The Agreement on Agriculture (AoA) is an international

treaty A treaty is a formal, legally binding written agreement between actors in international law. It is usually made by and between sovereign states, but can include international organizations An international organization or international o ...

of the

World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...

. It was negotiated during the

Uruguay Round The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1993 and embracing 123 countries as "contracting parties". The R ...

of the

General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pre ...

, and entered into force with the establishment of the WTO on January 1, 1995.

History

Origins

The idea of replacing agricultural price support with direct payments to farmers decoupled from production dates back to the late 1950s, when the twelfth session of the

GATT The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pre ...

Contracting Parties selected a Panel of Experts chaired by

Gottfried Haberler Gottfried von Haberler (; July 20, 1900 – May 6, 1995) was an Austrian-American economist. He worked in particular on international trade. One of his major contributions was reformulating the Ricardian idea of comparative advantage in a neoc ...

to examine the effect of agricultural

protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. ...

, fluctuating

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

prices and the failure of export earnings to keep pace with import demand in developing countries. The 1958 Haberler Report stressed the importance of minimising the effect of agriculture subsidies on competitiveness and recommended replacing price support with direct supplementary payments not linked with production, anticipating discussion on green box

subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...

. Only more recently, though, has this shift become the core of the reform of the global

agricultural system Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to ...

.Agricultural Subsidies in the WTO Green Box
ICTSD, September 2009.

Historical context

By the 1980s, government payments to agricultural producers in industrialised countries had caused large crop surpluses, which were unloaded on the world market by means of export

, pushing

food prices Food prices refer to the average price level for food across countries, regions and on a global scale. Food prices have an impact on producers and consumers of food. Price levels depend on the food production process, including food marketing an ...

down. The fiscal burden of protective measures increased, due both to lower receipts from import duties and higher domestic expenditure. In the meantime, the global economy had entered a cycle of

recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...

, and the perception that opening up markets could improve economic conditions led to calls for a new round of multilateral trade negotiations. The round would open up markets in services and high-technology goods, ultimately generating much needed efficiency gains. In order to engage developing countries, many of which were "demandeurs" of new international disciplines, agriculture, textiles, and clothing were added to the grand bargain. In leading up to the 1986

Ministerial Conference in

Punta del Este Punta del Este () is a seaside city and peninsula on the Atlantic Coast in the Maldonado Department of southeastern Uruguay. Starting as a small town, Punta del Este later became internationally known as a resort for the Latin and North American j ...

Uruguay Uruguay (; ), officially the Oriental Republic of Uruguay ( es, República Oriental del Uruguay), is a country in South America. It shares borders with Argentina to its west and southwest and Brazil to its north and northeast; while bordering ...

, farm lobbies in developed countries strongly resisted compromises on agriculture. In this context, the idea of exempting production and "trade-neutral" subsidies from WTO commitments was first proposed by the United States in 1987, and echoed soon after by the EU. By guaranteeing farmers continued support, it also neutralised opposition. In exchange for bringing agriculture within the disciplines of the WTO and committing to future reduction of trade-distorting subsidies, developed countries would be allowed to retain

that cause "not more than minimal trade distortion" in order to deliver various public policy objectives.

Three pillars

The Agreement on Agriculture consists of three pillars—domestic support, market access, and export subsidies.

Domestic support

The first pillar of the Agreement on Agriculture is "domestic support". AoA divides domestic support into two categories: trade-distorting and non-trade-distorting (or minimally trade-distorting). The WTO Agreement on Agriculture negotiated in the

(1986–1994) includes the classification of

by "boxes" depending on consequences of production and trade: amber (most directly linked to production levels), blue (production-limiting programmes that still distort trade), and green (minimal distortion)."Agriculture Negotiations: Background Fact Sheet"
World Trade Organization. While payments in the amber box had to be reduced, those in the green box were exempt from reduction commitments. Detailed rules for green box payments are set out in Annex 2 of the AoA. However, all must comply with the "fundamental requirement" in paragraph 1, to cause not more than minimal distortion of trade or production, and must be provided through a government-funded programme that does not involve transfers from consumers or price support to producers. The Agreement on Agriculture's domestic support system currently allows

Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...

and the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

to spend $380 billion a year on agricultural subsidies. The

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

dismissed the EU and the United States' argument that small farmers needed protection, noting that more than half of the EU's

Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce the ...

subsidies go to 1% of producers while in the United States 70% of subsidies go to 10% of its producers, mainly

agribusinesses Agribusiness is the Industry (economics), industry, Business, enterprises, and the field of study of Agribusiness value chain, value chains in agriculture and in the Bioeconomy, bio-economy, in which case it is also called bio-business or bio-ent ...

. These subsidies end up flooding global markets with below-cost commodities, depressing prices, and undercutting producers in poor countries, a practice known as dumping.

Market access

Market access refers to the reduction of

tariff A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...

(or non-tariff) barriers to trade by WTO members. The 1995 Agreement on Agriculture consists of tariff reductions of: *36% average reduction -

developed countries A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...

- with a minimum of 15% per-tariff line reduction in next six years. *24% average reduction -

developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...

- with a minimum of 10% per-tariff line reduction in next ten years. Least developed countries (LDCs) were exempt from tariff reductions, but they either had to convert

non-tariff barriers Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. The Southern African Development C ...

to tariffs—a process called

tariffication Tariffication is an effort to convert all existing agricultural non-tariff barriers to trade (NTBs) into bound tariffs and to reduce these tariffs over time. A ''bound tariff'' is one which has a "ceiling" beyond which it cannot be increased. E ...

—or "bind" their tariffs, creating a ceiling that could not be increased in future.

Export subsidies

Export subsidies Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export ...

are the third pillar. The 1995 Agreement on Agriculture required

to reduce export subsidies by at least 36% (by value) or by 21% (by volume) over six years. For developing countries, the agreement required cuts were 24% (by value) and 14% (by volume) over ten years.

Criticism

The Agreement has been criticised by

civil society Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.tariff A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...

protections for small farmers, a key source of income in

, while simultaneously allowing rich countries to continue subsidizing agriculture at home. The Agreement was criticised by

NGO A non-governmental organization (NGO) or non-governmental organisation (see spelling differences) is an organization that generally is formed independent from government. They are typically nonprofit entities, and many of them are active in h ...

s for categorizing subsidies into trade-distorting domestic

(the "amber box"), which have to be reduced, and non-trade-distorting

(blue and green boxes), which escape discipline and thus can be increased. As efficient agricultural exporters press

WTO The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...

members to reduce their trade-distorting "amber box" and "blue box" support, developed countries' green box spending has increased. A 2009 book by the International Centre for Trade and Sustainable Development (ICTSD) showed how green box subsidies distorted trade, affecting developing country farmers and harming the environment. While some green box payments only had a minor effect on production and trade, others have a significant impact. According to countries' latest official reports to the

, the

provided $76 billion (more than 90% of total spending) in green box payments in 2007, while the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...

notified €48 billion ($91 billion) in 2005, around half of all support. The EU's large and growing green box spending was decoupled from income support, which could lead to a significant impact on production and trade. Third World Network stated, "This has allowed the rich countries to maintain or raise their very high subsidies by switching from one kind of subsidy to another...This is why after the Uruguay Round the total amount of subsidies in OECD countries have gone up instead of going down, despite the apparent promise that Northern subsidies will be reduced." Moreover,

Martin Khor Martin Khor Kok Peng (November 9, 1951 – 1 April 2020) was the executive director of the South Centre, an intergovernmental organisation of developing countries based in Geneva, from 1 March 2009 to 2018. He replaced Dr. Yash Tandon who was t ...

argued that the green and blue box subsidies can be just as trade-distorting—as "the protection is better disguised, but the effect is the same". At the 2005 WTO meeting in

Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...

