Agreement on Agriculture

The Agreement on Agriculture (AoA) is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on January 1, 1995.

History

Origins

The idea of replacing agricultural price support with direct payments to farmers decoupled from production dates back to the late 1950s, when the twelfth session of the GATT Contracting Parties selected a Panel of Experts chaired by Gottfried Haberler to examine the effect of agricultural protectionism, fluctuating commodity prices and the failure of export earnings to keep pace with import demand in developing countries.

The 1958 Haberler Report stressed the importance of minimising the effect of agriculture subsidies on competitiveness and recommended replacing price support with direct supplementary payments not linked with production, anticipating discussion on green box subsidies. Only more recently, though, has this shift become the core of the reform of the global agricultural system.[1]

Historical context

By the 1980s, government payments to agricultural producers in industrialised countries had caused large crop surpluses, which were unloaded on the world market by means of export subsidies, pushing food prices down. The fiscal burden of protective measures increased, due both to lower receipts from import duties and higher domestic expenditure. In the meantime, the global economy had entered a cycle of recession, and the perception that opening up markets could improve economic conditions led to calls for a new round of multilateral trade negotiations.[2] The round would open up markets in services and high-technology goods, ultimately generating much needed efficiency gains. In order to engage developing countries, many of which were "demandeurs" of new international disciplines, agriculture, textiles, and clothing were added to the grand bargain.[1]

In leading up to the 1986 GATT Ministerial Conference in Punta del Este, Uruguay, farm lobbies in developed countries strongly resisted compromises on agriculture. In this context, the idea of exempting production and "trade-neutral" subsidies from WTO commitments was first proposed by the United States in 1987, and echoed soon after by the EU.[2] By guaranteeing farmers continued support, it also neutralised opposition. In exchange for bringing agriculture within the disciplines of the WTO and committing to future reduction of trade-distorting subsidies, developed countries would be allowed to retain subsidies that cause "not more than minimal trade distortion" in order to deliver various public policy objectives.[1]

Three pillars

The Agreement on Agriculture constitutes of three pillars—domestic support, market access, and export subsidies.

Domestic support

The first pillar of the Agreement on Agriculture is "domestic support". AoA divides domestic support into two categories: trade-distorting and non-trade-distorting (or minimally trade-distorting). The WTO Agreement on Agriculture negotiated in the Uruguay Round (1986–1994) includes the classification of subsidies by "boxes" depending on consequences of production and trade: amber (most directly linked to production levels), blue (production-limiting programmes that still distort trade), and green (minimal distortion).[3] While payments in the amber box had to be reduced, those in the green box were exempt from reduction commitments. Detailed rules for green box payments are set out in Annex 2 of the AoA. However, all must comply with the "fundamental requirement" in paragraph 1, to cause not more than minimal distortion of trade or production, and must be provided through a government-funded programme that does not involve transfers from consumers or price support to producers.[1]

The Agreement on Agriculture's domestic support system currently allows Europe and the United States to spend $380 billion a year on agricultural subsidies. The World Bank dismissed the EU and the United States' argument that small farmers needed protection, noting that more than half of the EU's Common Agricultural Policy subsidies go to 1% of producers while in the United States 70% of subsidies go to 10% of its producers, mainly agribusinesses.[4] These subsidies end up flooding global markets with below-cost commodities, depressing prices, and undercutting producers in poor countries, a practice known as dumping.

Market access

Market access refers to the reduction of tariff (or non-tariff) barriers to trade by WTO members. The 1995 Agreement on Agriculture consists of tariff reductions of:

  • 36% average reduction - developed countries - with a minimum of 15% per-tariff line reduction in next six years.
  • 24% average reduction - developing countries - with a minimum of 10% per-tariff line reduction in next ten years.

Least developed countries (LDCs) were exempt from tariff reductions, but they either had to convert non-tariff barriers to tariffs—a process called tariffication—or "bind" their tariffs, creating a ceiling that could not be increased in future.[5]

Export subsidies

Export subsidies are the third pillar. The 1995 Agreement on Agriculture required developed countries to reduce export subsidies by at least 36% (by value) or by 21% (by volume) over six years. For developing countries, the agreement required cuts were 14% (by volume) and 24% (by value) over ten years.

Criticism

The Agreement has been criticised by civil society groups for reducing tariff protections for small farmers, a key source of income in developing countries, while simultaneously allowing rich countries to continue subsidizing agriculture at home.

The Agreement was criticised by NGOs for categorizing subsidies into trade-distorting domestic subsidies (the "amber box"), which have to be reduced, and non-trade-distorting subsidies (blue and green boxes), which escape discipline and thus can be increased. As efficient agricultural exporters press WTO members to reduce their trade-distorting "amber box" and "blue box" support, developed countries' green box spending has increased.

