Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
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percent of domestic consumption) was provided by a system of tariff rate quotas<br />
(TRQs), 37 at lower, but usually positive rates, often allocated to individual suppliers.<br />
As the out of quota tariffs are usually prohibitively high, imports of a large number of<br />
agricultural products into developed countries are in fact subject to de facto<br />
quantitative limits. This protective regime is supplemented by a Special Safeguard<br />
Mechanism (SSM), which permits additional import charges to be applied when<br />
imports of “tariffied” products exceed trigger prices or trigger volumes.<br />
Thus, the new regime retained, in a somewhat different form, the quantitative<br />
restrictions (de facto) and variable levies that were central to the EU protective<br />
regime. It also established a framework for “micro-negotiation” for the granting of<br />
bilateral quotas reminiscent of the MFA. Within such a structure, analysis based on<br />
average tariff rates provides little useful guidance for policy makers. 38<br />
The WTO Agriculture Agreement also imposed some discipline on agricultural<br />
subsides. Export subsidies are subject to sectoral commitments, (volume and<br />
payments). Domestic production subsidies designed to have a distorting effect, (e.g..<br />
price supports), are also subject to overall negotiated ceilings (based on AMSaggregate<br />
measure of support) with a de minimis exception (5 per cent for developed,<br />
10 per cent for developing countries). Two other categories of subsidies are not<br />
subject to limitations: (i) direct payments to producers when linked to supply<br />
reduction (“blue” box), and (ii) those determined to have minimal trade impact<br />
(“green” box). This structure has not served to limit agricultural subsidization, which<br />
has increased to almost $300 billion annually. Subsidy programmes have simply been<br />
directed to those ‘boxes” where no limits are applied. 39<br />
Bound limits of domestic production subsidies (AMS) total $64 billion. However<br />
actual subsidization does not reach these limits. The utilization rate was 88 per cent in<br />
USA, 62 per cent in EU and 17 per cent in Japan. 40 Twenty nine WTO members have<br />
made AMS commitments. They are phrased in terms of overall payments, e.g. the<br />
European Community’s commitment is EUR 67 billion, that of the United States $19<br />
billion.<br />
“a primary agricultural product that is the predominant staple in the traditional diet of a developing<br />
country”. O nly Korea, the Philippines and Israel make use of this provision<br />
37 In practice not all countries have met the 5 per cent access commitment and the TRQs have been<br />
significantly under utilized.<br />
38 Stiglitz and Charlton, op. cit., pp. 217-234.<br />
39<br />
There is a concise description of the subsidy boxes on the WTO website at<br />
http://www.wto.org/english/tratop_e/agric_e/agboxes_e.htm.<br />
40 See presentation by Ralf Peters UNCTAD at UNECA Ad Hoc Meeting on Agriculture, Tunis,<br />
November 2004, http://www.uneca.og/eca_programes/trade.<br />
33