Increases in prices for agricultural commodities and consumer foods in 2008, 2010 and 2012 were unsettling for government officials and food suppliers in countries dependent on food imports. Some countries restricted exports and fears were common that restrictions would be widespread because they are not subject to meaningful WTO disciplines. That negative assessment of WTO disciplines is questioned by Professors Robert Howse and Tim Josling in Agricultural Export Restrictions and International Trade Law: A Way Forward prepared for the International Food & Agricultural Trade Policy Council (IPC).
The authors argue that expectations have changed over time, as have judicial cases at the WTO. As food uncertainties increased in 2008, groups recognized the need to minimize the use of export restrictions which increase the volatility of international prices and undermine progress towards freer trade in agricultural products. At the World Summit on Food Security in Rome in November 2009 all FAO member countries agreed to “remove food export restrictions or extraordinary taxes for food purchased for non-commercial humanitarian purposes, and to consult and notify in advance before imposing any such new restrictions”. The June 2011 Action Plan of the G-20 Agriculture Ministers included an effort under the WTO to “develop an operational definition of a critical food shortage situation that might justify consideration of an export restricting measure.”
While there has not been a change of disciplines at the WTO by a vote of the membership, the authors state, “Yet there are clear indications of an emerging norm that it is not appropriate for a state to respond to a food crisis in a manner that is simply indifferent to the effects of its actions on the food security of other states, regardless of how vulnerable the populations of the import-dependent countries are.”
Professors Howse and Josling believe the January 2012 Appellate Body ruling in the WTO case known as China-Raw Materials provides an opportunity for a change in policy on agricultural product export restrictions. The case was filed by the U.S. and others against China and dealt with restraints on exports of raw commodities. The U.S. said the export restraints created scarcity and cause higher prices for raw materials in global markets. The restraints also provide Chinese domestic industry with a significant advantage by way of a sufficient supply, and lower and more stable prices for raw materials.
The authors argue that “…the Appellate Body interpreted rather strictly Article XI:2(a) of the GATT, which allows for export restrictions to prevent or relieve a “critical shortage” of an essential product, holding that the restrictions and their surrounding circumstances must be scrutinized to determine that in fact, objectively, all of the criteria of Article XI:2(a) are met. While in China-Raw Materials, the export restrictions were imposed on non-agricultural products, the logic of the AB’s approach arguably breathes more life into the requirements in Article 12 of the Agreement on Agriculture that, inter alia, “due consideration” be given to the effects on the food security of importing WTO Members before new export restrictions are imposed.” Key to this interpretation is how the phrases ‘prevent or relieve a critical shortage’ and ‘due consideration be given’ are defined by a WTO Dispute Panel or the Appellate Body.
Howse and Josling also believe “…the disruption to economic activity from export restrictions may cross the divide between trade in goods, trade in services and foreign direct investment, with implications for GATS (General Agreement on Trade in Services) disciplines and the rights of investors under bilateral investment treaties.” Market intermediaries can be understood to provide services to producer in one country by bringing a product to market and to consumers in another country by offering the product on the store shelf. The authors believe, “There is little question that global agri-food suppliers are service suppliers within the meaning of GATS…”
There would be less need to match up expectations with dispute rulings if the Doha Round of negotiations had been concluded and included additional language on export restraints. Howse and Josling point out that the 2008 price increases stimulated discussions within the Doha Round. Japan and Switzerland issued an informal paper in April 2008 where they proposed any export restrictions be limited in light of production, stocks and domestic consumption of the imposing country. The Draft Modalities of December 2008 did not include all of the proposals made by Japan and Switzerland, but the issues were clearly up for further discussion.
Howse and Josling do not see their paper as the end of the debate on WTO disciplines on export restraints. They see the China-Raw Materials Appellate Body decision signaling that a country may not simply self-judge what constitutes a critical shortage. Countries may be obliged to vary the export restrictions depending on how various countries would be affected. When dealing with finite resources, “even-handedness” of the burden would be required for importing countries and domestic consumers in producing countries.
Export taxes could qualify as export restrictions and be covered by WTO rules.
If a WTO case is filed on a country’s agricultural export restrictions, the WTO Dispute Panel is highly likely to seek food security advice on the need to impose restrictions and impacts on importing countries. It has been previously suggested that the G-20 countries should develop a definition of ‘critical shortage’ in light of food security concerns. The WTO is not equipped to collect and evaluate the data and should identify a partner who focus is food security.
Howse and Josling conclude, “This path towards the integration of trade rules and food security aims requires a fresh perspective from countries and the institutions through which they formulate rules and obligations. It would require countries to recognize that a WTO Member has an obligation to ensure that it manages its domestic food security in a manner that minimizes the negative impacts of a food crisis on other WTO Members.”
WTO member can approach these issues by negotiating new food security language and disciplines or allowing the dispute resolution process to grind them out over time. If, in fact, there is a new set of expectations on food security, new disciplines will develop one way or the other.
Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade on Twitter | Truth About Trade & Technology on Facebook.