A 2009 book by the International Centre for Trade and Sustainable Development (ICTSD) showed how green box subsidies distorted trade, affecting developing country farmers and harming the environment. While some green box payments only had a minor effect on production and trade, others have a significant impact.[6] According to countries' latest official reports to the WTO, the United States provided $76 billion (more than 90% of total spending) in green box payments in 2007, while the European Union notified €48 billion ($91 billion) in 2005, around half of all support. The EU's large and growing green box spending was decoupled from income support, which could lead to a significant impact on production and trade.[1]

Third World Network stated, "This has allowed the rich countries to maintain or raise their very high subsidies by switching from one kind of subsidy to another...This is why after the Uruguay Round the total amount of subsidies in OECD countries have gone up instead of going down, despite the apparent promise that Northern subsidies will be reduced." Moreover, Martin Khor argued that the green and blue box subsidies can be just as trade-distorting—as "the protection is better disguised, but the effect is the same".[7]

At the 2005 WTO meeting in Hong Kong, countries agreed to eliminate export subsidy and equivalent payments by 2013. However, Oxfam argued that EU export subsidies comprise for only 3.5% of its overall agricultural support. United States, removed export subsidies for cotton which only covers 10% of overall spending.

[8]

on 18 July 2017 India and China jointly submitted a proposal to the World Trade Organisation (WTO) calling for the elimination – by developed countries – of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support (AMS) or 'Amber Box' support as a prerequisite for consideration of other reforms in domestic support negotiations. [9]

Mechanisms for developing countries

During the Doha negotiations, developing countries have fought to protect their interest and population, afraid of competing on the global market with strong developed and exporting economies. In many countries large populations living in rural areas, with limited access to infrastructure, farming resources and few employment alternatives. Thus, these countries are concerned that domestic rural populations employed in import-competing sectors might be negatively affected by further trade liberalization, becoming increasingly vulnerable to market instability and import surges as tariff barriers are removed. Several mechanisms have been suggested in order to preserve those countries: the Special Safeguard Mechanism (SSM) and treatment of Special Products (SPs).

Special Safeguard Mechanism

A Special Safeguard Mechanism (SSM) would allow developing countries to impose additional safety measures in the event of an abnormal surge in imports or the entry of unusually cheap imports.[10] Debates have arisen around this question, some negotiating parties claiming that SSM could be repeatedly and excessively invoked, distorting trade. In turn, the G33 bloc of developing countries, a major SSM proponent, has argued that breaches of bound tariffs should not be ruled out if the SSM is to be an effective remedy. A 2010 study by the International Centre for Trade and Sustainable Development simulated the consequences of SSM on global trade for both developed and developing countries.[10]

Special Products

At 2005 WTO Ministerial Conference in Hong Kong, WTO members agreed to allow developing countries to assign or make appropriate list of products for tariff lines as Special Products (SPs) based on "food security, livelihood security and rural development".[11]

See also

References

  1. ^ a b c d e Agricultural Subsidies in the WTO Green Box, ICTSD, September 2009.
  2. ^ a b Néstor Stancanelli (2009). "The Historical Context of the Green Box". In Meléndez-Ortiz, Ricardo; Bellmann, Christophe; Hepburn, Jonathan (eds.). Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development Goals. Cambridge, UK: Cambridge University Press. pp. 19–35. ISBN 978-0521519694.
  3. ^ "Agriculture Negotiations: Background Fact Sheet", World Trade Organization.
  4. ^ "Fine words - now we need action". The Guardian. 15 November 2005.
  5. ^ [1]
  6. ^ Meléndez-Ortiz, Ricardo; Bellmann, Christophe; Hepburn, Jonathan, eds. (2009). Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development Goals. Cambridge, UK: Cambridge University Press. ISBN 978-0521519694.
  7. ^ TWN Statement on Agriculture at the UN ECOSOC High-Level Session" Archived December 27, 2010, at the Wayback Machine TWN, July 2003
  8. ^ "WTO agreement a betrayal of development promises" Archived September 28, 2011, at the Wayback Machine, Oxfam December 2005
  9. ^ Srinivas, Vasudeva. "India,China Join Hand in WTO for Amber Box" (Online). ABC Live. Retrieved 1 September 2017.
  10. ^ a b Raul Montemayor (April 2010). Simulations on the Special Safeguard Mechanism: A Look at the December 2008 Draft Agriculture Modalities (Issue Paper No. 25) (PDF). Geneva, Switzerland: International Centre for Trade and Sustainable Development. p. viii. ISSN 1817-356X.
  11. ^ International Centre for Trade and Sustainable Development and Food and Agriculture Organization, "Indicators for the Selection of Agricultural Special Products: Some Empirical Evidence", ICTSD Information Note Number 1. July 1, 2007.

External links

Afghanistan–France relations

Afghanistan–France relations refers to the diplomatic relations between Afghanistan and France.

