Wto Disciplines On Us Domestic Support For Agriculture

Farm support is contentious in international negotiations. This in-depth assessment of the legal compliance and economic evaluation issues raised by the WTO Agreement on Agriculture presents consistent support data and forward-looking projections for eight developed and developing countries (EU, US, Japan, Norway, Brazil, China, India, Philippines), using original estimates where official notifications are not available. Variations over time in notified support in some cases reflect real policy changes; others merely reflect shifts in how countries represent their measures. The stalled Doha negotiations presage significantly tighter constraints for developed countries that provide the highest support, but loopholes will persist. Developing countries face fewer constraints and their trade-distorting farm support can rise. Pressure points and key remaining issues if a Doha agreement is reached are evaluated. Vigilant monitoring for compliance of farm support with WTO commitments will be required to lessen its negative consequences whether or not the Doha Round is concluded.

The upcoming WTO Ministerial in November 2021 will once again provide WTO Members with an opportunity to address and reform agricultural domestic support. As pointed out in the Draft Chair Text on Agriculture of 29 July 2021, the Domestic Support pillar has been at the heart of the agricultural negotiations since their commencement in 2000, and, to date, has proven to be a challenging area to achieve consensus on how best to further reforms in that area. This paper examines three broad questions: First, what would be the effect on agricultural trade if Members were to fully utilize domestic support entitlements under the current Agreement on Agriculture. To study the role of existing policy space inherited from the Uruguay Round, we examine the impact of full utilization of domestic support entitlements on agricultural markets. Under the scenario, trade-distorting support would increase to USD 1.3 trillion, 5.5 times the level under the baseline scenario (USD 246 billion). Assuming full use of policy space, global agricultural production is projected to increase by 6 percent and global prices will drop by 8 percent, with all agricultural product prices showing declines. While farm income rises, a greater share of farm income comes from taxpayer resources, and the efficiency of additional transfers (ratio between increase in farmer income and taxpayer cost) is about 60 percent. The second objective of the paper is to discuss and analyze new disciplines that would further the re-forms accomplished under the Agreement on Agriculture by harmonizing support levels across Members and providing additional constraints to prevent Members from undermining these disciplines by concentrating support in a few commodities. The paper examines how these disciplines would affect production, prices, trade and farm sector income compared to a business-as-usual baseline. We find that using an overall concept of Overall Trade Distorting Support including all forms of trade-distorting measures, associated with amber and blue boxes, will have very negligible impacts on applied policies by 2030 and small effects on the agricultural markets overall. Extending this discipline to measures currently notified under Art. 6.2., the development box, will not put significant constraints on developing countries. Moving to this simplified and more transparent framework will require to define properly an anti-concentration clause, limiting the amount of payments that can benefit the producers of a specific commodity. Such feature will be quite important for sensitive commodities like cotton. Lastly, the paper examines how the proposed disciplines would affect agricultural markets under the alternative baseline that assumes that Members will utilize full entitlements under the current AoA. De-pending on the discipline scenarios, the potential subsidies increase will be reduced by USD 240 billion to USD 800 billion.

The WTO Agreement on Agriculture subjects different groups of developed and developing countries to different limits on domestic support and allows various exemptions from these limits. Offering a comprehensive assessment of the Agreement's rules and implementation, this book develops guidance toward socially desirable support policies. Although dispute settlement has clarified interpretation of the Agriculture and SCM Agreements, gaps remain between the legal disciplines and the economic effects of support. Considering the Agriculture Agreement also in the context of today's priorities of sustainability and climate change mitigation, Lars Brink and David Orden build a strategy that aligns the rules and members' commitments with the economic impacts of agricultural support measures. While providing in-depth analysis of the existing rules, their shortcomings and the limited scope of ongoing negotiations, the authors take a long-term view, where policies directed toward evolving priorities in agriculture are compatible with strengthened rules that reduce trade and production distortions.

