Export Competition Disciplines in the Doha Round

The Doha Round Ministerial Decision called for "Reduction of, with a view to phasing out, all forms of export subsidies." The Export Competition Pillar of the agricultural negotiations includes direct export subsidies, export credits, state trading enterprises and food aid. The July framework gives further instruction that disciplines should ensure the parallel elimination of all export subsides with equivalent effect by a credible end date. The July Framework states that all direct export subsidies will be eliminated, so that the task remaining is to decide on the time frame and other details of the transition period. The elimination of export subsidies would be a significant achievement. While greater gains are expected to accrue from reform of domestic subsidies and improvements in market access, export subsidies have long been condemned as greatly distorting to world markets and detrimental to competitive exporters and import competing producers. As export subsidies are a compliment to policies such as high internal prices, their elimination will prevent the reemergence of some distorting forms of producer support. WTO members would benefit from being flexible about the details of the transition period if necessary to ensure achievement of this long-term goal. Food aid can act as an implicit export subsidy in some situations; however, disciplines on the subsidy component of food aid must preserve it humanitarian and developmental roles. Food aid programs with a market development objective should be eliminated. Food aid from surpluses accumulated due to agricultural policy could be disciplined by mandating that they be donated through the UN's World Food Program, in order to minimize possible political motivations for donations. However, many other disciplines that have been proposed would likely result in lower levels of food aid overall. The July Framework states that disciplines on food aid should prevent commercial displacement, an emphasis that indicates that the WTO is not the appropriate institution to develop detailed rules for food aid. A new institutional home with appropriate representation from recipients and the development community should be charged with assisting the WTO in developing further appropriate rules for food aid. The July Framework also states that government subsidies for STEs will be eliminated. A further discipline requiring countries maintaining STES to offer duty-free access to their domestic market for the goods they manage would eliminate the possibility that a highpriced domestic market is used to subsidized exports. Beyond these two measures, it is difficult to propose disciplines on STEs, as both economic analysts and member governments widely disagree on the impact of exporting STEs on world markets. Elimination of STEs monopoly rights is likely to result in further market power on the part of the private firms remaining in the market, and will not resolve concerns over market power, transparency and price discrimination on the part of both STEs and private firms. It is recommended that STEs be disciplined within negotiations on competition policy, so that both STEs and private firms are addressed. The July Framework also mandates that export credit programs of more than 180 days be eliminated, a major step towards reducing the subsidy component of export credit programs. Negotiations are now focused on developing detailed rules for export credit programs. Due to the recent WTO ruling on the US cotton program, it is important that rules for export credit programs ensure that programs are structured to avoid a net cost to the government. Progress in the negotiations indicate that WTO members want to eliminate the subsidy element of export credit programs even at the cost of eliminating the potential additionality that these programs can create when they assist importers in alleviating liquidity constraints. Special and differential treatment for developing country members can be realized through granting longer transition periods in the elimination of direct export subsidies. Likewise, if STEs are mandated to coexist with the private sector, developing countries should be exempted, and elimination of government subsidies to STEs should have a longer transition period. It is proposed to create a new export credit program to assist developing countries in alleviating liquidity constraints for food imports. If this program is not limited by budgetary constraints or excessive conditionality for recipients, it could provide a significant step in meeting the goals of the Doha Round and previous WTO commitments to developing country food security. Parallel elimination of various forms of export subsidies is ideal and helpful in achieving the political consensus for reform. However, parallel elimination should not compromise the important role that food aid can play in the food security and development of developing countries. It can perhaps best be achieved by writing simple rules that eliminate over time the use of government funds for direct export subsidies, export credit programs and state trading.