Australia–Brazil relations

Australia–Brazil relations are foreign relations between Brazil and Australia. Brazil has an embassy in Canberra and a consulate general in Sydney. Australia has an embassy in Brasília and consulates in São Paulo and Rio de Janeiro. Brazil and Australia are the largest countries in the Southern Hemisphere.

Brazil–United States cotton dispute

The Brazil–United States cotton dispute was a World Trade Organization dispute settlement case (DS267) on the issue of unfair subsidies on cotton. In 2002, Brazil—a major cotton export competitor—expressed its growing concerns about United States cotton subsidies by initiating a WTO dispute settlement case (DS267) against certain features of the U.S. cotton program. On March 18, 2003, a Panel was established to adjudicate the dispute. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan, and Venezuela participated as third parties. Focusing on six specific claims relating to US payment programmes, Brazil argued that the US had failed to abide by its commitments

in the Uruguay Round Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures (SCM). On September 8, 2004, a WTO dispute settlement (DS) panel ruled against the United States on several key issues in case.The United States is the second-largest producer and world’s largest exporter of cotton. In recent years, the United States has been exporting an increasing share of its annual production, due in large part to a decline in domestic mill use.On August 31, 2009, after a series of recourses by both United States and Brazil, WTO issued a decision on the dispute DS267.The implications of the ruling are that it shows that the US and European Union have used loopholes and creative accounting to continue dumping products on developing markets, hurting impoverished developing country farmers. The WTO dispute settlement panel also found that the USA misreported certain programmes as ‘non trade-distorting’, when in fact they were trade-distorting.In October 2014, a mutually acceptable solution to the cotton dispute was reached just before Brazil was set to raise tariffs on hundreds of millions of dollars in American goods. This included cars, electronics, and pharmaceuticals. Under the terms of the agreement, the US granted a one-off payment of US$300 million to the Brazilian Cotton Institute.

Dairy Export Incentive Program

The Dairy Export Incentive Program (DEIP) is a program that offers subsidies to exporters of U.S. dairy products to help them compete with other nations. USDA pays cash to exporters as bonuses to help them sell certain U.S. dairy products at prices below the exporter’s cost of acquiring them. The program was originally authorized by the Food Security Act of 1985 (P.L. 99-198) and extended by the 1990 farm bill (P.L. 101-624) and the Uruguay Round Agreements Act of 1994 (P.L. 103-465). The total tonnage and dollar amounts of these and other export subsidies have been limited by the Uruguay Round Agreement on Agriculture.

The 2002 farm bill (P.L. 107-171) extended the program through 2007.

Domestic support

Domestic support may refer to:

alimony (domestic support as a synonym)

domestic support, one of three central concepts of the WTO Agreement on Agriculture

Export Enhancement Program

The Export Enhancement Program (EEP) is a program that the United States Department of Agriculture (USDA) initiated in May 1985 under the Commodity Credit Corporation Charter Act to help U.S. exporters meet competitors’ subsidized prices in targeted markets. The program currently is authorized through 2007 under the 2002 farm bill (P.L. 107-171). Under EEP, exporters are awarded cash payments that enable an exporter to sell certain commodities to specified countries at competitive prices. EEP program activity is constrained by annual dollar and tonnage limits on commodities that can be subsidized, as agreed to under the Uruguay Round Agreement on Agriculture, and these annual limits are incorporated into the EEP authorizing legislation. In practice, the program has been used very little since the mid-1990s.

Green box

Green box may refer to:

Green box (container), a large metal container, designed and utilized for free public disposal and recycling of electronic waste.

Green box (phreaking), a device used to manipulate the coin collection mechanism of payphones

Green box (WTO agreement), a class of subsidies regulated by the international Agreement on Agriculture

The Green Box, Marcel Duchamp's published notes on his work The Bride Stripped Bare By Her Bachelors, Even

A Flash flood watch

Green box policies

Green box policies refer to domestic or trade policies that are deemed to be minimally trade-distorting and that are excluded from reduction commitments in the Uruguay Round Agreement on Agriculture. Examples are domestic policies dealing with research, extension, inspection and grading, environmental and conservation programs, disaster relief, crop insurance, domestic food assistance, food security stocks, structural adjustment programs, and direct payments not linked to production. Trade measures or policies such as export market promotion (but not export subsidies or foreign food aid) are also exempt.

Iceland–Mexico relations

Iceland–Mexico relations refer to bilateral relations between Iceland and Mexico. Both nations are mutual members of the Organisation for Economic Co-operation and Development, United Nations and the World Trade Organization.

Mexico–Norway relations

Mexico–Norway relations refers to the diplomatic relations between Mexico and Norway. Both nations are members of the Organisation for Economic Co-operation and Development and the United Nations.

