The WTO has had longstanding debates about export restrictions in agriculture and non-agricultural items like rare-earth materials. Under GATT 1994 rules quantitative restrictions are banned, but Article XI paragraph 2(a) allows “restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.” Presenters at the forum suggested that terms like ‘temporarily’ and ‘critical shortages’ should be clearly defined by the WTO Agricultural Committee.
Better implementation of existing rules on transparency under Article 12 of the Uruguay Round Agreement on Agriculture was suggested by several contributors. Member are required to “give due consideration to the effects of such prohibition or restriction on importing Members’ food security”, “give notice in writing, as far in advance as practicable, to the Committee on Agriculture” and “consult, upon request, with any other Member having a substantial interest as an importer”.
Participants noted other conferences called for protection for low-income net food importing countries, but nothing has happened except a ‘carve out’ for World Food Program purchases which are relatively small. Hope was expressed that actions would be taken at the eighth WTO Ministerial Conference in December.
An International Policy Council background paper from 2009, Agricultural Export Restrictions: Welfare Implications and Trade Disciplines by Mitra and Josling, delved deeper into the issues. The authors recognize that countries impose export restrictions because of their own food security issues or to retain profit opportunities in further processing. Low income people in the exporting country could be protected by a two-price system where the government subsidized purchases at stable prices. The other opportunities are on the supply side by holding emergency reserves or increasing agricultural productivity to meet domestic and export needs.
Increasing importers’ rights under the WTO has been discussed recently. Mitra and Josling explained that in April 2008, in the midst of high food prices, Japan and Switzerland proposed that the Doha Round agreement require “any new export prohibition or restriction [to] be limited to the extent strictly necessary” for the country imposing it for production, stocks, and domestic consumption. Countries seeking to restrict exports would give “consideration” to importers’ food security, and how trade would flow without restrictions. Countries would notify the WTO Committee on Agriculture before instituting export restrictions, explaining the nature, duration, and reasons for the measures and would be required to consult with importers about “any matter related to” proposed export restrictions, with the measure stayed pending consultations. If differences were not resolved within a certain period of time, the proposed restrictions would be referred to binding arbitration by a “standing committee of experts.” Nothing that binding would likely survive the WTO process, Doha or otherwise, but highlights concerns of importers.
The authors made a key point, “it may be desirable to think of export restrictions as more like safeguards.” Importers use safeguards when the domestic market is oversupplied to protect the economic survival of domestic suppliers. Governments use export restrictions when domestic consumers cannot compete with overseas buyers. Then Mitra and Josling stated, “So if importing countries have safeguards in the form of temporary import restrictions, why should exporting countries not have similar safeguards?” Exporters are less likely to use restrictions for fear of losing market reputation. Importers using safeguards do not have similar worries. Importers cannot have it both ways in protecting domestic producers from import competition, but have unlimited access to exporters’ supplies when prices go up.
No discussion about food security and importers’ rights would be complete without some thought to intergovernmental commodity agreements and stocks policies. Stabilizing prices with multilateral grain stocks would reduce the need to have import or export restrictions, but the authors note “the history of multilateral action in the area of price stabilization has not been encouraging.” Most of the ideas were tried in the 1960s and 1970s. The ASEAN Food Security Reserve has been in existence for 30 years and given renewed life in recent months. Others have proposed a “virtual grain reserve” where countries would commit funds in advance to temper markets under speculative pressures.
An “exporters’ code” was suggested by Mitra and Josling. This would include the ending of direct export subsidies and through food aid, export credit guarantees, state-trading entities and export embargoes and placing limits on export taxes. This may be attractive to countries that are significant exporters and importers. If it is effective in removing distortions from global agricultural markets, it could be referred to as a “food security code.” The authors suggest it be negotiated among a smaller group of countries, maybe those WTO members accounting for 80 percent of exports, but its benefits would apply to all WTO members who are importers.
Rebalancing importer and exporter rights under the WTO will require importers to give up some of their current rights if exporters are to give up some of theirs. As Russia is showing again this year with wheat sales, selling at a lower price will regain markets after a decision to restrict exports, even though low-income net food importing countries like Egypt and Bangladesh were hurt by the export restrictions. Achieving greater market access when exporters have large crops may make them more willing to guarantee supplies in short crop years. This problem will not go away by doing nothing. The Ministerial Conference may be an opportunity to accomplish something because last year is still a vivid memory.
Ross Korves is the Economic Policy Analyst for Truth About Trade & Technology.