THE World Trade Organisation’s long-awaited decision to abolish agricultural export subsidies, which are accused of distorting international trade, will enable the developing countries to better integrate themselves into the global market.

The unexpected decision, which took an extra day of intense negotiations at the 10th biennial ministerial meeting in Nairobi, has been welcomed by all WTO members, including the developed countries, which are generally viewed as responsible for misusing the subsidies.

The decision, which may bring the Doha talks nearer to a solution, was described as ‘a turning point for the WTO’ by US Trade Representative Michael Froman and as ‘remarkable and historic’ by Australian trade minister Andrew Robb. Pakistan’s ambassador at the WTO, Dr Tauqir Shah, says the decision will go a long way in providing a level-playing field for Pakistani farmers and exporters of agricultural produce.

WTO members from developed states have committed to removing subsidies immediately, except for those on a handful of farm products, while the developing countries will do so by 2018

WTO Director General Roberto Azvedo termed it the “most significant outcome on agriculture in WTO’s history”. He said WTO members, especially the developing countries, had consistently demanded action on this issue due to ‘the enormous distorting potential’ of these subsidies for domestic production and trade. “[This] decision tackles the issue once and for all.”

Export subsidies are seen as the most destructive form of assistance provided for numerous agricultural commodities. These include sugar, beef, pork, lamb, dairy, wheat, rice, wine, fruit, vegetables, processed foods and cotton.

Rich nations, according to a Reuter report, are spending $250bn annually to subsidise their agricultural sectors to the detriment of farmers of poor nations, as they artificially lower prices for some crops and block market access for growers from these countries.

Subsidies from the 31-member Organisation for Economic Cooperation and Development (OECD), a group of wealthy countries, include direct payments to farmers, trade barriers for food imports from poor countries, and mandates for biofuels.

According to the WTO, the legally-binding decision would not only eliminate the subsidies but also prevent governments from reverting to trade-distorting export support in the future. The developed members have given a commitment to remove the subsidies immediately, except for those on a handful of agriculture products, while the developing countries will do so by 2018.

However, the developing members will keep the flexibility to cover marketing and transport costs for agriculture exports until the end of 2023, and the poorest and food-importing countries would enjoy additional time to cut their export subsidies.

The ministerial decision contains disciplines to ensure that other export policies are not used as disguised forms of subsidies. These disciplines include terms to limit the benefits of financing support to agriculture exporters, rules on state enterprises engaging in agriculture trade, and disciplines to ensure that food aid does not negatively affect domestic production. Developing countries have been given a longer time to implement these rules.

The Nairobi package contains six ministerial decisions on agriculture, cotton and issues related to the least-developed countries. Apart from the decision to abolish subsidies for farm exports, the other decisions cover public stockholding for food security purposes, a special safeguard mechanism for developing countries, and measures related to cotton.

In a statement, Commerce Minister Khurram Dastgir Khan said “cotton is the economic lifeline of Pakistan. Once the subsidies are removed, the entire increase in the value of cotton will be reflected in both the textile and clothing sectors”.

The ministerial decision on cotton includes three elements: market access, domestic support and export competition. The decision calls for cotton from least developed countries (LDCs) to be given duty-free and quota-free access to the markets of developed countries and to those developing countries which say they are able to do so, from January 1, 2016.

The domestic support part of the decision acknowledges the members’ reforms in their domestic cotton policies and stresses that more efforts need to be made. On the export competition for cotton, the decision mandates that developed countries prohibit cotton export subsidies immediately and the developing countries do so at a later date.

According to the WTO, the decision on public stockholding for food security purposes commits members to find a permanent solution to this issue in the next ministerial conference in 2017. Under the Bali ministerial decision of 2013, developing countries were allowed to continue food stockpiling programmes, which were otherwise at risk of breaching the WTO’s domestic subsidy cap.

A decision on a special safeguard mechanism (SSM) gives developing members the right to temporarily increase tariffs in case of import surges by using SSMs.

According to the commerce ministry, the Pakistani delegation claims to have successfully nullified an Indian move to convert the 2013 decision into a permanent solution. As a result of lobbying with likeminded members by Pakistan, the issue of interim order on public stockholding was deferred until the 2017 ministerial meeting.

Speaking at the plenary session, Khurram Dastagir said the public stockholding proposal in its current form already had serious and adverse unintended consequences for Pakistan’s economy.

According to the BBC, the final declaration adopted in Nairobi said “many members reaffirmed their full commitment to conclude” the Doha Development Agenda goals. But it added: “other members do not reaffirm the Doha mandates as they believe new approaches are necessary to achieve meaningful outcomes in multilateral negotiations.”

Published in Dawn, Business & Finance weekly, December 28th, 2015