Analytical Note, January 2017

The WTO’s Agriculture Domestic Supports Negotiations

The historical problems in agriculture continue today. Developed countries with the financial capacity continue to subsidise their farmers and export these agricultural products. This has also been enabled by the Uruguay Round through large AMS entitlements for mostly developed countries ($19 billion for US and now about $95 billion for EU27), as well as the Green Box (Annex 2 of the Agreement on Agriculture).

As a result of the US 2014 Farm Bill and the shift away from direct payments (Green Box) to farm subsidy programmes based more on prices or revenues (Aggregate Measures of Support payments or AMS), the US now refuses to continue with the Doha agriculture negotiations along the lines of the last Doha draft negotiating text, the ‘Rev.4’ (2008). US’ discourse is that it will reduce its farm subsidies only if developing countries do the same. Whilst some developing countries are indeed increasing their farm payments, their payments per farmer remain miniscule – about $348 per farmer for China, $306 for India, as compared to $68,910 for the US.

Following the cue of the US, the move in the recent months at the WTO has been to target developing countries’ ‘trade-distorting’ domestic supports, even when most have 0 AMS entitlements i.e. targeting reduction of their already very small de minimis entitlements and also their input subsidies (Art 6.2) to low-income or resource-poor farmers. At the same time, the developed countries continue to enjoy their AMS entitlements, their de minimis, as well as an unlimited Green Box which contains farm programmes that are more appropriate for them. In the current negotiations, developed countries may, at most, be asked to make some AMS cuts, and some de minimis cuts. But this would still leave them with large AMS entitlements. Importantly, there is no serious discussion about reforming the Green Box even though it makes up 88-90% of EU and US’ total domestic supports. Elimination of the large AMS entitlements of developed countries, and thorough reform of the Green Box would at least contribute towards partially levelling the currently imbalanced playing field in the WTO’s agriculture trade rules. The other aspect of imbalance are the rules regarding how Public Stockholding programmes of developing countries should be calculated, whereby the numbers to be notified to the WTO as trade-distorting supports (AMS /de minimis) are artificially inflated with little bearing to the actual subsidies provided.

If the recent domestic support proposals (2016) see the light of day, this will mean that developed countries’ historically privileged position in the rules on domestic supports are being preserved, whilst the already little space developing countries have been given to provide domestic supports are being targeted for further reduction. The imbalance is starkly obvious at the per farmer level. In this scenario, the question of whether there should be an outcome in this area of negotiations is a valid one.

This paper provides a historical background and analysis of the issue and an overview of the most significant proposals that have been tabled from Rev.4 (2008) up until July 2016.

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