Trade Policy Note Final-rev08 - Development

percent of domestic consumption) was provided by a system of tariff rate quotas
(TRQs), 37 at lower, but usually positive rates, often allocated to individual suppliers.
As the out of quota tariffs are usually prohibitively high, imports of a large number of
agricultural products into developed countries are in fact subject to de facto
quantitative limits. This protective regime is supplemented by a Special Safeguard
Mechanism (SSM), which permits additional import charges to be applied when
imports of “tariffied” products exceed trigger prices or trigger volumes.
Thus, the new regime retained, in a somewhat different form, the quantitative
restrictions (de facto) and variable levies that were central to the EU protective
regime. It also established a framework for “micro-negotiation” for the granting of
bilateral quotas reminiscent of the MFA. Within such a structure, analysis based on
average tariff rates provides little useful guidance for policy makers. 38
The WTO Agriculture Agreement also imposed some discipline on agricultural
subsides. Export subsidies are subject to sectoral commitments, (volume and
payments). Domestic production subsidies designed to have a distorting effect, (e.g..
price supports), are also subject to overall negotiated ceilings (based on AMSaggregate
measure of support) with a de minimis exception (5 per cent for developed,
10 per cent for developing countries). Two other categories of subsidies are not
subject to limitations: (i) direct payments to producers when linked to supply
reduction (“blue” box), and (ii) those determined to have minimal trade impact
(“green” box). This structure has not served to limit agricultural subsidization, which
has increased to almost $300 billion annually. Subsidy programmes have simply been
directed to those ‘boxes” where no limits are applied. 39
Bound limits of domestic production subsidies (AMS) total $64 billion. However
actual subsidization does not reach these limits. The utilization rate was 88 per cent in
USA, 62 per cent in EU and 17 per cent in Japan. 40 Twenty nine WTO members have
made AMS commitments. They are phrased in terms of overall payments, e.g. the
European Community’s commitment is EUR 67 billion, that of the United States $19
billion.
“a primary agricultural product that is the predominant staple in the traditional diet of a developing
country”. O nly Korea, the Philippines and Israel make use of this provision
37 In practice not all countries have met the 5 per cent access commitment and the TRQs have been
significantly under utilized.
38 Stiglitz and Charlton, op. cit., pp. 217-234.
39
There is a concise description of the subsidy boxes on the WTO website at
http://www.wto.org/english/tratop_e/agric_e/agboxes_e.htm.
40 See presentation by Ralf Peters UNCTAD at UNECA Ad Hoc Meeting on Agriculture, Tunis,
November 2004, http://www.uneca.og/eca_programes/trade.
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