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Compatibility of result-based 
agri-environmental schemes with the WTO framework 
Lars Brink 
Workshop on result-based env...
–Substantial reductions in support and protection 
•Taking into account non-trade concerns: environment 
•Doha: substantia...
–Support for environment without any agr. production 
•May fall outside of Agreement on Agriculture 
–Support for environm...
Blue box measures 
Development 
programs 
Non-exempt 
measures 
Non-green 
measures 
Green box 
measures 
… measures in fa...
Blue box measures 
Development 
programs 
Non-exempt 
measures 
Current 
Total AMS 
must 
not exceed 
Non-green 
measures ...
Blue box measures 
Development 
programs 
Non-exempt 
measures 
NPS AMS 
Product 1 PS AMS 
Product 2 PS AMS 
Current 
Tota...
Non-green 
measures 
Blue box measures 
Development 
programs 
Non-exempt 
measures 
NPS AMS 
Product 1 PS AMS 
Product 2 ...
–Expenditures 
–General services 
–Public stockholding for food security 
–Domestic food aid 
–Payments 
–Direct payments ...
•Para. 12: Payments under environmental programs 
–(a) Eligibilityfor such payments shall be determined as part of a clear...
–Did EU regulation inspire URAA wording or vice versa? 
•Predates 1994 Uruguay Round Agreement on Agriculture URAA 
–Regul...
(increasingnumber of member states) 
€billion 
0.0 
2.8 
4.2 
3.7 
5.0 
5.5 
5.7 
5.5 
5.0 
5.2 
5.4 
5.6 
5.5 
6.3 
5.7 
...
2011/12 notification of EU 
environmental programs in G/AG/N/EU/20 
Monetary value: EUR 8,302.0 million 
Name and descript...
–Environmental objective does not make payment non- distorting of agricultural production 
•Result-based scheme may allow ...
–Are result-based payments properly reported only as “extra costs or loss of income”? 
–Researchers say it is difficult to...
–If some environment payments not eligible for para. 12 
•Would be in an AMS: product-specific or non-product-specific 
–E...
–Review in CoAgneed not lead to change in notification 
•Draws attention to unclear or missing information 
•May question ...
–Green box criteria do not determine what is allowed 
•Criteria determine only what can be exemptedfrom AMSs 
•EU regulati...
Thank you! 
Lars.Brink@hotmail.com 
Selected references 
Blandford, D. and T. Josling. 2007. Should the green box be modif...
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Result-based agri-environmental payments and the WTO rules

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Agri-environmental payment schemes can pay based on actions taken or results achieved (outcomes). Interest in developing result-based schemes seems to be growing. Questions arise about the compatibility of result-based payments with the WTO Agreement on Agriculture. This presentation examines some of these questions in the context of the EU Common Agricultural Policy.

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Result-based agri-environmental payments and the WTO rules

