dialogue on SUSTAINABLE AGRICULTURE IN THE
MULTILATERAL TRADING SYSTEM
communication from BRAZIL
The following communication,
dated 4 June 2024, is being circulated at the request of the delegation of
Brazil.
_______________
1 INTRODUCTION
1.1. During negotiations of the outcome document for the Thirteenth
Ministerial Conference of the WTO (MC13), Brazil proposed establishing a
dedicated dialogue on sustainable agriculture. This would provide space for
discussions on how the multilateral trading system can better support
agriculture and food systems that are sustainable and resilient, in recognition
of Members' unique circumstances, practices, and common concerns related to
economic development, food security, environmental sustainability. Such forward-looking
dialogue, of a general nature, would occur under the direction of the General
Council.
1.2. Notwithstanding the fact that some issues were not captured in MC13's
outcome document, the relevance of sustainable agriculture for the future of
the multilateral trading system, building on the foundations of agricultural
reform and other related topics, is undeniable. The WTO can and must play a
role in this area of increasing concern to help overcome what the FAO has
described as drivers of agriculture sustainability inactions: denial, division,
distraction and doomism.[1]
2 AGRICULTURE AND SUSTAINABILITY
2.1. In today's world, humanity is faced with the challenges of
mitigating and adapting to climate change and reversing the exhaustion or
degradation of natural resources, including biodiversity, water, soil
fertility, among others. With this in view, the number of trade policies and
measures guided by environmental goals has increased, not all of them
necessarily effective, nor free and fair. Some would require a new reading of
the multilateral trade rules to be considered compliant. Additionally, these
policies and measures must balance legitimate sustainability objectives with
the need to increase production and productivity of safe and nutritious food
that is able to satisfy the needs for a growing global population. These
policies must make the benefits of inclusive and sustainable development extend
to all, including communities in rural areas left behind. In other words, the
effectiveness of the global response to environmental challenges requires
building national social and economic capacities ("no farmer will go green
if he is in the red"), narrowing the gap between developed and developing
countries through increased and more effective international cooperation,
coordination, trade, and rulemaking.
2.2. While assessing worldwide emissions from agrifood systems, it is
important to bear in mind, firstly, the inescapable need to respond to growth
in demand, as the global population rose by 60% in the last three decades and
is expected to peak at 9.8 billion people in 2050, in addition to efforts to
improve levels of food and nutritional security worldwide. Secondly, that the
commensurate boost in agriculture output has been made with marginal change in
land use patterns in this period and relative decrease in participation on GHG
emissions in comparison to other sectors. From 1990 to 2019, agrifood systems'
share in global emissions fell from 40% to 31%. In the meantime, emissions from
industrial processes, energy, and waste grew 203%, 62.0%, and 19.9%,
respectively. As the data demonstrates, the relative share of agriculture and
Direct Land-use Change and Forestry (LUCF) in total GHG emissions has dropped
in relative terms in the last three decades.[2]
In our consideration of sustainable agriculture, we must therefore bear in mind
that agriculture, as such, is not the major contributor to climate change and
that making it more sustainable is a win-win objective in terms of
food-security and effective climate-change mitigation and adaptation.
3 AGRIFOOD TRADE AND SUSTAINABILITY
3.1. The value of global agrifood trade in real terms has more than
doubled in the past three decades. Overall, it grew at an annual average rate
of 3.8%, reaching USD 1.37 trillion in 2019 from
USD 531 billion (in real terms) in 1990. Market participation of
developing countries has been on the rise, attesting to the increased
production efficiency and capacity of countries in the South, and the critical
role agriculture plays as a development enabler. However, growth has slowed
down as of the 2008 financial crisis, and agrifood trade has since been
outpaced by global merchandise trade once again. Consequently, its share in
total global merchandise exports has dropped[3],
particularly to the detriment of developing countries. We need to reverse this
trend through agriculture reform and the promotion of more sustainable patterns
of production, freer flows, and less distorting measures.
3.2. The 2030 Agenda for Sustainable Development defines international
trade as "an engine for inclusive economic growth and poverty reduction,
[that] contributes to the promotion of sustainable development".
