COLLEGE OF AGRICULTURE, JABUGAM (AAU)

DOMESTIC SUPPORT IN
AGRICULTURE
Presented By:
Dhruv Patel
(5010321002)

SUBJECT AG ECON 4.3

SUBMITTED TO: Dr. Mahammadhusen T Korajiya

SEMESTER: 4TH
 LIST OF CONTENTS
• Introduction
• National treatment
• GATT exceptions and waivers
• Three pillars of the agreement on agriculture
• Market access in the Uruguay round
• Types of boxes
• Amber Boxes
• Blue box
• Green Box
• Development measures
• De Minimis
 INTRODUCTION
THE BOXES
• In WTO terminology, subsidies in general are identified by “boxes”
which are given the colours of traffic lights: GREEN (PERMITTED),
amber (slow down – i.e. be reduced), red (forbidden).
• In agriculture, things are, as usual, more complicated.
• The Agriculture Agreement has no red box, although domestic
support exceeding the reduction commitment levels in the amber
box is prohibited; and there is a blue box for subsidies that are tied
to programmers that limit production.
• There are also exemptions for developing countries (sometimes
called an “S&D box”, including provisions in Article 6.2 of the
agreement.)
 NATIONAL TREATMENT
• Imported and domestically produced goods should be treated
equally once the foreign goods have entered the market.
• “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”
• Imports “shall be accorded treatment no less favorable than
that accorded to like products of national origin in respect of
all laws, regulations and requirement affecting their sale,
offering for sale, purchase, transportation, distribution or
use”.
 GATT EXCEPTIONS AND WAIVERS
• The GATT recognized that there are circumstances in which
strict adherence to these principles would be inappropriate.

• E.g. measures considered “necessary” to protect public health provided their

General application does not constitute arbitrary or unadjustifiable discrimination.
exceptions

Customs
• Countries that offer each other more favorable treatment within a custom’s union or RTA
Unions and were allowed to waive full adherence to the MFN clause.
Free Trade
Agreements

• 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
Others its normal commitments.
 THREE “PILLARS” OF THE
AGREEMENT ON AGRICULTURE
Agreement on Agriculture (AoA)
Market access Domestic Support Export competition

Article 4,5 and Annex 5 Article 3,6,7, and Article 3, and 8-11
Annexes 2,3,4
Tariffs Green Box Export Subsicides
•Tariffication
•Reduction
•commitments

Tariff Rate Quotas Blue Box Anti-circumvention

•Food aid
•Export credits
Special safeguards Development Box
Amber Box
•De minimis
•Commitments
 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 commitments 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
1. Those countries that did the Tariffication exercise
2. Those agricultural products for which the right to use this safeguard is
reserved in the country schedules.
TYPES OF BOXES
1. AMBER BOX
• All domestic support measures considered to distort
production and trade (with some exceptions) fall into the
amber box, which is defined in Article 6 of the Agriculture
Agreement as all domestic supports except those in the blue
and green boxes.
• These include measures to support prices, or subsidies
directly related to production quantities.
• These supports are subject to limits: “de minimal” minimal
supports are allowed (5% of agricultural production for
developed countries. 10% for developing countries).
• The 30 WTO members that had larger subsidies than the de
minims levels at the beginning of the post-Uruguay Round
reform period are committed to reduce these subsidies.
• The reduction commitments are expressed in terms of a
“Total Aggregate Measurement of Support” (Total AMS) which
includes all supports for specified products together with
supports that are not for specific products, in one single
figure.
• In the current negotiations, various proposals deal with how
much further these subsidies should be reduced, and whether
limits should be set for specific products rather than
continuing with the single overall “aggregate” limits.
AMBER
BOX

Calculatio
DE
n of
Minimis
product-
threshold Bound
and non-
and total AMS
The amber box captures all domestic product-
current
support from policies that do not meet specific
total AMS
the green box, blue box, or article 6.2 AMS
(development measures) criteria.

Such support is limited through

commitments applying to the
aggregate measurements of support
(AMSs)
 BLUE BOX
• This is the “amber box with conditions” – conditions designed
to reduce distortion.
• Any support that would normally be in the amber box is
placed in the blue box if the support also requires farmers to
limit production (details set out in Paragraph 5 of Article 6 of
the Agriculture Agreement).
• At present there are no limits on spending on blue box
subsidies. In the current negotiations, some countries want to
keep the blue box as it is because they see it as a crucial
means of moving away from distorting amber box subsidies
without causing too much hardship.
• Others wanted to set limits or reduction commitments, some
advocating moving these supports into the amber box.
BLUE
BOX
 GREEN BOX
• The green box is defined in Annex 2 of the Agriculture
Agreement.
• In order to qualify, green box subsidies must not distort trade, or
at most cause minimal distortion (paragraph 1).
• They have to be government-funded (not by charging consumers
higher prices) and must not involve price support.
• They tend to be programmes that are not targeted at particular
products, and include direct income supports for farmers that are
not related to (are “decoupled” from) current production levels
or prices.
• They also include environmental protection and regional
development programmes
• “Green box” subsidies are therefore allowed without limits,
provided they comply with the policy-specific criteria set out in
table.
• In the current negotiations, some countries argue that some of
the subsidies listed in Annex-2 might not meet the criteria of the
annex’s first paragraph – because of the large amounts paid, or
because of the nature of these subsidies, the trade distortion they
cause might be more than minimal.
• Among the subsidies under discussion here are: direct payments
to producers (paragraph 5), including decoupled income support
(paragraph-6) and 109 government financial support for income
insurance and income safety net programmes (paragraph 7) and
other paragraphs.
• Some other countries take the opposite view that the current
criteria are adequate, and might even need to be made more
flexible to take better account of non-trade concerns such as
environmental protection and animal welfare.
 GREEN BOX
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.

Policy specific criteria (paragraph 2-13 of annex 2)

General services including: Direct payments including:

•Research •Decoupled income support
•Pest and disease control •Income insurance and income safety-net
•Training •Relief from natural disasters
•Extension /advisory services •Structural adjustment assistance
•Inspection •Producer retirement
•Marketing and promotion •Resource retirement
•Infrastructural services •Investments aids
•Environmental programmes
•Regional assistance programmes

Public stockholding for food security

purposes
Domestic food aid
 DEVELOPMENT • Investment subsidies that are
MEASURES 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
Specific provisions for diversification from growing illicit
developing countries on a narcotic crops.
special and differential
treatment ceiling.
It allows, under specific
conditions, the exemption of
support under some
measures from the otherwise
applicable ceiling.
 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
 DOMESTIC SUPPORT
CALCULATION
• 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.

Administered Fixed
Market price prices
support for a External
As close to the Reference
product
point of first sale Price(FERP)
as practicable

Eligible
production
THANK YOU