  1. 1. Compatibility of result-based agri-environmental schemes with the WTO framework Lars Brink Workshop on result-based environmental schemes AgriFoodEconomics Centre and Royal Swedish Academy of Agriculture and Forestry 12 November 2014 Lund, Sweden Lars.Brink@hotmail.com
  2. 2. –Substantial reductions in support and protection •Taking into account non-trade concerns: environment •Doha: substantial reductions in trade-distorting support –Domestic support •Not border measures: tariffs, export subsidies, etc. •Two kinds of domestic support –Not limited: green box, blue box, Article 6.2 –Limited: everything else –Measure support in particular ways •AMSs Aggregate Measurements of Support –Administered prices –Payments, subsidies WTO Agreement on Agriculture Lars Brink 2
  3. 3. –Support for environment without any agr. production •May fall outside of Agreement on Agriculture –Support for environment with agricultural production •Joint production of environment and agriculture •Support in favour of agricultural producers –Green box measures not subject to AMS calculation •No ceiling limit on green box support if measure meets –Fundamental requirement: no or minimal production effects –Two basic criteria: funded by government; not price support –Policy-specific criteria “… in favourof agricultural producers” Lars Brink 3
  4. 4. Blue box measures Development programs Non-exempt measures Non-green measures Green box measures … measures in favor of agricultural producers Art. 6.1 Art. 6.1 Annex 2 Art. 6.2 Art. 6.5
  5. 5. Blue box measures Development programs Non-exempt measures Current Total AMS must not exceed Non-green measures Green box measures … measures in favor of agricultural producers Blue box payments Development support Green box support Bound Total AMS Art. 3.2; 6.3
  6. 6. Blue box measures Development programs Non-exempt measures NPS AMS Product 1 PS AMS Product 2 PS AMS Current Total AMS etc. Bound Total AMS Calculate AMSs must not exceed Non-green measures Green box measures … measures in favor of agricultural producers Blue box payments Green box support Development support Annex 3 Annex 3.1 Annex 3.6
  7. 7. Non-green measures Blue box measures Development programs Non-exempt measures NPS AMS Product 1 PS AMS Product 2 PS AMS … measures in favor of agricultural producers Blue box payments Green box support Development support Current Total AMS etc. de minimis AMSs > 5% VOP? Calculate AMSs must not exceed > 5% VOP? > 5% VOP? Green box measures no no no yes yes yes Bound Total AMS Art. 6.4
  8. 8. –Expenditures –General services –Public stockholding for food security –Domestic food aid –Payments –Direct payments to producers –Decoupled income support –Income insurance –Crop insurance –Producer retirement –Resource retirement –Investment aids –Environmental programs –Regional assistance programs Sets of policy-specific green box criteria Lars Brink 8
  9. 9. •Para. 12: Payments under environmental programs –(a) Eligibilityfor such payments shall be determined as part of a clearly-defined government environmental or conservation program and be dependent on the fulfilment of specific conditions under the government program, including conditions related to production methods or inputs. –(b) The amountof payment shall be limited to the extra costs or loss of incomeinvolved in complying with the government program. (emphasis added) Annex 2 of Agreement on Agriculture Lars Brink 9
  10. 10. –Did EU regulation inspire URAA wording or vice versa? •Predates 1994 Uruguay Round Agreement on Agriculture URAA –Regulations go beyond “extra costs orloss of income” –Reg’nallows selection by tender or calls for proposals •Use as measurement of extra costs or loss of income? “… extra costs or loss of income” Lars Brink 10 746/96 “additional costs” and “incentive component” 1257/1999 “additional costs”, “income foregone”, and “incentive” 1698/2005 & 1974/2006 “additional costs andincome foregone” and “transaction costs” 74/2009 silent on these words 1305/2013 “additional costs andincome foregone” and “transaction costs” 2078/92 “loss of income”
  11. 11. (increasingnumber of member states) €billion 0.0 2.8 4.2 3.7 5.0 5.5 5.7 5.5 5.0 5.2 5.4 5.6 5.5 6.3 5.7 6.6 7.2 8.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 AGST 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Payments under EU environmental programs in agriculture 1995-2011 Source: Notifications to WTO Committee on Agriculture
  12. 12. 2011/12 notification of EU environmental programs in G/AG/N/EU/20 Monetary value: EUR 8,302.0 million Name and description of measure: Protection of environment and preservation of the countryside; aid for environmentally sensitive areas; support and protection of organic production by creating conditions of fair competition; aid for forestry measures in agriculture; conservation and improvement of rural heritage. Comments: Council Regulation 1698/2005, Council Regulation 1234/2007, Council Regulation 1257/1999, Commission Regulation 1857/2006, Agricultural State Aid Guidelines 2006/C 319/01, Council Regulations 1535/2007 and Commission regulation 1998/2006 Data sources: EAGF, EAFRD and national sources Lars Brink 12
  13. 13. –Environmental objective does not make payment non- distorting of agricultural production •Result-based scheme may allow or depend on agr. production –EU notification not transparent •One single “Environmental programs” amount; several reg’s •No mention of result-based payments –EU environment programs 1995-2010 in WTO Ctteeon Agr •7 questions: confirm payment is no larger than costs or income loss •EU asserts payments meet para. 12 costs or income loss criteria Worry about hidden production subsidy Lars Brink 13
  14. 14. –Are result-based payments properly reported only as “extra costs or loss of income”? –Researchers say it is difficult to measure such costs and losses –If properly reported, EU must know how to measure them, even if EU result-based payments are still very small –Basis for exempting allenvironment payments? •Either: all environment programs meet para. 12 criteria •Or: EU claimsall environment programs meet para. 12 criteria –Do EU reg’sstretch interpretation of WTO green box? •Significance of more generous andinstead of orof para. 12? EU environment payments and para. 12 Lars Brink 14
  15. 15. –If some environment payments not eligible for para. 12 •Would be in an AMS: product-specific or non-product-specific –Environment payments fit below de minimisthresholds •Threshold for beef AMS in 2011: €1.6 billion •Threshold for non-product-specific AMS in 2011: €18.5 billion EU has much room for AMS support Lars Brink 15 Total AMS & Overall Trade-Distorting Support URAA €bill. IfDoha €bill. Bound Total AMS (limit) 72 22 Current Total AMS 2011 (applied) 7 7 Bound OTDS (limit) Not applicable 24 Current OTDS 2011 (applied) Not applicable 11
  16. 16. –Review in CoAgneed not lead to change in notification •Draws attention to unclear or missing information •May question legitimacy of a country’s claims •No power to order a change in a country’s notification –Country exceeds its Bound Total AMS: may face dispute •Not an issue here: EU is far below Bound Total AMS –Environmental payments relatively small –Agreement on Subsidies and Countervailing Measures •Another country may claim “adverse effects”; seems unlikely WTO procedures Lars Brink 16
  17. 17. –Green box criteria do not determine what is allowed •Criteria determine only what can be exemptedfrom AMSs •EU regulations say what EU allows; they differ from para. 12 –Not observing para. 12 criteria is of little consequence •But let us presume EU wants to notify as per para. 12 criteria –Do EU notifications actually observe para. 12 criteria? •Yes? Measuring “extra costs or loss of income” under result- based schemes is then revealed not to be a problem in the EU •No? Should report non-compliant payments as AMS support Issue is not what the WTO “allows” Lars Brink 17
  18. 18. Thank you! Lars.Brink@hotmail.com Selected references Blandford, D. and T. Josling. 2007. Should the green box be modified? IPC Discussion Paper, International Food and Agricultural Trade Policy Council. Washington, DC. Brink, L. 2009. WTO constraints on domestic support in agriculture: past and future. Canadian Journal of Agricultural Economics57(1): 1-21. DOI:10.1111/j.1744-7976.2008.01135.x Brink, L. 2011. The WTO Disciplines on domestic support.In WTO Disciplines on Agricultural Support: Seeking a Fair Basis for Trade, ed. D. Orden, D. Blandfordand T. Josling. Cambridge: Cambridge University Press. Josling, T. and A. Swinbank. 2011. European Union. In WTO Disciplines on Agricultural Support: Seeking a Fair Basis for Trade, ed. D. Orden, D. Blandfordand T. Josling. Cambridge: Cambridge University Press. Meléndez-Ortiz, R., C. Bellman, and J. Hepburn (ed.). 2009. Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development Goals. Cambridge: Cambridge University Press.

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