WTO Public Symposium 2003: Agriculture
Agriculture: Subsidies
One of the most sensitive yet most urgent topics for
reform under the Agreement on Agriculture was that of subsidies.
Subsidies come in two forms: domestic support subsidies, and export
subsidies. Although there are always special interests who would like to
see certain products subsidized, the
negative effects of agricultural subsidies to both developed and
developing countries are widely recognized.
First, subsidizing can lead to export dumping.
As it is often governments of developed countries who can afford to
subsidize, we often find that in export dumping cases a developed country
is dumping a good in a developing country, to the detriment of the farmers
in the developing country. Subsidies depress world prices of goods, making
it difficult for producers of those goods in developing countries to
compete on the world market. Many argue that subsidy policies also waste
the resources of developed countries, channeling money into sectors that
are relatively inefficient. Also,
they artificially raise domestic prices of the good, forcing consumers in
developed countries to pay more.
According to the World Bank, developed countries provide an annual $300
billion in agricultural subsidies (1). Most of this is due to the EU’s heavy support policies, but
the US and Japan also commandeer a significant share.
The Uruguay Round Agreement on Agriculture tackles the
problem of heavy domestic support that (mainly industrial) countries give
to their agricultural sectors by categorizing these supports into
"boxes", and
prescribing rules based on category.
Almost all subsidy measures which are considered to distort trade
and production fall under the “amber box” category.
These measures are subject to strict surveillance, and were
expected to be reduced over the period of the Uruguay Round.
Industrial countries were expected to lower their domestic supports
for goods in this category by an average of 20%, and developing countries
by an average of 13.3%.
However, some policies were labeled as exceptions to the
reduction rules of the amber box, and were put into another category,
“the blue box”, which would be subject to relatively looser
monitoring. These policies
allow for domestic support on the condition that production is limited.
The final category, “the green box”, allows for
support measures that do not distort trade or production, such as income
assistance for farmers, research, environmental programs, and so on.
Another serious form of trade-distorting agricultural subsidy is export
subsidies. This has been a
heavily-implemented policy by the EU and US, in particular.
The Agreement on Agriculture mandates that, with the exception of
certain types of agricultural exports such as food aid, all industrial
countries must decrease their overall export subsidy volumes by 21% and
values by 36% by 2000. Developing
countries are expected to reduce subsidized exports by 14% and the value
of subsidized exports by 24% by 2004.
While countries are enacting these agricultural sector reforms, they are
subject to Article 13 of the Agreement on Agriculture, called the “Peace
Clause”. The clause
stipulates that until 2003 certain provisions in the agreement may void
other WTO agreements and rights. More
particularly, policies that fall under the amber box and blue box are
exempt from all threats of trade disputes – members cannot register
complaints or initiate countervailing duties in response to another
member’s subsidy measures. Unless
members come to a consensus to extend the Peace Clause beyond 2003, normal
WTO rules will apply to the Agreement on Agriculture after the clause has
expired.
Visit these pages for more information on global trade in
agriculture:
(1). Cutting
Agricultural Subsidies: World Bank Chief Economist Urges Cuts in Rich
Country Agricultural Subsidies
Additional Resources
Economic Research
Service: Uruguay Round Agreement on Agriculture
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