WTO Agreement on Agriculture
The systems of internal support in agriculture are governed by the Agreement on Agriculture negotiated during the Uruguay Round (1986-1994) and which came into force in 1995. The long-term goal of the Agreement on Agriculture is to create a fair and market-oriented agricultural trade system and to initiate a reform process through negotiations on obligations of support and protection and through the introduction of more consistent and operationally more effective rules and disciplinary measures. Agriculture therefore has a special position, as this branch of industry is regulated by its own convention, the provisions of which are authoritative.
In the context of the General Agreement on Tariffs and Trade (GATT) signed in Geneva in 1947 and the Agreement on the Establishment of the World Trade Organization (WTO) signed in Marrakech in 1994 (OJ L 336 of 23.12.1994), the European Union and its member states rely on the articles 207 (Common Commercial Policy) and Articles 217 and 218 (International agreements) of the Treaty on the Functioning of the European Union (TFEU) (see Abstract 5.2.2 ).
General framework of the external dimension of the CAP
The entire common agricultural policy (CAP) has been subject to the rules of the WTO since 1995, including the Dispute Settlement Body (DSB), with which a binding dispute settlement procedure was introduced and the signatory states comply with the new multilateral rules.
In addition, the CAP is linked to concessions in the agricultural sector, which are recognized in the framework of multilateral and bilateral agreements for the benefit of a large number of countries, as well as to unilateral derogations granted under the General System of Preferences (GSP). These preferential agreements, which explain the high proportion of imports from developing countries in the European Union’s agricultural imports, must also be compatible with WTO rules (see Abstract 3.2.10 , Table VI).
WTO Agreement on Agriculture
The 1947 General Agreement on Tariffs and Trade (GATT) initially applied to agriculture, but it was incomplete and the signatory states (or “parties”) excluded this industry from the scope of the principles set out in the general agreement. Between 1947 and 1994, Member States were allowed to subsidize the export of agricultural raw materials and, under certain circumstances, to impose import restrictions, with the result that the main agricultural raw materials were subject to trade barriers that other categories of goods did not apply to this extent are common. The road to a fair and market-oriented agricultural trade system was therefore long and rocky, until the negotiations during the Uruguay Round (1986-1994) could finally be brought to a conclusion. Agriculture enjoys a special status in the WTO conventions and agreements on trade in goods (which were signed in 1994 and entered into force on 1 January 1995), as this branch of industry has its own agreement, the provisions of which are authoritative. In addition, certain provisions of the Convention on the Application of Sanitary and Phytosanitary Measures (SPS) also apply to agricultural production and agricultural trade. The same applies to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) with regard to the protection of geographical indications.
These agreements allow for some flexibility in terms of enforcement, in favor of WTO developing countries (special and differentiated treatment) as well as the least developed countries (LDCs) and developing countries which are net importers of food ( Special provisions).
On the basis of the Agreement on Agriculture, the WTO member states have committed themselves to a program to reform the existing agricultural policy, which contains concrete, binding commitments in three important areas:
A. Market Access
The Agriculture Agreement aims to improve market access through the following measures:
Conversion of all protective measures at the borders into tariffs (tariff equivalents) and their subsequent gradual reduction (by 36% in the period 1995-2000 compared to the reference period 1986-1988) for industrialized countries and by 24% for developing countries),
Obligation to grant “minimum access” to third countries through the introduction of tariff quotas for certain products that are not subject to any tariff regulation, whereby the tariff quotas at the end of 2000 for each product group amounted to 5% of the consumption of the reference period 1986-1988.
Maintaining tariff concessions for imports at least at the level that existed between 1986 and 1988 (so-called “usual access”); Introduction of a special safeguard clause that takes effect when the volume of imports exceeds a certain threshold or when the prices for imports fall below a certain threshold.
B. Internal support
The Agreement on Agriculture provided for a gradual reduction in aid depending on the type of aid. These are categorized into different “boxes” according to the distortive effects they may have on trade within the agricultural markets.