, countries agreed to eliminate

export subsidy Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export ...

and equivalent payments by 2013. However,

Oxfam Oxfam is a British-founded confederation of 21 independent charitable organizations focusing on the alleviation of global poverty, founded in 1942 and led by Oxfam International. History Founded at 17 Broad Street, Oxford, as the Oxford Co ...

argued that EU export subsidies comprise for only 3.5% of its overall agricultural support. United States, removed export subsidies for

cotton Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus ''Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor perce ...

which only covers 10% of overall spending. on 18 July 2017 India and China jointly submitted a proposal to the World Trade Organization (WTO) calling for the elimination – by developed countries – of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support (AMS) or 'Amber Box' support as a prerequisite for consideration of other reforms in domestic support negotiations.

Mechanisms for developing countries

During the Doha negotiations,

have fought to protect their interest and population, afraid of competing on the global market with strong developed and exporting economies. In many countries large populations living in rural areas, with limited access to infrastructure, farming resources and few employment alternatives. Thus, these countries are concerned that domestic rural populations employed in import-competing sectors might be negatively affected by further

trade liberalization Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...

, becoming increasingly vulnerable to market instability and import surges as tariff barriers are removed. Several mechanisms have been suggested in order to preserve those countries: the Special Safeguard Mechanism (SSM) and treatment of Special Products (SPs).

Special Safeguard Mechanism

A Special Safeguard Mechanism (SSM) would allow developing countries to impose additional safety measures in the event of an abnormal surge in imports or the entry of unusually cheap imports. Debates have arisen around this question, some negotiating parties claiming that SSM could be repeatedly and excessively invoked, distorting trade. In turn, the G33 bloc of developing countries, a major SSM proponent, has argued that breaches of bound tariffs should not be ruled out if the SSM is to be an effective remedy. A 2010 study by the International Centre for Trade and Sustainable Development simulated the consequences of SSM on global trade for both developed and developing countries.

Special Products

At 2005

Ministerial Conference in

, WTO members agreed to allow developing countries to assign or make appropriate list of products for tariff lines as Special Products (SPs) based on "

food security Food security speaks to the availability of food in a country (or geography) and the ability of individuals within that country (geography) to access, afford, and source adequate foodstuffs. According to the United Nations' Committee on World F ...

, livelihood security and

rural development Rural development is the process of improving the quality life and economic well-being of people living in rural areas, often relatively isolated and sparsely populated areas. Rural development has traditionally centered on the exploitation of l ...

".International Centre for Trade and Sustainable Development and

Food and Agriculture Organization The Food and Agriculture Organization of the United Nations (FAO)french: link=no, Organisation des Nations unies pour l'alimentation et l'agriculture; it, Organizzazione delle Nazioni Unite per l'Alimentazione e l'Agricoltura is an intern ...

"Indicators for the Selection of Agricultural Special Products: Some Empirical Evidence"
''ICTSD Information Note'' Number 1. July 1, 2007.

References

External links

*Text of the Agreement on Agriculture
html(1)docpdf
*Institute for Agriculture and Trade Policy
Agreement on Agriculture Basics
2003. *Institute for Agriculture and Trade Policy
WTO Agreement on Agriculture: A Decade of Dumping
Feb 2005. *Devinder Sharma
The Indian Experience of Liberalisation of Agriculture
Aug 17, 2005.
Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development Goals
ICTSD, September 2009.
World Trade Organization and Agriculture: Selective Bibliography
prepared by Hugo H.R. van Hamel, Peace Palace Library *International Centre for Trade and Sustainable Development
Simulations on the Special Safeguard Mechanism: a look at the December 2008 Draft Agricultural Modalities
April 2010, by Raul Montemayor, Federation of Free Farmers Cooperatives, Inc. (FFFCI) * ''Agritrade

