On Dec. 31, a provision of the 1994 world agricultural trade agreement that critics have labelled the greatest symbol of the “hypocrisy” of rich subsidizing countries under existing rules will slip into history.
The so-called “peace clause” of the General Agreement on Tariffs and Trade, cooked up by the United States and the European Union in 1993 and reluctantly accepted by other World Trade Organization members as one of the costs of getting a deal, expires at the end of the year.
It protected from WTO challenge many of the subsidies used by rich countries to buy market share.
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Expiry of the peace clause, despite U.S. and EU objections, raises the possibility of a flurry of challenges of American and European market-distorting subsidies before WTO dispute resolution panels.
However, most trade observers say that is not likely, at least in the short term. WTO talks are deadlocked and there are fears that an avalanche of legal challenges would poison political efforts to get the talks going again.
“I would expect there will be some restraint shown in launching challenges,” Canadian WTO ambassador Sergio Marchi said from Geneva.
“I hope we see some restraint because otherwise, the WTO could become a body consumed by litigation rather than negotiation.”
The Americans and Europeans already have said they will be less anxious to plunge back into the negotiations if they are forced to spend time and resources defending themselves against new complaints.
Besides, WTO challenges can be costly and last for years. Not many developing countries that are most likely to want to challenge have the resources to do it, say trade observers.
“I’m not so sure the end of the peace clause will be quite the weapon it may have been designed to be,” agreed Tom Groser, New Zealand’s WTO ambassador. “The political architecture of the WTO has been undermined by unfolding events and I’m not sure challenges would be all that effective just now.”
Still, critics of the WTO and developed country subsidies say they are delighted at the end of the peace clause.
“It has had a chilling effect on countries that might otherwise have sought to protect themselves from subsidized agricultural exports,” said the Institute for Agriculture and Trade Policy in Minneapolis.
“Since the disciplines on domestic and export support were so weak as to effectively allow spending by developing countries to continue virtually unchanged, the peace clause locked in already prevalent dumping practices.”
IATP trade director Sophia Murphy said even if challenges do not immediately arise, it has made rich country subsidy practices vulnerable and has given developing countries a psychological boost.
