WTO Agreement on Agriculture

Ekaterina Krivonos
Economist, Trade and Markets Division, FAO

Materials of the workshop on Resolving agricultural trade issues through the WTO organized by FAO in collaboration with Ukraine’s Ministry of Agrarian Policy and Food of Ukraine in Kyiv on June 7, 2017.

http://www.fao.org/economic/est/est-events-new/wtokiev/en/
http://www.fao.org/europe/news/detail-news/en/c/892730/

1. WTO Agreement on Agriculture
Ekaterina Krivonos, FAO
Kyiv, Ukraine
7 June 2017

2. Key principles in GATT/WTO
The key principles of theGATT 1994 foresee that the multilateral trading system should be:
Fundamental
principle; Most
Favoured Nation
and National
Treatment
Lowering trade
barriers through
negotiations
Non-
discriminatory
Freer
Predictable and
transparent
Protecting
against unfair
trade
Promoting
development of
all countries
Bound tariff rates and
market opening
commitments that
cannot be changed
arbitrarily
Disciplines on the
use of “unfair”
practices
Special provisions in
favour of developing
and LDCs
2

3. National Treatment
•“national treatment” = giving others the same treatment as one’s own
nationals
•Imports shall not be subject to “internal taxes or other internal
charges of any kind in excess of those applied, directly or indirectly, to
like domestic products” (art. III par. 2)
•Imports “shall be accorded treatment no less favourable than that
accorded to like products of national origin in respect of all laws,
regulations and requirements affecting their internal sale, offering for
sale, purchase, transportation, distribution or use”. (art. III par. 4)
3
Imported and domestically produced goods should be
treated equally once the foreign goods have entered the
market.

4. GATT Exceptions and Waivers
General exceptions
Customs Unions and Free
Trade Agreements
Others
E.g. measures considered “necessary” to protect public health, provided
their application does not constitute arbitrary or unjustifiable
discrimination…
Countries that offer each other more favourable treatment within a
custom’s union or RTA were allowed to waive full adherence to the
MFN clause.
Include exceptions related to national security or balance of payment
problems; waivers e.g. permissions granted by WTO Members
allowing another Member to not comply with its normal
commitments.
The GATT recognized that there are circumstances in which strict adherence to these
principles would be inappropriate.
4

5. The Legal Framework
Agreement on Agriculture
Modalities
+
Supporting Tables
Schedules of Commitments
Other WTO Agreements Protocols of Accession
Decisions Disputes
5

6. Three “Pillars” of the Agreement on Agriculture
Agreement on Agriculture (AoA)
Market Access Domestic Support Export Competition
Tariffs:
•Tariffication
•Reduction
Commitments
Tariff Rate Quotas
Special Safeguards
Amber Box
•De minimis
•Commitments
Green Box
Blue Box
Development Box
Export Subsidies
Anti-Circumvention
•Food aid
•Export credits
Article 4, 5 and Annex 5
Article 3, 6, 7 and
Annexes 2, 3, 4
Article 3, and 8 –11
6

7. Market access: Pre-Uruguay Round
Problems: unpredictable / non-transparent /may prohibit MA
Quantitative
restrictions
Voluntary export
restraints
Non-tariff barriers by
state trading
enterprises
N O N –T A R I F F
M E A S U R E S
T A R I F F I C A T I O N
Variable import
levies
Minimum
import prices
Discretionary
import
licensing
Market
Access
7

8. Market Access in the Uruguay Round
Base period:1986-1988
Years of implementation:1995-2000 (1995-2004 for developing countries)
Tariffication of non-tariff barriers: Conversion of NTMs during the base period (1986-88)
into tariffs. Some countries (mainly developing countries) opted to negotiate a bound rate
that bore little relation to their actual levels of protection.
Tariff binding and reduction of agricultural tariffs
A new tariff only regime
Some exemptions to the commitment to reduce tariffs products apply under the Special
Safeguards Provisions (SSG) (Article 5 of the Agreement on Agriculture).The use of SSG
is limited to
◦Those countries that did the tariffication exercise
◦Those agricultural products for which the right to use this safeguard is reserved in the
country schedules
Market
Access
8

9. Tariff rate quotas (TRQs)
As part of the tariffication package, countries agreed that quantities imported before the
agreement took effect by each member state, should be made possible to import under the
AoA. This was achieved through two provisions:
•“Current access guarantee”
•“Minimum access commitment”
Market
Access
A system of “tariff-quotas”was established with:
•lower tariff rates for imports within the specified quantitative limits, and
•rates (up to the bound level), for quantities that exceed the quota
9