The “yellow box” (also known as the “aggregated measure of support” (AMS)) includes price support and production-linked subsidies that are not exempt from the reduction obligation. Their volume was to be reduced by 20% within six years, based on the reference period 1986-1988. All WTO countries can also use the de minimis clause, which makes it possible to deduct from the current support the amount of which is less than 5% of the value of the product concerned (targeted aid) or of the total value of agricultural production (general aid) to exclude aggregated measure of support. A threshold of 10% applies to developing countries.
The ‘blue box’ includes aid linked to supply control programs that are exempt from reduction commitments, such as direct aid based on a specific area and yield or paid on the basis of a specific number of livestock (as in the case of the 1992 of “compensatory aid ” authorized under the CAP) ( 3.2.3 ). For each product, however, the amount of support granted under the AMS and the aid that is part of the blue box (“total AMS”) may not exceed the amount of the total support granted in the 1992 marketing year.
The “Green Box” comprises two support groups. The first includes programs for public services (e.g. research, training, advice, marketing, infrastructure, internal food aid and public storage for food security purposes). The second includes direct payments to producers who are completely decoupled from production. These are mainly programs for securing income and ensuring security (natural disasters, financial participation of the state in crop insurance, etc.), structural adjustment programs and environmental protection programs. Since all Green Box subsidies are considered compatible with the WTO framework, they are completely exempt from the reduction.
C. Export Subsidies
The export subsidies had to be reduced by 21% in volume and by 36% in budget over a period of six years in relation to the 1986-1990 reference period (1986-1992 for beef). In the European Union, this linear reduction affected 20 product groups. Only the budget cut was applied for processed products.
The implications of the Agriculture Agreement for the CAP
A sub-objective of the 1992 CAP reform was to facilitate the signing of the Uruguay Round Agreement on Agriculture. Indeed, the European Union has largely met the commitments it made in Marrakech.
A. Market Access
The European Union’s bound tariff commitments covered 1 764 tariff lines. While the average bound tariff rate for agricultural products was 26% at the beginning of the implementation period, it was only 17% at the end of this period. In addition, the European Union applied zero or minimum tariff rates for 775 of the total of 1 764 tariff items. For only 8% of the tariff items, the duty rate is over 50%. These peak tariffs are levied on dairy products, beef, cereals and cereal products, as well as on sugar and sweeteners. In terms of tariff quotas, the European Union introduced a total of 87 quotas, 37 of which relate to so-called minimum access and 44 to so-called normal access. In 2014 about 71% of all agricultural and food imports, i.e. H. Goods worth EUR 72 billion imported into the Union at zero tariffs.
B. Subsidized Exports
Previously, most of the subsidized exports reported to the WTO came from the European Union, before these subsidies were phased out under the CAP reform in 2013 and fell to zero in 2017. It should be noted, however, that a number of measures taken by our main competitors (e.g. food aid, export credits and state trading companies) are not subject to WTO rules. In future, the EU will only apply export refunds in exceptional cases in the event of severe crises affecting the market. The share of export refunds in the Union’s agricultural budget therefore fell from 29.5% in 1993 (EUR 10.1 billion) in the EU-12 to almost 0% in 2017 in the EU-28 ( 3.2.2). There have been significant cuts in some of the EU’s products: in particular butter, rapeseed, cheese, fruit and vegetables, eggs, wine and meat in general. The last notification to the WTO relates to the period 2017-2018 (G / AG / N / EU / 61 of April 30, 2020).
C. Internal support
The 2003 CAP reform, which decoupled most of the existing direct aid, and the subsequent sector-specific reforms, turned most of the yellow and blue box aid into green box aid (EUR 65.8 billion in the years 2017-2018, see attached table). With a reduction from EUR 81 billion at the beginning of the agreement to EUR 6.9 billion in the period 2017-2018, the volume of the “Yellow Box” (aggregated measure of support, AMS) fell significantly regardless of successive accession to the EU. The European Union is thus largely meeting the commitments it made in Marrakech with regard to this box (EUR 72.37 billion annually). The blue box amounted to EUR 4.8 billion in the same reporting period.