PDF _ RL30612 - Agriculture in the WTO:Member Spending on Domestic Support
17-Jun-2005; Randy Schnepf; 44 p.

Update: 9/12/05 Previous Releases: /NLE/CRSreports/Agriculture/ag-107.pdf

Abstract: Under the World Trade Organization's (WTO?s) Agreement on Agriculture (AA), member countries agreed to general rules regarding disciplines on domestic subsidies (as well as on export subsidies and market access). The AA?s goal was to provide a framework for the leading members of the WTO to make changes in their domestic farm policies to facilitate more open trade. Under the AA, domestic spending is disaggregated according to those outlays that have the greatest potential to distort agricultural markets (i.e., amber box) and therefore are subject to spending limits, and more benign outlays (i.e., which cause less market distortion) that are exempted from spending limits under green box, blue box, de minimis, or special and differential treatment exemptions.

Of the 148 members in the WTO on February 16, 2005, 35 had made specific commitments to reduce domestic spending. Based on a review of the 1995-2001 period for which WTO member data are available, WTO policy commitments appear to have either reduced or redirected domestic subsidies away from market-distorting policies and towards programs of the exempt categories. In addition, amber box spending generally has declined relative to spending limits. A notable exception to these trends is the United States, where domestic support has trended higher, both in total value and as a share of WTO spending limits.

During 1995-2001, three WTO members ? the 15-member European Union (EU-15), the United States, and Japan ? dominated every WTO category of domestic support spending. Together, they accounted for over 90% of amber box spending by WTO members ? the EU-15 had a commanding 60% share compared with 19% for Japan and 13% for the United States.

However, policy reforms in the EU-15 and Japan have helped to reduce their amber box spending in recent years ? both in total value and as a share of the amber box ceiling. EU-15 amber box spending has declined steadily from $66.5 billion in 1995 to $34.8 billion in 2001 while the outlay-to-ceiling average share has held fairly steady at about 65%. Japan?s amber box outlays have fallen from $36.8 billion (an outlay-to-ceiling share of 73%) in 1995 to $5.3 billion (17%) in 2001. U.S. amber box spending has trended higher from an average of $6.1 billion during 1995-97, to $16 billion during 1999-2001. As a share of its WTO ceiling, U.S. amber box spending has risen from 27% to 83% during those same two periods. A tightening gap between WTO spending limits and outlays has the potential to constrain flexibility and policy choices in considering ways to assist domestic agricultural producers, as well as to limit trade negotiators in the ongoing Doha Round of trade negotiations. In contrast, a widening gap between the amber box ceiling and actual outlays represents greater negotiating power for future cuts in WTO spending limits without sacrificing domestic policy flexibility.

Data on domestic support by WTO members has been assembled from available notifications and is presented in a series of appendix tables (Appendix Tables 1-13) at the end of this report. This report will be updated as events warrant. [read report]

Topics: Agriculture, International Finance, International

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