INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

IFPRI

On Food Stocks, “Peace Clauses” and “Permanent

Solutions” after Bali

Eugenio Diaz-Bonilla (IFPRI) A Post-Bali Food Security Agenda

May 6, 2104IFPRI

IFPRI

Structure of Presentation

Background

Legal Issues

Economic and Operational Issues

Conclusions

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Background 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

IFPRI

Legal Issues: Background and Proposal 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 exportsPage 4

IFPRI

Legal Issues: “Peace Clause” 1 No time to discuss options; therefore, postpone the

issue… Protects developing with existing programs from

complaints under AoA, if they comply with the rest of Annex 2.3 and additional conditions:

a) notify CoA that it is exceeding or at risk of exceeding DS b) be current on notifications of DS c) provide timely information on public FSS (template) d) FSS do not distort trade or adversely affect FS of others e) potential increase in DS only up to that notified in a) f) Accept requests for consultations

Temporary (limited period) versus Interim (until a “permanent solution” is found)

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Legal Issues: “Peace Clause” 2 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

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Legal Issues: “Permanent Solution” 1 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

“in accordance” with Annex 3 and “taking into account” constituent data and methodology in original schedule

With procured quantities and USD FERP, many developing countries stay below the “de minimis” (examples in Montemayor, 2014).

IFPRI

Legal Issues: Permanent Solution 2

The question is procurement (cont…) • Consider adjustment by inflation

18.4 refers to Committee on Agriculture, not countries 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…

IFPRI

Economic and Operational Issues 1

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

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Economic and Operational Issues 2

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)?

IFPRI

Conclusions

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…

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Food and Oil Price Indices (real; 2010=100)

Food Price Index Real Crude Oil Price Index

Oil Price Index Food Price Index

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