Agreement on Agriculture

The Agreement on Agriculture is an international treaty

of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Taris and Trade, and entered into force with the establishment of the WTO on January 1, 1995.

ence, developed country farm groups that had beneted

from protectionist policies strongly resisted any specic
compromise on agriculture. In this context, the idea of
exempting production and trade-neutral subsidies from
WTO commitments was rst proposed by the US in 1987,
and echoed soon after by the EU.[2] By guaranteeing
farmers a continuation of their historical level of support, it also contributed to neutralising opposition to the
1 History of the Agreement
round. In exchange for bringing agriculture within the
disciplines of the WTO and committing to future re1.1 Original idea
duction of trade-distorting subsidies, developed countries
would be allowed to retain subsidies that cause not more
The idea of replacing agricultural price support with than minimal trade distortion in order to deliver various
direct payments to farmers decoupled from production public policy objectives.[1]
dates back to the late 1950s, when a Panel of Experts,
chaired by Professor Gottfried Haberler, was established
at the twelfth session of the GATT Contracting Parties to
2 Three Pillars
examine the eect of agricultural protectionism, uctuating commodity prices and the failure of export earnings
to keep pace with import demand in developing coun- The AoA has three central concepts, or pillars": domestries. The 1958 Haberler Report stressed the importance tic support, market access and export subsidies
of minimising the eect of agriculture subsidies on competitiveness, and recommended replacing price support
by direct supplementary payments not linked with pro- 2.1 Domestic support: the boxes
duction, anticipating discussion on green box subsidies.
Only more recently, though, has this shift from price sup- The rst pillar of the AoA is domestic support.
port to producer support become the core of the reform The WTO Agreement on Agriculture negotiated in the
of the global agricultural system.[1]
Uruguay Round (19861994) includes the classication
of subsidies into boxes depending on their eects on production and trade: amber (most directly linked to produc1.2 Historical context
tion levels), blue (production-limiting programmes that
still distort trade), and green (causing not more than miniBy the 1980s, government payments to agricultural pro- mal distortion of trade or production).[3] While payments
ducers in industrialised countries had caused large crop in the amber box had to be reduced, those in the green
surpluses,which were unloaded on the world market by box were exempt from reduction commitments. Detailed
means of export subsidies, pushing food prices down. rules for green box payments are set out in Annex 2 of
The scal burden of protective measures increased, due the Agreement on Agriculture. However, all must comboth to lower receipts from import duties and higher do- ply with the fundamental requirement in paragraph 1,
mestic expenditure. In the meantime, the global econ- to cause not more than minimal distortion of trade or
omy had entered a cycle of recession, and the perception production, and must be provided through a governmentthat opening up markets could improve economic con- funded programme that does not involve transfers from
ditions led to calls for a new round of multilateral trade consumers or price support to producers.[1]
negotiations.[2] The round would open up markets in ser- The AoAs domestic support system currently allows
vices and high technology goods, and ultimately generate Europe and the USA to spend $380 billion every year
much needed eciency gains. With a view to engaging on agricultural subsidies alone. It is often still argued
developing countries in the negotiations, many of which that subsidies are needed to protect small farmers but, acwere demandeurs of new international disciplines, agri- cording to the World Bank, more than half of EU support
culture, textiles and clothing were added to the grand goes to 1% of producers while in the US 70% of subsibargain.[1]
dies go to 10% of producers, mainly agri-businesses. .
In leading up to the 1986 GATT Ministerial Confer- The eect of these subsidies is to ood global markets
1

4 MECHANISMS FOR DEVELOPING COUNTRIES

with below-cost commodities, depressing prices and un- box payments probably have only a minor eect on prodercutting producers in poor countries a practice known duction and trade, others have a signicant impact. Acas dumping.
cording to countries latest ocial reports to the WTO,
the United States provided $76 billion in green box payments in 2007 over nine-tenths of its total spending
2.2 Market Access
while the EU notied 48 billion ($91 billion) in 2005,
or around half of all support provided by the bloc. In the
Market access is the second pillar of the AoA, and case of the EU, a large and growing share of green box
refers to the reduction of tari (or non-tari) barriers to spending was on decoupled income support, which the
trade by WTO member-states. The 1995 AoA required book shows can have a particularly signicant impact on
tari reductions of:
production and trade.[1]
Third World Network states that; This has allowed the
36% average reduction by developed countries, with
rich countries to maintain or raise their very high subsia minimum per tari line reduction of 15% over six
dies by switching from one kind of subsidy to another...
years.
like a magicians trick. This is why after the Uruguay
24% average reduction by developing countries with Round the total amount of subsidies in OECD countries
a minimum per tari line reduction of 10% over ten have gone up instead of going down, despite the apparent
promise that Northern subsidies will be reduced. Moreyears.
over, Martin Khor argues that the green and blue box subsidies can be just as trade-distorting - as the protection
Least Developed Countries (LDCs) were exempted from
is better disguised, but the eect is the same.[4]
tari reductions, but either had to convert nontari barriers to tarisa process called taricationor bind At the WTO meeting in Hong Kong in 2005, countries
their taris, creating a ceiling which could not be in- agreed to eliminate export subsidy and equivalent payments by 2013. However, Oxfam has stated that EU excreased in future.
port subsidies account for only 3.5% of its overall agricultural support. In the US, export subsidies for cotton
2.3 Export subsidies
were announced to be removed but these represent 10%
of overall spending which does not address the core is"Export subsidies" is the third pillar of the AoA. The sue of domestic payments that have been proven to distort
1995 AoA required developed countries to reduce export trade and facilitate dumping.[5]
subsidies by at least 36% (by value) or by at least 21%
(by volume) over the six years. In the case of developing
country Members, the required cuts are 14% (by volume) 4 Mechanisms
for developing
and 24% (by value) over 10 years.