website for ACP-EU agriculture and fisheries trade issues.
Agricultural Subsidies in the WTO Green Box: Ensuring Coherence with Sustainable Development Goals
by Ricardo Meléndez-Ortiz, Christophe Bellmann, Jonathan Hepburn, September 2009.
WTO Negotiations on Agriculture and Developing Countries
by Anwarul Hoda and Ashok Gulati, (2007) Johns Hopkins University Press {{World Trade Organization Agrarian politics Agricultural economics Agricultural treaties Treaties concluded in 1994 Treaties entered into force in 1995 Treaties of Albania Treaties of Angola Treaties of Antigua and Barbuda Treaties of Argentina Treaties of Armenia Treaties of Australia Treaties of Austria Treaties of Bahrain Treaties of Bangladesh Treaties of Barbados Treaties of Belgium Treaties of Belize Treaties of Benin Treaties of Bolivia Treaties of Botswana Treaties of Brazil Treaties of Brunei Treaties of Bulgaria Treaties of Burkina Faso Treaties of Burundi Treaties of Cambodia Treaties of Cameroon Treaties of Canada Treaties of Cape Verde Treaties of the Central African Republic Treaties of Chad Treaties of Chile Treaties of the People's Republic of China Treaties of Taiwan Treaties of Colombia Treaties of the Republic of the Congo Treaties of Costa Rica Treaties of Ivory Coast Treaties of Croatia Treaties of Cuba Treaties of Cyprus Treaties of the Czech Republic Treaties of the Democratic Republic of the Congo Treaties of Denmark Treaties of Djibouti Treaties of Dominica Treaties of the Dominican Republic Treaties of Ecuador Treaties of Egypt Treaties of El Salvador Treaties of Estonia Treaties entered into by the European Union Treaties of Fiji Treaties of Finland Treaties of France Treaties of Gabon Treaties of the Gambia Treaties of Georgia (country) Treaties of Germany Treaties of Ghana Treaties of Greece Treaties of Grenada Treaties of Guatemala Treaties of Guinea Treaties of Guinea-Bissau Treaties of Guyana Treaties of Haiti Treaties of Honduras Treaties of Hong Kong Treaties of Hungary Treaties of Iceland Treaties of India Treaties of Indonesia Treaties of Ireland Treaties of Israel Treaties of Italy Treaties of Jamaica Treaties of Japan Treaties of Jordan Treaties of Kazakhstan Treaties of Kenya Treaties of Kuwait Treaties of Kyrgyzstan Treaties of Laos Treaties of Latvia Treaties of Lesotho Treaties of Liberia Treaties of Liechtenstein Treaties of Lithuania Treaties of Luxembourg Treaties of Macau Treaties of Madagascar Treaties of Malawi Treaties of Malaysia Treaties of the Maldives Treaties of Mali Treaties of Malta Treaties of Mauritania Treaties of Mauritius Treaties of Mexico Treaties of Mongolia Treaties of Montenegro Treaties of Morocco Treaties of Mozambique Treaties of Myanmar Treaties of Namibia Treaties of Nepal Treaties of the Netherlands Treaties of New Zealand Treaties of Nicaragua Treaties of Niger Treaties of Nigeria Treaties of Norway Treaties of Oman Treaties of Pakistan Treaties of Panama Treaties of Papua New Guinea Treaties of Paraguay Treaties of Peru Treaties of the Philippines Treaties of Poland Treaties of Portugal Treaties of Qatar Treaties of South Korea Treaties of Moldova Treaties of Romania Treaties of Russia Treaties of Rwanda Treaties of Samoa Treaties of Saudi Arabia Treaties of Senegal Treaties of Seychelles Treaties of Sierra Leone Treaties of Singapore Treaties of Slovakia Treaties of Slovenia Treaties of the Solomon Islands Treaties of South Africa Treaties of Spain Treaties of Sri Lanka Treaties of Saint Kitts and Nevis Treaties of Saint Lucia Treaties of Saint Vincent and the Grenadines Treaties of Suriname Treaties of Eswatini Treaties of Sweden Treaties of Switzerland Treaties of Tajikistan Treaties of Thailand Treaties of North Macedonia Treaties of Togo Treaties of Tonga Treaties of Trinidad and Tobago Treaties of Tunisia Treaties of Turkey Treaties of Uganda Treaties of Ukraine Treaties of the United Arab Emirates Treaties of the United Kingdom Treaties of Tanzania Treaties of the United States Treaties of Uruguay Treaties of Vanuatu Treaties of Venezuela Treaties of Vietnam Treaties of Yemen Treaties of Zambia Treaties of Zimbabwe World Trade Organization agreements