Agreement on Agriculture

Introduction

Although trade in agricultural products has in the past been governed by both general and specific GATT disciplines, they are less operational and less effective than for industrial goods. In practice, this has had two effects.

5. It has contributed to uncompetitive production and growing surpluses shielded behind a wide variety of market restrictions and subsidy practices in many countries

6. Agricultural products have been largely excluded from the reductions in tariffs and non-tariff measures made in previous negotiating rounds.

The recognition of these facts by governments is reflected in the long-term objectives as agreed at the Mid-Term Review - ie. to establish a fair and market-oriented agricultural trading system. The Agreement on Agriculture is based on a two-pronged approach:

• re-instrumentation; that is, a conversion of all non-tariff measures into tariffs ("tariffication"); and
• binding commitments in the areas of market access, domestic support and export competition.

The results of the Uruguay Round negotiations on agriculture comprise two components:

1. The Uruguay Round Agreement on Agriculture

2. Schedules of commitments implemented according to detailed guidelines or "modalities".

The Agreement on Agriculture stipulates that Members must undertake specific binding and reduction commitments in the areas of

• market access
• domestic support
• export subsidies.

Least-developed countries are exempted from undertaking reduction commitments.

All commitments are recorded in each Member's Schedule of agricultural concessions and commitments. This initial reform of trade in agriculture will be made over an implementation period of six years (10 years for developing countries).

Market access


Concessions include bindings and reductions of tariffs and the introduction of tariff quotas at reduced tariff rates. Recourse or reversion to non-tariff measures is not allowed since this would nullify the concessions (in the sense of this paragraph, "non-tariff measures" exclude general non-agriculture-specific provisions of GATT 1994 such as those measures maintained under balance-of-payments provisions).

Members may have recourse to a special safeguard mechanism, on a temporary basis, for products that have been subject to tariffication to limit imports in case of a surge in volumes or significant falls in the import price. These safeguard measures are to take the form of increased tariffs. The safeguard 'trigger' for import surges depends on the current "import penetration" in the market; where imports make up a large proportion of consumption, the import surge required to trigger the special safeguard is lower. This special safeguard mechanism will remain in force for the duration of the reform process, as defined in the continuation clause (see below).

In order to facilitate the implementation of tariffication in particularly sensitive situations, a "special treatment" clause of the Agreement allows, under certain carefully and strictly defined conditions, a Member to maintain import restrictions up to the end of the implementation period. Negotiations on any possible extension of such special treatment must be completed before the end of the six-year implementation period (or ten year in the case of developing countries).

Domestic support


The Agreement provides for commitments on all domestic support in favour of agricultural producers, with the exception of three groups of policies.

1. Those policies that have no, or at most minimal, trade distortion effects or effects on production, and which meet basic and policy-specific criteria. These are designated as "green box" policies.

2. Those policies involving direct payments under production-limiting programmes that conform to certain criteria. These are designated as "blue box" measures.

3. Those policies that involve specified types of assistance, whether direct or indirect, to encourage agricultural and rural development which are an integral part of the development programmes of developing countries.

The Agreement also creates disciplines to ensure that any domestic support measure in favour of agricultural producers, including any modification of existing measures, is applied in conformity with the disciplines of the Agreement.

The types of policies in operation may be classified in one of three categories

• green box policies include: general service policies (research, training services, stockholding for food security objectives, domestic food-aid, etc.) and direct payments to producers (decoupled income support, income insurance, disaster relief, environmental programmes, regional assistance programmes, etc.).
• blue box policies include: production-limiting programmes - those for which the payments are based on fixed areas and yields, or are made on 85 per cent or less of the base level of production, or that livestock payments are made on a fixed number of head. Development policies in the 'blue box' that are exempt from reduction comprise generally available investment subsidies, domestic support to encourage diversification from the growing of illicit narcotic crops, and agricultural input subsidies provided to low-income or resource-poor producers.
• amber box policies are any other measures comprising domestic support in favour of agricultural producers. These policies are subject to commitments through the reduction of the Total Aggregate Measurement of Support (AMS). Domestic support policies that do not exceed 5 per cent of the total value of production of a product, or product sector, will not be included in the Total AMS (de minimis provision). In the case of developing countries, the 5 per cent ceiling is increased to a 10 per cent ceiling.

Export competition


The Agreement specifies the export subsidies that are subject to reduction commitment. There are

• direct subsidies contingent on export performance
• the sale or disposal for export of stocks at a price lower than that in the domestic market
• payments on exports financed by producers by virtue of governmental action
• subsidies to reduce the costs of marketing exports including handling, upgrading and other processing costs
• the costs of international transport (but excluding widely available export promotion and advisory services)
• internal transport subsidies on export shipments
• subsidies on agricultural products contingent on their incorporation in exported products.