Furthermore, regional imbalances between food supply and demand, disparities in
the endowment of natural resources, and the different geographical conditions
for sustainable food production are closely linked and require concerted global
action to eradicate hunger with greater environmental efficiency in food
production. Some regions show significant comparative advantages over others in
this regard. Accordingly, international trade should support resource
efficiency and act as a resilience strategy. This requires fair competition and
strong disciplines, while recognizing domestic production cannot be downplayed
as a means of reducing inequalities[4]
and promoting food security.
4 EFFECTS OF CERTAIN POLICIES AND MEASURES ON AGRICULTURAL TRADE
4.1. Trade in the agricultural sector is heavily distorted. Not only are
bound and applied tariffs on agricultural products almost double those of
industrial goods, on average; non-tariff measures (NTMs), such as SPS or TBT
measures, disproportionately affect agricultural trade. Ad Valorem Equivalents
(AVEs) of NTMs are much higher for agriculture than for other economic sectors,
while for food products, in particular, AVEs of NTMs are on average almost
three times higher than normal tariffs.[5]
Furthermore, 87% of the USD 470 billion spent annually on agricultural
subsidies distorts prices and harms people and the planet. At the current pace,
spending will triple by 2030 to USD 1.759 trillion, with 73% of this
amount affecting market and prices.[6]
4.2. In this context, many policies and measures designed to generate
positive environmental outcomes may negatively impact the already heavily
distorted trade in agriculture. For instance, distortions caused by large-scale
domestic subsidies, particularly in developed countries with ample fiscal
space, tend to jeopardize the economic viability of national agricultural
sectors in cash constrained developing countries, particularly, but not
exclusively, the least developed among them. Furthermore, measures enacted for
environmental reasons can be trade restrictive and unfair, transferring the
onus of adjustments or the ensuing burden of protectionism upon others,
enhancing asymmetries contrary to the rules and principles of the multilateral
trading system. As highlighted by the Forum on Trade, Environment and the SDGs
(TESS), the use of unilateral border measures, such as bans, restrictions, or
additional duties which purport to "equalize" environmental
transition costs, passing it on to exporting third countries, remain highly
controversial in the multilateral trade setting. Affected exporting countries
argue the high probability that such measures would not be considered compliant
with the WTO agreements.[7]
Possible direct consequences are increased food insecurity, the erosion of
socio-economic capacities of affected Members and the unwarranted deviation of
valuable resources that could be allocated to financing sustainable transitions
in a larger pool of countries.
5 FOSTERING SUSTAINABLE AGRICULTURE
5.1. The idea that distorting agricultural subsidies can be repurposed as
"environmentally smart" has appeared in recent trade and environment
literature, as a sort of panacea. It is argued that appropriate incentives
could encourage producers to adopt practices that generate positive
environmental effects.
5.2. However, the risk is high that such "repurposed" support
measures end up masking a loss of competitiveness or a reduction in
productivity; encourage practices that disregard the other pillars of
sustainable development; or serve objectives that are not necessarily
legitimate from a trade and environment point of view. It is not easy to
measure environmental benefits to ensure that payments are at most equal to the
ecosystem benefits generated, so that they do not become mere rule‑breaking
competitive advantages. The World Bank and the International Food Policy
Research Institute (IFPRI), in "Repurposing Agricultural Policies and
Support"[8],
provide data that cast doubt on policies such as transferring subsidies to
low-emission crops, or promoting methods and practices that have been called
"green", but which unnecessarily reduce land productivity and
agricultural efficiency, such as the uncritical reduction of fertilizers and
pesticides. The study suggests that these policies can generate negative
environmental, social, and economic results, in the form of increased planted
area, higher cost of healthy diets, and reduction in economic activity and
income.
