General Council - Committee on Agriculture - Committee on Trade and Environment - Committee on Sanitary and Phytosanitary Measures - Committee on Technical Barriers to Trade - Dialogue on sustainable agriculture in the multilateral trading system - Communication from Brazil

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.

 

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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:

·_              Policies that support sustainable and productivity enhancing agricultural practices.

·_              Policies that support strong, science-based institutional frameworks and research programs that facilitate innovation and adoption of new agricultural technologies.

·_              Policies that result in over-production, overuse or misallocation of resources, market distortions, or other negative impacts, environmental or otherwise.

·_              Policies that promote access to food for people in situation of food and nutritional insecurity while creating enabling conditions for family and small farmers or groups in a vulnerable situation to participate in and benefit from domestic food markets.

·_              Policies and mechanisms for technology transfer to enhance food security, build agricultural resilience, and encourage or incentivize low-carbon climate-friendly agricultural practices.

·_              Policies that give more favourable access to agricultural products produced with more sustainable methods.

·_              Cooperation in the definition of environment-related parameters for agriculture with a view of mitigating fragmentation.

8.2.  The issues listed above are not exhaustive but outline some of the challenges and opportunities that lie at the intersection of agriculture, trade, and environment. With a view to initiating a constructive dialogue on this important matter for the future of world trade, Brazil proposes that the General Council decides to hold a retreat in September 2024 on Sustainable Agriculture, in addition to identifying priorities and appointing a facilitator. The General Council would oversee this work and report on progress, including any recommendations, preferably addressing it to a Senior Officials Meeting on Agriculture to be convened in the second semester of 2025.

 

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[1] FAO (2023). Achieving SDG 2 without breaching the 1.5° C threshold: A global roadmap, Part 1 - https://www.fao.org/agrifood-economics/publications/detail/en/c/1675931/.

[2] IFPRI (2023), From Farm to Table: Agrifood Systems and Trade Challenges in the Southern Cone - https://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/137016/filename/137226.pdf.

[3] FAO (2021), Changing patterns of agrifood trade: the rising importance of developing countries. Trade policy briefs, no. 48. Rome, - https://doi.org/10.4060/cb7272en.

[4] FAO (2023), Achieving SDG 2 without breaching the 1.5o C threshold: A global roadmap, Part 1 - https://www.fao.org/agrifood-economics/publications/detail/en/c/1675931/.

[5] UNCTAD & the World Bank (2018), The Unseen Impact of Non-Tariff Measures: Insights from a new database - https://unctad.org/system/files/official-document/ditctab2018d2_en.pdf.

[6] FAO, UNDP and UNEP (2021), A multi-billion-dollar opportunity – Repurposing agricultural support to transform food systems. Rome, FAO - https://doi.org/10.4060/cb6562en.

[7] TESS (2022), Trade and Sustainability in the Agricultural Sector: Options for multilateral trade cooperation - https://tessforum.org/latest/trade-and-sustainability-in-the-agricultural-sector-options-for-multilateral-trade-cooperation.

[8] The World Bank and IFPRI (2022), Repurposing Agricultural Policies and Support: Options to Transform Agriculture and Food Systems to Better Serve the Health of People, Economies, and the Planet - https://openknowledge.worldbank.org/server/api/core/bitstreams/9b868e1d-ad84-5229-a0df-12b5411e848b/content.

[9] OECD (2023), Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change, OECD Publishing, Paris - https://doi.org/10.1787/b14de474-en.

[10] UNCTAD (2021), Better Trade for Sustainable Development: The role of voluntary sustainability standards Geneva - UNCTAD/DITC/TAB/2021/2 and Corr.1.