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WTO Agreement on Agriculture


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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.

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WTO Agreement on Agriculture

  1. 1. WTO Agreement on Agriculture Ekaterina Krivonos, FAO Kyiv, Ukraine 7 June 2017
  2. 2. Key principles in GATT/WTO The key principles of the GATT 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. 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. 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. 5. The Legal Framework Agreement on Agriculture Modalities + Supporting Tables Schedules of Commitments Other WTO Agreements Protocols of Accession Decisions Disputes 5
  6. 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. 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. 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. 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. 10. Domestic support Domestic Support The AoA classifies 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 the exemption 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 BoxBlue Box Development Box Green Box 10
  11. 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 production or 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. 12. Green Box Domestic Support Measures that do not distort production or 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. 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. 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 stabilisation programme Norway – Structural income support to dairy farmers; Headage support Domestic Support 14
  15. 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. 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. 17. Export Competition Export Competition Instrument Developed Members Developing Members Article 9 Definition of export subsidies subject to reduction; Article 10 Prevent the use of export subsidization practices not mentioned in Article 9, in such a manner that would circumvent the reduction commitments and:  food aid must be provided according to other relevant provisions agreed outside the WTO and in such way that it will not be directly or indirectly tied to commercial exports of agricultural products to recipient countries  an undertaking to work towards internationally agreed disciplines regarding the provision on export credits; Article 3.3 Prohibition on the use of export subsidies on products not subject to reduction commitments; Schedules Distinct reduction commitments on both volume (21%) and budgetary outlays (36%) over six years; Two-thirds of the reduction required for developed countries over ten years; Article 11 For incorporated / processed products budgetary outlays only (36%); Article 9.4 Exception during the implementation period in respect of certain marketing and transportation subsidies The main provisions of the AoA, prior to the Nairobi Decision 17
  18. 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 AoA that includes temporary exceptions for developing Members, allowing them to subsidize marketing, handling, and upgrading as well as international transport 18
  19. 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 All products Immediately Canada Dairy products, processed products All other products End of 2020 Immediately European Union Pork meat, processed products Sugar All other products End of 2020 September 2017 Immediately Norway Pork meat, dairy products, processed products All other products End of 2020 Beginning of 2016 Switzerland Processed products All other products End of 2020 Immediately Developing Members Member Product End date Brazil, Colombia Cotton All other products End of 2016 End of 2018 Indonesia, Mexico, Uruguay All products End of 2018 Israel Cotton Fruits and Vegetables All other products End of 2016 End of 2022 End of 2018 South Africa Cotton All other products End of 2016 End of 2018 Turkey * 19 products All other products End of 2022 End of 2018 Venezuela * 50 products All other products End of 2022 End of 2018 19
  20. 20. Thank you! 20
  21. 21. Extra slides – do not translate 21
  22. 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. 23. Calculating product-specific AMS Wheat (US$) Administered price (US$/tonne) 290 External reference price (US$/tonne) 210 Domestic production (tonnes) 2,000,000 Value of production 580,000,000 Total market price support (MPS) 160,000,000 (290-210) x 2,000,000 Other types of wheat AMS support* 1,000,000 Total product-specific AMS 161,000,000 (MPS + other support types) Domestic Support 23
  24. 24. Calculating Current Total AMS Example: Russia 2008 (US$ 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. 25. Final Bound total AMS (Million US$ equivalent 2013) Source: Cédric Pène, WTO Secretariat, presentation in Rome, FAO, 18-19 April 2016 Domestic Support 25