Developing countries are not required to undertake commitments on subsidies to reduce the cost of marketing exports and internal transport subsidies.

The Agreement provides some limited flexibility in the allocation of subsidy reductions between the years of the implementation period. It also contains provisions aimed at preventing the circumvention of the export subsidy commitments. Food-aid (granted according to specific rules) is explicitly excluded from these provisions. An Article containing disciplines in the case of imposition by Members of export prohibitions and restrictions completes obligations in the area of export competition.

The Agreement includes a "continuation clause" that calls for new negotiations to continue the reform process to commence one year before the end of the six-year implementation period. It also contains "peace" provisions under which, during nine years, Members agree, with respect to products included in the reform programme:

• that certain actions available under the Subsidies Agreement (ie. recourse to countervailing measures and to dispute settlement) will not be applied with respect to green box policies;
• that "due restraint" will be used in the application of countervailing duty rights under the General Agreement with respect to domestic support and export subsidies maintained in conformity with the commitments;
• that limits are established in terms of the applicability of nullification and impairment actions under Article XXIII:1(b) of GATT 1994; and
• domestic support (subject to limits) and export subsidies conforming to reduction commitments will not be subject to action under Article XVI of GATT 1994 or Articles 3, 5 and 6 of the Subsidies Agreement.

The Agreement establishes a Committee on Agriculture.

Many developing countries are efficient producers of agricultural products from both temperate and tropical zones. With the implementation of the results of the Uruguay Round, these countries benefit not only from improved market access opportunities in developed and other developing country markets, but also from the reduction of subsidized exports and trade distorting production incentives in other countries. It is likely that the share of developing countries in the world market for agricultural products will increase.

As increases in the level and stability of world prices for many agricultural products are passed through to producers, domestic production levels in developing countries, including the least-developed and net food-importing countries, are expected to increase. Possible negative effects of the reform programme on least-developed and net food-importing developing countries are addressed in a Ministerial Decision [**].

Recognition of Interests

Preamble


Special and differential treatment for developing country Members was accepted as an integral element of the Uruguay Round negotiations. In addition, Members took account of the possible negative effects of the implementation of the reform programme on least-developed and net-food importing developing country Members.

Special and Differential Treatment: Article 15:1


Reiterates that special and more favourable treatment for developing country Members was an integral part of the negotiation, and commitments will be applied accordingly, including ten-year implementation period.

Least-developed and Net-Food Importing Developing Countries: Article 16.1


Developed country Members are to act in accordance with the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net-Food Importing Developing Countries.

Continuation of the Reform Programme: Article 20(c)


Within the negotiations for continuing the reform in agricultural trade, Members are to take into account special and differential treatment to developing country Members.

Fewer Obligations

Domestic Support Commitments: Article 6:2

The following domestic support policies adopted by developing country Members are excluded from the reduction commitments -

• investment subsidies generally available to agriculture;
• agricultural input subsidies generally available to low-income or resource-poor producers; and
• support to producers to encourage diversification from growing illicit narcotic crops.

Domestic Support Commitments: Article 6:4



Under the de minimis provision, domestic support policies of developing country Members which do not exceed 10 per cent of the total value of production (product-specific or non-product-specific) are excluded from reduction commitments (5 per cent for developed country Members).

Export Subsidy Commitments: Article 9:2(b)(iv)



The flexibility granted for implementing export subsidy commitments apply both to developed and developing country Members. The final reduction is smaller for developing countries.

Export Subsidy Commitments: Article 9:4



Developing country Members may use the following subsidies, which are subject to reduction commitments in the case of developed country Members, to promote exports -

subsidies to reduce the costs of marketing exports, including handling, upgrading and other processing costs, and the costs of international transport; and

internal transport charges on export shipments on terms more favourable than for domestic shipment.


Disciplines on Export Prohibition and Restriction: Article 12:2



Any Member applying an export prohibition or restriction on foodstuffs must give due consideration to the effect of such a measure on importing Members' food security, and must notify the measure to the Committee on Agriculture before it is implemented. This provision does not, however, apply to developing country Members unless the Member is a net-exporter of the concerned foodstuff.

Special and Differential Treatment: Article 15:2



Least-developed countries are not required to undertake reduction commitments in any area of the negotiations.

Public stockholding for food security purposes: Annex 2, paragraph 3 and Footnotes 5 and 6


The criteria and conditions under which stockholding is designated a "green box" policy are more flexible for developing countries. All developing country governmental stockholding programmes for food security, including those where foodstuff stocks are acquired and released at administered prices and those where foodstuffs are provided at subsidized prices for urban and rural poor on a regular basis are considered "green box" policies.

Domestic food aid: Annex 2, paragraph 4 and Footnote 6



Domestic food aid is subject to more flexible criteria in developing countries. Programmes that provide foodstuffs for urban and rural poor on a regular basis at subsidized prices will be considered as green box policies.