.

Comparing the US and Indian domestic food aid

The US farm value of the 14.6 Mt of cereals (rice excluded)

was $3.685 bn, at an average price of $252.5 $/t. Each of the

80 M beneficiaries of the US food aid consumed 182 kg for

$461, of which 235 kg for the SNAP or $594/beneficiary.

Comparing the US and Indian domestic food aid

475 Indian poor, of whom 325 M under the poverty line and

150 M above it, got in 2012 17,5 Mt of wheat for $4.020 bn

(36.8 kg/head) and 24 Mt of rice for $5.424 bn (50.5 kg/head).

Each Indian beneficiary got 87.3 kg of cereals for $199,

48% less than the 182 kg of the US 80 M beneficiaries of

food aid (rice excluded) and 2.7 times less than the 235

kg (rice excluded) of the 46.6 M beneficiaries of SNAP.

14,6

182

3,873

484

41,5

87,3

9,444

199

0 100 200 300 400 500

Total cereals, Mt

Cereals/beneficiary, kg

Cereals, $M

Cereals/beneficiary, $

The value of US cereals food aid (US rice excluded) per beneficiary in 2012 was 2.4 times

larger than in India and the volume 2.1 times

India US

CONCLUSIONS

Because the bulk of the US food aid (food stamps) is

bought in agreed shops without passing through a public

procurement channel as in India, what is the logic that the

WTO demands to India (and all DCs) and not to the US

that "the difference between the acquisition price" and

"the external reference price of 1986-88" be "accounted

for in the AMS"? If the SNAP beneficiaries can also buy

some imported food, the overwhelming part is US made.

CONCLUSIONS

All US food programs other than SNAP, for about $25 bn

in 2012, imply public purchases of food on the market,

including procured from farmers for $1.6 bn in 2012-13,

all notified in the green box, which could be challenged as

trade-distorting as USDA acknowledges that: “These

purchases also help to stabilize prices in agricultural

commodity markets by balancing supply and demand”.

CONCLUSIONS

Many WTO Members, including among the G-33, lean to

solve the issue through a “Peace Clause”, the G-33

demanding it would last until a definitive solution be found

in the Doha Round whereas the developed countries would

agree it for at most 3 to 5 years, which would be dangerous

for the DCs for two reasons:

1) The Peace Clause of the AoA article 13 has allowed the

EU and US to continue their massive dumping for 9 years;

2) A Peace Clause in our issue will be presented as a huge

concession to DCs by the US-EU which will demand in

return a Peace Clause in the finalisation of the DR or in

other plurilaterals in order to continue their dumping.

RECOMMANDATIONS

What should be agreed instead in Bali is a WTO decision

once and for all that all domestic food aid should be

notified in the green box for all Members, independently of:

1) the level of prices paid to farmers, either through

public procurement or purchases at market prices,

2) the means by which the food reaches the poor:

either release in kind or purchases by food stamps.

Indeed these are very futile distinctions, provided that

other Members should not be harmed through dumping.

DCs are all the more justified to pay higher prices to their

farmers that they do not enjoy the large domestic

subsidies received by their colleagues of the developed

countries and which have a dumping effect on world

prices and consequently also on DCs’ market prices.

Such a decision would send a strong signal to all world

poors, and even to the US poors where the House of

Representatives refuses to finalize the Farm Bill unless the

Senate follows its Bill to cut the nutrition part by $4 bn/year.

Instead of being prevented from sustaining the agricultural

prices of their poor farmers by the present absurd AoA

rules on the AMS, the DCs should to the contrary be

praised by the most developed WTO Members to foster

in that way their overall development, which would

eventually spill over the developed countries themselves.

RECOMMANDATIONS

The detailed data of this presentation can be found in the paper "Analysis of the G-33's proposal to change the AoA provision on Public stockholding for food security” and downloaded at http://www.solidarite.asso.fr/Papers-2013

Thank you !