As a member of the World Trade Organization (WTO) agreements, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy as spelled out in the Agreement on Agriculture (AoA). Since establishment of the WTO on January 1, 1995, the United States has complied with its WTO spending limits on marketdistorting types of farm program outlays (referred to as amber box spending). However, the addition of large, new trade assistance payments to producers in 2018 and 2019, on top of existing farm program support, has raised concerns by some U.S. trading partners, as well as market watchers and policymakers, that U.S. domestic farm subsidy outlays might exceed the annual spending limit of $19.1 billion agreed to as part of U.S. commitments to WTO member countries. CRS analysis indicates that the United States probably did not violate its WTO spending limit in 2018 but could potentially exceed it in 2019. A farm support program can violate WTO commitments in two principal ways: first, by exceeding spending limits on certain market-distorting programs, and second, by generating distortions that spill over into the international marketplace and cause significant adverse effects. Program outlays are cumulative, and compliance with WTO commitments is based on annual aggregate spending levels. Under the WTO's AoA, total U.S. amber box outlays (that is, those outlays deemed market distorting) are limited to $19.1 billion annually, subject to de minimis exemptions. De minimis exemptions are spending that is sufficiently small (less than 5% of the value of production)-relative to either the value of a specific product or total production-to be deemed benign. Since 1995, the United States has apparently stayed within its amber box limits. However, U.S. compliance has hinged on judicious use of the de minimis exemptions in a number of years to exclude certain amber box spending from counting against the amber box limit. These exemptions have never been challenged by another WTO member. According to CRS analysis, projected U.S. amber box spending for 2018 (inclusive of $8.7 billion in product-specific outlays under the 2018 trade assistance package) could exceed $14 billion. This would be the largest U.S. amber box notification since 2001. However, despite its magnitude, it still would fit within the U.S. spending limit of $19.1 billion. A more ambiguous result is projected for 2019. The expansion of direct payments under a second trade assistance package to $14.5 billion in 2019 and their shift to a non-product-specific WTO classification-when combined with currently projected spending under other non-product-specific programs such as the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs-could push U.S. amber box outlays above $24 billion. This would be in excess of the U.S. amber box spending limit of $19.1 billion. However, this projection hinges on several as-yet-unknown factors, including market prices, output values, and program outlays under traditional countercyclical ARC and PLC programs. If the final price and revenue values are higher than currently projected, then program payments under ARC and PLC could be smaller than those used in this analysis. This could decrease both aggregate non-product-specific outlays and the possibility of exceeding the amber box spending limit. If cumulative payments in any year were to exceed the agreed-upon spending limit, then the United States would be in violation of its commitments and could be vulnerable to a challenge under the WTO's dispute settlement mechanism. Furthermore, to the extent that such program outlays might induce surplus production and depress market prices, they could also result in potential challenges under the WTO.

Subsidies are arguably the dominant theme in International Economic Law. A prolific case law has been elaborated by WTO Panels and Appellate Body in response to the multitude of complaints lodged in the past two decades (Softwood Lumber, Airbus, Boeing, etc.) Unfortunately, it is possible to be overwhelmed by the complexity of this case law. This book provides a comprehensive approach in response to this complexity. First, it avoids unnecessary legal jargon, making it accessible to a large public. Second, it adopts a comprehensive and progressive approach where legal subtleties are not avoided but presented at the right moment and the right place. The reader is therefore not overwhelmed from the outset by a multitude of details. The first Part of the book adopts the perspective of a WTO Member seeking to counter an alleged subsidy granted by another Member. To this end, this first Part scans and analyzes in detail all WTO Agreements, containing cumulative disciplines and remedies relating to subsidies. Therefore, it is not only the SCM Agreement that is scanned and analyzed but also the Agreement on Agriculture (AoA), GATT 1994, and even the 1980 Agreement on Trade in Civil Aircraft (ATCA). The second Part of the book adopts the perspective of a WTO Member accused of granting subsidies violating subsidies disciplines.To this end, an original classification is offered of the various strategies that can be used by this Member. For this purpose, a distinction is made between the “threshold strategy” where the existence of a challengeable subsidy is recused from the outset, the “denying violation of disciplines strategy,”the “exemption or exception strategy,” the “procedural and evidentiary strategy,” and finally the “implementing strategy.” The last Part of this book, which could turn out to be the most useful for the community of agents concerned by subsidies, offers an original examination of pending legal issues. To this end, a relevant distinction is established between pending legal issues partially answered by present case law and pending legal issues not still answered by present case law. This case law and the norms disciplining subsidies in WTO Agreements are of utmost importance first for International Trade Ministries, Parliaments, and International Institutions (OECD, CNUCED, FAO, etc.). However, Non-Governmental Organizations (World Wide Fund, etc.) are also directly concerned by this topic regarding, for example, fisheries subsidies and their impact on overexploitation of marine resources. The private sector (fishing fleets, fishermen, extractive industries, etc.) is also affected by this topic particularly regarding future investments.Law firms involved in subsidies cases are naturally at the forefront of the community of agents concerned by this topic.