Non-Agricultural Market Access

The Non-Agricultural Market Access (NAMA) negotiations of the World Trade Organization are based on the Doha Declaration of 2001 that calls for a reduction or elimination in tariffs, particularly on exportable goods of interest to developing countries. NAMA covers manufacturing products, fuel and mining products, fish and fish products, and forestry products. These products are not covered by the Agreement on Agriculture or the negotiations on services.

The WTO considers the NAMA negotiations important because NAMA products account for almost 90% of the world's merchandise exports.

Peace Clause

Trade negotiators generally refer to Article 13 of the World Trade Organization's Agreement on Agriculture as the Peace Clause. Article 13 holds that domestic support measures and export subsidies of a WTO Member that are legal under the provisions of the Agreement on Agriculture cannot be challenged by other WTO Members on grounds of being illegal under the provisions of another WTO agreement.

The Peace Clause has expired on January 1, 2004. It is now possible, therefore, for developing countries and nations favoring free trade in agricultural goods, such as the Cairns Group, to use the WTO dispute settlement mechanism in order to challenge, in particular, U.S. and EU export subsidies on agricultural products.

Another temporary peace clause was made at the WTO Bali conference in December 2013. It stipulated that no country would be legally barred from food security programs for its own people even if the subsidy breached the limits specified in the WTO Agreement on Agriculture.

Section 22

Section 22, as referred to in shorthand, is a provision of permanent United States agricultural law (Agricultural Adjustment Act Amendment of 1935, P.L. 74-320) that allows the President to impose import fees or import quotas to prevent imports from non-WTO member countries from undermining the price support and supply control objectives of domestic farm programs.

Legislation implementing The North American Free Trade Agreement (NAFTA) and the Uruguay Round Agreement on Agriculture exempts NAFTA partners and WTO member countries from Section 22 quotas and fees. Under both trade agreements, the United States converted then-in-effect Section 22 restrictions into tariff-rate quotas. This effectively eliminates Section 22 as a tool to shield domestic price support operations.

Special Agricultural Safeguard

The Special Agricultural Safeguard (SSG) is provision in the Uruguay Round Agreement on Agriculture. The SSG allows Member countries to impose additional tariffs on agricultural products if their import volume exceeds defined trigger levels, or if prices fall below specified trigger levels. Its purpose is to prevent disruption of domestic markets due to import surges or abnormally low import prices. The SSG applies only to products that are (1) subject to tarrification and (2) in cases where the country has designated a productas eligible for the SSG in its Schedule of Commitments. It can apply only to imports that exceed tariff-rate quota volumes. The SSG is an alternative to the general safeguard provision of the GATT and is easier to invoke because it does not require a test of injury or threat of injury. In the Doha Development Agenda (DDA) negotiations, the United States, the Cairns Group, and many developing countries have proposed elimination of the SSG.

Special and differential treatment

Special and differential treatment (S&D) is a set of GATT provisions (GATT 1947, Article XVIII) that exempts developing countries from the same strict trade rules and disciplines of more industrialized countries. In the Uruguay Round Agreement on Agriculture, for example, developing countries are given longer time periods to phase in export subsidy and tariff reductions than the more industrialized countries. The least developed countries are exempt from any reduction commitments.

U.S. Sugar Program

The U.S. Sugar program is the federal commodity support program that maintains a minimum price for sugar, authorized by the 2002 farm bill (P.L. 107-171, Sec. 1401-1403) to cover the 2002-2007 crops of sugar beets and sugarcane.

Designed to protect the incomes of the sugar industry-growers of sugarcane and sugar beets, and firms that process each crop into sugar - the program supports domestic sugar prices by:

(1) making available nonrecourse loans to processors (not less than 18¢/lb. for raw cane sugar, or 22.9¢/lb. for refined beet sugar);

(2) restricting sugar imports using a tariff rate quota, and

(3) limiting the amount of sugar that processors can sell domestically (under marketing allotments) when imports are below 1.532 million short tons.Import restrictions are intended to meet U.S. commitments under the North American Free Trade Agreement (NAFTA) and Uruguay Round Agreement on Agriculture. Processor and refiner marketing allotments are set by USDA according to statutory requirements. Marketing allotments and new payment-in-kind authority are designed to help the USDA meet the no-cost-requirements to the federal government by avoiding the forfeiture of sugar put under loan. Other parts of the new program can include a storage loan program for sugar processors, and reduced (by 1%) the USDA interest rate charged on sugar loans.

Variable import levy

A variable import levy is a levy on imports that raises their price to a level at least as high as the domestic price. Such levies are adjusted frequently (hence variable) in response to changes in world market prices, and are imposed to defend administered prices set above world market prices. Under the Uruguay Round Agreement on Agriculture, the variable levies of the EU have been converted into fixed tariffs or tariff-rate quotas.

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