countries

Criticism

The AoA has been criticised by civil society groups for reducing tari protections for small farmers a key source
of income for developing countries. At the same time,
the AoA has allowed rich countries to continue paying
their farmers massive subsidies which developing countries cannot aord.
The Agriculture Agreement has been criticised by NGO's
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 disciplines and thus can be increased. As
ecient agricultural exporters press WTO members to
reduce their trade-distorting amber box and blue box
support, developed countries green box spending has increased a trend widely expected to continue. A book
from the International Centre for Trade and Sustainable
Development shows how green box subsidies do in fact
distort trade, aect developing country farmers and can
also harm the environment. While some types of green

During 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. Many still have large rural populations composed of small and resource-poor farmers
with limited access to infrastructure and few employment
alternatives. Thus, these countries are concerned that domestic rural populations employed in import-competing
sectors might be negatively aected by further trade liberalization, becoming increasingly vulnerable to market
instability and import surges as tari 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).

4.1 Special Safeguard Mechanism

A Special Safeguard Mechanism would allow developing countries to impose additional safeguard duties in
the event of an abnormal surge in imports or the entry
of unusually cheap imports.[6] Debates have arise around

3
this question, some negotiating parties claiming that SSM
could be repeatedly and excessively invoked, distorting
the normal ow of trade in the process. In turn, the G33 negotiating bloc of developing countries, which has
been the major proponent of the SSM, has argued that
breaches of bound taris should not be ruled out if the
SSM is to be an eective remedy.[6] A study by ICTSD
simulated the consequences of SSM on global trade for
both developed and developing countries.[6]

4.2

Special Products

At the 2005 WTO Ministerial Conference in Hong Kong,

Members agreed that Developing country Members will
have the exibility to self-designate an appropriate number of tari lines as Special Products guided by indicators
based on the criteria of food security, livelihood security
and rural development.[7]

See also
Peace Clause
World Trade Organization
International Centre for Trade and Sustainable Development
Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development
Goals by Ricardo Melndez-Ortiz, Christophe Bellmann, Jonathan Hepburn, September 2009.
WTO Negotiations on Agriculture and Developing Countries by Anwarul Hoda and Ashok Gulati,
(2007) Johns Hopkins University Press

References

[1] Agricultural Subsidies in the WTO Green Box, ICTSD,

September 2009.
[2] The Historical Context of the Green Box, Stancanelli,
N. (2009), ,In Agricultural Subsidies in the WTO Green
Box: Ensuring Coherence with sustainable Development
Goals. Eds. Melndez-Ortiz, R., Bellmann, C., and Hepburn, J. Cambridge University Press, UK.
[3] AGRICULTURE NEGOTIATIONS: BACKGROUND
FACT SHEET, WTO Website.
[4] TWN STATEMENT ON AGRICULTURE AT THE UN
ECOSOC HIGH-LEVEL SESSION, TWN July 2003
[5] WTO agreement a betrayal of development promises, Oxfam December 2005
[6] Simulations On The Special Safeguard Mechanism, by
Raul Montemayor, 2010, ICTSD, p.viii

[7] Indicators for the Selection of Agricultural Special Products: Some Empirical Evidence, Information Note. Number 1. July 2007. by ICTSD and FAO

7 External links
Text of the Agreement on Agriculture: html(1),
html(2), doc, pdf
Institute for Agriculture and Trade Policy,
Agreement on Agriculture Basics 2003.
Institute for Agriculture and Trade Policy, WTO
Agreement on Agriculture: A Decade of Dumping,
Feb 2005.
Devinder Sharma, The Indian Experience of Liberalisation of Agriculture, Aug 17, 2005.
Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development
Goals, ICTSD, September 2009.
World Trade Organization and Agriculture: Selective Bibliography, prepared by Hugo H.R. van
Hamel, Peace Palace Library
International Centre for Trade and Sustainable Development, Simulations on the Special Safeguard
Mechanism: a look at the December 2008 Draft
Agricultural Modalities, April 2010, by Raul Montemayor, Federation of Free Farmers Cooperatives,
Inc. (FFFCI)
Agritrade website for ACP-EU agriculture and sheries trade issues.

8 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

Text and image sources, contributors, and licenses

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