The long wait for WTO reform
The US presidential election on November 3rd poses enormous challenges for the multilateral system. First, for the Paris Climate Agreement: by coincidence, at the end of the process initiated by Donald Trump in June 2017, the United States will withdraw from the Agreement on November 4th, unless Joe Biden, if elected, keeps his promise to return to it. Second, for the resolution of ongoing disputes at the World Trade Organization (WTO), starting with the one between Boeing and Airbus that threatens to escalate into a trade war. Finally, for the very functioning of the WTO, since Washington is blocking the appointment of new judges to the Appellate Body, thus paralyzing the dispute settlement process.
In truth, Europe is calling for a reform of the WTO that would go far beyond restoring its proper functioning. It wants to fundamentally renew the multilateral trade framework, in order to be able to negotiate with China, now recognized as a "systemic rival," on subsidies to state-owned enterprises, intellectual property theft, and forced technology transfers, areas currently little or not regulated by the Geneva-based organization. Brussels wants to discuss these issues by seeking consensus with all trading partners, rather than engaging in gunboat diplomacy with an uncertain outcome.
How is agriculture affected by WTO reform? Of the 593 disputes brought before this organization since 1995, 14 involve the Agreement on Agriculture and concern nearly half of the member states.[1]. Certainly, no one is seriously considering, in the immediate future, resurrecting the defunct Doha Round of negotiations, which aimed in particular to deepen the liberalization of trade and agricultural policies. But the world needs an effective arbiter to curb subsidies and regulate the practices of states with traditional sovereignist aspirations, reinforced by the Covid-19 pandemic. These aspirations are sometimes legitimate, but it is better to include them in a cooperative approach, so as not to give free rein to the law of the strongest.
WTO reform proposals presented by the European Commission in 2018[2] also aim to restrict the conditions for applying "special and differential treatment" (SDT). This allows developing countries to benefit from less stringent disciplines or even complete exemptions for the reduction of certain subsidies and the opening of markets, including in agriculture. According to Europe and the United States, allies on this point, emerging countries make excessive use of SDT, beyond what is justified by their specific constraints. This is a sensitive issue, which would require a better understanding of the nature and intensity of these constraints in order to find a balance between development requirements and the reduction of market distortions. This review of SDT will probably not be possible without concessions from high-income countries, for example on the preferential treatment granted to aid in the "green box" of the Agreement on Agriculture, in which the majority of European direct payments are classified.
Finally, in the coming years, agriculture will need a strong and respected WTO to clarify and evolve trade rules that impact the protection of biodiversity and the fight against climate change. This is evidenced by the French government's refusal to ratify the draft agreement between the European Union and Mercosur because it "has no provisions to discipline the practices of Mercosur countries in the fight against deforestation"[3]. It should be noted, however, that in this case, the issue is whether or not to grant the countries concerned (Argentina, Brazil, Paraguay, Uruguay) trade concessions beyond those consolidated at the WTO, not to call the latter into question (Brazilian soybeans already enter Europe at zero duty). In other words, it is the European strategy of bilateral trade agreements that is being singled out, because it remains too timid when it comes to sustainable development.[4]. But we can clearly sense that a much more radical position is emerging in public opinion, which questions the legitimacy of open trade with countries accused of reprehensible environmental practices. A position that goes so far as to challenge the basic rules of world trade, as codified in the General Agreement on Tariffs and Trade (GATT).
In this context, it will be interesting to follow the debates that will undoubtedly arise from the European Commission's plan, still under consideration, to impose a "carbon border adjustment mechanism", that is to say a tax or customs duty on products imported from countries with overly lax climate policies.[5]To avoid trade retaliation, the Commission wants to develop a "WTO-compatible" mechanism, i.e. based on the provisions of Article XX of the GATT Agreement, which authorizes, under certain conditions, the restriction of market access in the name of environmental objectives. Will the carbon tax be applicable to agricultural products? Should trade policy be "greened"?[6] This is what European farmers want, although they are not directly subject to greenhouse gas emission reductions, but who are subject to increasingly stringent health and environmental standards and see their competitiveness eroded against competitors who sometimes do not even respect their own environmental legislation.[7]Some third countries view this development very negatively and denounce a protectionist drift; at the World Economic Forum in Davos in January 2020, the Managing Director of the International Monetary Fund, Kristalina Georgieva, publicly expressed reservations about the establishment of such a mechanism.
Perhaps the solution lies, beyond the carbon adjustment mechanism, in a WTO agreement clarifying the rights and duties of states in integrating trade and sustainable development. A narrow path, but one that is far preferable to the one recently proposed by the UN Special Rapporteur on the Right to Food.[8], who wishes "terminate the WTO Agreement on Agriculture" on the grounds that he "has not achieved the desired trade results, let alone food security", as trade will play an increasing role in global food security due to the negative effects of climate change on agricultural production. This is certainly a lot of work for the next head of the WTO.
[1] Joseph W. Glauber and Xiarong Xing, “WTO Dispute Settlement Cases Involving the Agreement on Agriculture, 1995-2019,” IFPRI Discussion Paper 01917, April 2020.
[2] “WTO – EU's proposals on WTO modernization”, Council of the European Union – General Secretariat, WK 8329/2018 INIT, 05 July 2018.
[3] The Express, September 18, 2020.
[4] Tancrède Voituriez, “Does Europe have control over its agricultural free trade agreements?” Demeter 2020 under the direction of Sébastien Abis and Matthieu Brun.
[5] The European Commission's communication published on 27 May 2020 as part of the presentation of the "Next Generation EU" recovery plan includes a forthcoming proposal for carbon adjustment at the Union's borders by 2021. This measure is designed as "a new own resource for the EU budget, which would help repay funds raised in the future for the 'Next Generation EU' instrument"It is also presented as a means of dealing with the risk of carbon leakage, by "full compatibility with WTO rules".
[6] Pascal Lamy, Geneviève Pons and Pierre Leturcq, “Greening EU trade policy. A proposal for carbon adjustment at the borders of the European Union”, Policy paper / June 2020, Jacques Delors Institute.
[7] According to a study published in the magazine Science As of July 17, 2020, approximately one-fifth of Brazilian soy and beef exports to the European Union come from land that has been subject to illegal deforestation.
[8] “The right to food in the context of international trade law and policy,” Note by the Secretary-General, United Nations General Assembly, A/75/219, July 22, 2020.