5.3. On the other hand, certain other measures that are not in
contradiction with the multilateral trading system and policies may be
effective in supporting sustainable agriculture. For instance, support for
agricultural R&D and innovation, as well as for training and extension
services, play a vital role in helping to mitigate agricultural emissions and
to adapt agricultural sector to climate change. Agricultural R&D is a key
driver of productivity growth, which can help reduce emissions by allowing more
food to be produced with the same or even smaller quantities of
emissions-intensive inputs (e.g. land, fertilizers, feed). Innovations such as
improvements in farm management practices, new crop varieties and livestock
breeds, and new digital technologies (e.g. precision agriculture) can reduce
the emissions intensity of production (i.e. emissions per unit of output) while
mitigating emissions from land use change. Nonetheless, support for
agricultural innovation, as measured by the OECD, remains low at just 0.7% of
the value of agricultural production for the 54 countries covered.[9]
5.4. Finally, instead of focusing on protectionist or otherwise punitive
trade measures designed to discourage unsustainable practices, Members should
be discussing trade measures that encourage sustainable practices. Little to no
attention has been given thus far to bringing together, in innovative
negotiating formats, Members that are interested in creating trade-incentives
for products meeting certain parameters of agriculture sustainability or
produced in accordance with them.
6 REGULATORY FRAGMENTATION AND ITS IMPACT ON DEVELOPMENT
6.1. One negative effect of the proliferation of private standards and
unilateral trade measures, even under the best of environmental intentions, is
regulatory fragmentation. Different certifications define sustainability in
radically different ways and there is no standardized, authoritative definition
of sustainable production; therefore, no benchmark against which to measure
environmental performance.[10]
6.2. Such fragmentation leaves room for arbitrage, hampering trade and
innovation. It can also increase transaction costs and compliance for
agricultural producers, especially in developing countries. In a worst-case
scenario, agricultural producers from developing countries would be excluded
from value-chains and face the widening of the inequality gap between rural and
urban populations. Alternatively, but also negatively, proliferation of
certification processes would allow for an intermediary in the value chain who
eats away at the income margins of producers.
6.3. Regulatory fragmentation also hinders international regulatory
cooperation and coordination, creating a conflictive dynamic between exporters
and importers. International regulatory cooperation, on the other hand, would
facilitate joint efforts to address environmental challenges, improving (i)
regulatory effectiveness (by addressing cross-border problems), (ii) economic
efficiency (by reducing barriers to trade) and (iii) administrative efficiency
(through training and learning from the experiences of other countries).
7 LEVELLING THE PLAYING FIELD WHERE CONDITIONS DIFFER
7.1. Trade and sustainability measures are increasingly advancing over
processes and production methods (PPMs). In doing so, Members should refrain
from prescribing one-size-fits-all PPMs for producers under very divergent
climatic and geographical conditions. Levels of environmental protection cannot
be arbitrarily selected, nor can they be divorced from other economic and
social development considerations, which are equally important pillars in the
promotion of agriculture sustainability. Therefore, when developing measures to
address environmental issues, multilateral indicators should be used, such as
the prevalence of clean energy in the energy source matrix. In addition,
reducing the level of subsidies is relevant not only to guarantee a level
playing field but also to channel natural and financial resources to efficient
ends.
7.2. In the interest of leaving no one behind, which is true for hunger
and cannot be different for agrifood production, international cooperation is
of the utmost importance, especially considering the increasing burdensome
requirements for effective market access. Many countries lack the knowledge and
the technical and financial resources to implement initiatives needed either to
enhance the sustainability of their production or to certify their agrifood
systems. These challenges are particularly evident in the agricultural sector,
as a result of the costly technological packages required for assessing the
agroecological and edaphic soil conditions of each country. Therefore,
cooperation plays a vital role in bridging the gap for the adoption of more
efficient production systems globally.
8 CONCLUSION
8.1. Given its priority status, and centrality to the credibility of the
WTO, agriculture reform, in line with Article 20 of the Agreement on
Agriculture, requires a fully dedicated negotiating track for its
deliberations. This should not preclude a forward-looking discussion on
sustainable agriculture under the direction of the WTO General Council,
addressing 21st century challenges to agricultural production and
trade, which seems timely and appropriate. Such dialogue should take into
account all the three pillars of sustainable development and be science and
evidence-based, without prejudice to the GATT, AoA, SPS and TBT Agreements.
Among aspects worthy of attention, discussions could include:
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