IFPRI On Food Stocks Peace Clauses and Permanent

IFPRI On Food Stocks, “Peace Clauses” and “Permanent Solutions” after Bali Eugenio Diaz-Bonilla (IFPRI) A Post-Bali Food Security Agenda May 6, 2104 IFPRI INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Structure of Presentation IFPRI § Background § Legal Issues § Economic and Operational Issues § Conclusions Page 2

Background IFPRI § Food security not a new issue… • Emerged during UR, after UR, Doha (breakdown in 2008), almost breakdown in Bali § …but changed circumstances • • Higher prices, volatility? Recurrence of extreme weather events Energy developments affecting the food system Developing countries increases in GDP, agricultural production/exports, support to agriculture. • Changes in consumption and marketing channels § Bali Agreement only part of DDA • Trade Facilitation; 5 Ministerial Decisions on agriculture and cotton; 4 on development and LDCs. Page 3

Legal Issues: Background and Proposal IFPRI § Annex 2 (“Green Box”), paragraph 1: • “fundamental requirement” and “basic criteria” § Food security stocks (Annex 2. 3) and domestic food subsidies (Annex 2. 4) • Purchases at “current market prices. ” If “administered prices, ” compare to FERP (1986 -1988) • Selling prices can be at subsidized prices § G-33 proposal, based on the 2008 Modalities Rev. 4 • Not counting in AMS when a developing country purchases products for FSS from LI/RP producers • Concerns: violates basic criteria of no price support; excessive stocks may lead to subsidized exports Page 4

Legal Issues: “Peace Clause” 1 IFPRI § No time to discuss options; therefore, postpone the issue… § Protects developing with existing programs from complaints under Ao. A, if they comply with the rest of Annex 2. 3 and additional conditions: Ø a) notify Co. A that it is exceeding or at risk of exceeding DS Ø b) be current on notifications of DS Ø c) provide timely information on public FSS (template) Ø d) FSS do not distort trade or adversely affect FS of others Ø e) potential increase in DS only up to that notified in a) Ø f) Accept requests for consultations § Temporary (limited period) versus Interim (until a “permanent solution” is found) Page 5

Legal Issues: “Peace Clause” 2 IFPRI § WTO Members have to find “permanent solution” (until two Ministerial Conferences, about 4 years) § Only existing FSS protected § Notification and transparency requirements not mere formalities, considering many WTO members are extremely behind schedule § “traditional staple food crops” …. “primary agricultural products that are predominant staples in the traditional diet. . ” § LDCs exempted from DS disciplines § FSS could be challenged under other WTO texts (e. g. Subsidies and Countervailing Measures)? Page 6

Legal Issues: “Permanent Solution” 1 IFPRI § Developing countries can provide domestic food aid (Annex 2, paragraph 4) § The question is procurement… • Buy at market prices (Brazil, US) • Define “eligible production” in a way that focuses on quantities bought (follow Korean Beef case) • Define “fixed external reference price” (FERP) in USD Ø “in accordance” with Annex 3 and “taking into account” constituent data and methodology in original schedule Ø With procured quantities and USD FERP, many developing countries stay below the “de minimis” (examples in Montemayor, 2014).

Legal Issues: Permanent Solution 2 IFPRI § The question is procurement (cont…) • Consider adjustment by inflation Ø 18. 4 refers to Committee on Agriculture, not countries Ø But one submission was in constant 1991 prices § Clarify link between “administered prices” and “market prices” (Diaz-Bonilla, 2013) • Rebuttable presumed in compliance of not providing price support if administered prices are in line with domestic prices or import parity prices (including allowed border protection under WTO) • Not exports allowed from food security stocks § There are other (not good) ideas…

Economic and Operational Issues 1 IFPRI § Integrated Food Security Framework • FS: multidimensional ; influenced by many policies and contextual variables; diverse impacts depending on other policies, structural issues and type of households • Role for Public Food Security Stocks? Page 9

Economic and Operational Issues 2 IFPRI § Tinbergen Rule (1952) and Bhagwati Rule (1971) § Different types of FSS: Emergency, Food Redistribution Stocks, Stabilization Stocks (single price, price bands, extreme values, price support…) § Triple burden malnutrition: a) under-nutrition, b) micronutrients, and c) over consumption • Lack of dietary diversity, child stunting/wasting, mothers low BMI. Arimond & Ruel, 2006; Headey, 2013 § Food safety nets: physical delivery, vouchers, cash • Difficulty to administer? Costs? Vouchers and cash lead to greater dietary diversity (John Hoddinot et al, 2013) § If food stocks are to provide income support to producers, then better Article 6. 2, or Annex 2 paragraph 5 (direct income support to LI/RPs)?

Conclusions IFPRI § WTO: variety of legal options for FS, some do not need additional negotiations § “Food security” products a bad idea? It does not address poverty issues, and dietary diversification § Main problems are economic and operational • Analyze different FSS within Integrated Food Security Framework (multidimensional approach) § More complex political economy of trade negotiations and trade issues • Example India, many poor and small farmers, but a net food exporter (important in rice, beef, wheat)

IFPRI § THANKS… Page 12