10. Domestic support
Domestic
Support
The AoAclassifies the support measures into the two basic categories:
Total Domestic Support
These are measures that can be used without
any limits on support. This category includes
three basic sets of measures.
Measures that are not subject to
ceiling commitments
Measures that are subject to
ceiling commitments
Measures which do not meet theexemption
criteria of Green Box, Development Box or,
Blue Box, are often referred to as Amber Box
measures. Only support under these non-
exempt measures is subject to limit.
De minimis
Amber Box
Blue Box
Development
Box
Green
Box
10

11. Green Box
General criteria(paragraph 1 of Annex 2)
•must be provided through a publicly-funded programme(including government
revenue forgone) not involving transfers from consumers, and
•must not have the effect of providing price support to producers.
These are measures that:
Domestic
Support
Measures that do not distort productionor trade or, at most, cause
minimal distortion.
To qualify as a green box measure, a programme must satisfy some
general and some policy-specific criteria.
11

12. Green Box
Domestic
Support
Measures that do not distort productionor trade or, at most, cause
minimal distortion.
To qualify as a green box measure, a programme must satisfy some
general and some policy-specific criteria.
General services including:
•research
•pest and disease control
•training
•extension/advisory services
•inspection
•marketing and promotion
•infrastructural services
Policy-specific criteria(paragraphs 2-13 of Annex 2)
Direct payments including:
•decoupled income support
•income insurance and income safety-
net
•relief from natural disasters
•structural adjustment assistance
•producer retirement
•resource retirement
•investment aids
•environmental programmes
•regional assistance programmes
Public stockholding for food security
purposes
Domestic food aid
12

13. Development Measures (Article 6.2)
Specific provisions for developing countries on a Special and
Differential Treatment basis.
It allows, under specific conditions, the exemption of support under
some measures from the otherwise applicable ceiling
Investment subsidies that are generally available to agriculture in developing
countries;
Agricultural input subsidies generally available to low-income or resource-poor
producers in developing countries;
Domestic support to producers in developing countries to encourage diversification
from growing illicit narcotic crops.
Domestic
Support
13

14. Blue Box (Article 6.5)
Payments are based on fixed area and yields;
Payments are made on 85% or less of production in a defined
base period;
Livestock payments are made on a fixed number of livestock.
Direct payments under production-limiting programmes that are
exempt from reduction commitments if they meet at least one of the
following requirements:
Examples:
EC –Voluntary set-aside; Per hectare compensatory payments for producers of maize,
based on regional base areas; Special premium for beef and veal
Japan –Rice farming income stabilisationprogramme
Norway –Structural income support to dairy farmers; Headagesupport
Domestic
Support
14

15. Amber Box
The Amber Box captures all domestic support from policies that do
not meet the Green Box, Blue Box or Article 6.2 (development
measures) criteria.
Such support is limited through commitments applying to the
Aggregate Measurements of Support (AMSs)
Domestic
Support
Calculation of
Product-and Non-
Product-specific
AMS
De Minimis
threshold and
Current Total AMS
Bound Total
AMS
De minimis
15

16. De Minimis
Domestic
Support
De Minimis
This provision allows any AMS to be excluded from the Current Total AMS
if it is below a specific threshold that is calculated on the basis of the year’s
value of production.
•AMS product specific level if :
< 5% of the product’s value of production for developed countries
<10% of the product’s value of production for developing countries
•AMS non product specific level if :
< 5%of the value of total production for developed countries
<10% of the value of total production For developing countries
The threshold is 8.5% for China and Kazakhstan
16

17. Export Competition
Export
Competition
InstrumentDevelopedMembers DevelopingMembers
Article9 Definitionofexportsubsidiessubjecttoreduction;
Article10 PreventtheuseofexportsubsidizationpracticesnotmentionedinArticle9,insuchamanner
thatwouldcircumventthereductioncommitmentsand:
foodaidmustbeprovidedaccordingtootherrelevantprovisionsagreedoutsidetheWTO
andinsuchwaythatitwillnotbedirectlyorindirectlytiedtocommercialexportsof
agriculturalproductstorecipientcountries
anundertakingtoworktowardsinternationallyagreeddisciplinesregardingtheprovision
onexportcredits;
Article3.3Prohibitionontheuseofexportsubsidiesonproductsnotsubjecttoreductioncommitments;
SchedulesDistinctreductioncommitmentsonbothvolume(21%)
andbudgetaryoutlays(36%)oversixyears;
Two-thirdsofthereductionrequired
fordevelopedcountriesoverten
years;
Article11 Forincorporated/processedproductsbudgetaryoutlays
only(36%);
Article9.4 Exception during the
implementationperiodinrespectof
certainmarketingandtransportation
subsidies
The main provisions of the AoA, prior to the Nairobi Decision
17

18. Export Competition in the Nairobi Outcome (2015)
Export
Competition
Export Subsidies
•Elimination of all export subsidies: developed countries –immediately;
developing countries
*
–by end of 2018; LDCs and NFIDCs by 2030.
•Specific exceptions for some products and specific Members
International Food Aid
•General and specific commitments to prevent/ minimize potential for food
aid to displace trade and domestic and/ or regional production
Exporting Credits
•Maximum repayment term of 18 months
•Export credit guarantee, insurance and reinsurance programs should be
self-financing and cover long-term operating costs and losses
Exporting STEs
•Exporting STEs do not operate in a manner that circumvents any other
disciplines
*
The Decision includes extension of Article 9.4 of the AoAthat includes temporary exceptions for developing Members,
allowing them to subsidize marketing, handling, and upgrading as well as international transport
18

19. Export Competition in the Nairobi Outcome (2015)
Export
Competition
* Turkey and Venezuela have not submitted their relevant notifications since 2003 and 1998, respectively, so the
list of notified products is longer than those of the rest of the Members. That said, it does not mean that these two
Members have made use of the tool during recent years.
Developed Members
Member Product End date
Australia,
Iceland,
United
States
Allproducts Immediately
Canada Dairyproducts,processed
products
Allotherproducts
Endof2020
Immediately
European
Union
Pork meat, processed
products
Sugar
Allotherproducts
Endof2020
September2017
Immediately
Norway Porkmeat,dairyproducts,
processedproducts
Allotherproducts
Endof2020
Beginningof2016
SwitzerlandProcessedproducts
Allotherproducts
Endof2020
Immediately
Developing Members
Member Product End date
Brazil,
Colombia
Cotton
Allotherproducts
Endof2016
Endof2018
Indonesia,
Mexico,
Uruguay
Allproducts Endof2018
Israel Cotton
FruitsandVegetables
Allotherproducts
Endof2016
Endof2022
Endof2018
SouthAfricaCotton
Allotherproducts
Endof2016
Endof2018
Turkey* 19products
Allotherproducts
Endof2022
Endof2018
Venezuela*50products
Allotherproducts
Endof2022
Endof2018
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20. Thank you!
[email protected]
www.fao.org/economic/est
www.fao.org/trade
20

21. Extra slides –
do not translate
21

22. •Budgetary outlays (or revenue foregone)
•Gap between price of the subsidized good or service and representative
market price for a similar good or service
•Market Price Support
Domestic Support Calculation
Domestic
Support
Market price
support for a
product
Administered price
as close to the
point of first sale
as practicable
Fixed
external
reference
price (FERP)
Eligible
production
22

23. Calculating product-specific AMS
Wheat (US$)
Administered price (US$/tonne)
290
External reference price (US$/tonne)
210
Domestic production (tonnes) 2,000,000
Value of production 580,000,000
Total market price support (MPS) 160,000,000
(290-210) x 2,000,000
Other types of wheat AMS support* 1,000,000
Total product-specific AMS 161,000,000
(MPS + other support
types)
Domestic
Support
23

24. Calculating Current Total AMS
Example: Russia 2008 (US$ Millions)
AMS
Value of
production
(VOP)
AMS/VOP
De minimis if
less than 5%
AMS
exceeding
de minimis
Product-Specific
AMS
Flax and
hemp
14.5 23.8 60.8% 14.5
Sheep 27 802.6 3.4% De minimis
Horse 8.3 155.8 5.3% 8.3
Milk 362.2 14,818.2 2.4% De minimis
All other
products
123.3
(some products
are de minimis)
35.0
Non-product
specific AMS
5596.1 99,208.2 5.6% 5,596.1
Sum of Product-specific AMSs that exceed de minimis & non-product
specific AMS if it exceeds de minimis = Current Total AMS
5,653.9
Domestic
Support
24

25. Final Bound total AMS (Million US$ equivalent 2013)
Source: CédricPène, WTO Secretariat, presentation in Rome, FAO, 18-19 April 2016
Domestic
Support
25