WTO AGRICULTURE CTTE TAKES UP GREEN BOX

A group of 21 developing countries presented an informal paper at the WTO on 16 May which tries to ensure that developing countries can subsidise farmers for legitimate developmental and environmental purposes. It also aims to make sure that developed countries do not disguise trade-distorting agricultural subsidies under an environmental guise to avoid WTO rules. The negotiations took place during an informal meeting of the Committee on Agriculture, and centred upon what types of subsidies should be excluded from the general WTO requirement to reduce agricultural subsidies (see Bridges Trade BioRes, 10 June 2005).

Under Annex 2 of the AoA, some subsidies can be placed in a "green box" exempted from reduction commitments if they do not distort trade (or at the most cause minimal distortion), are government-funded, do not involve price support and are not targeted at particular products. Types of subsidies that have in the past been allowed by the green box include direct income supports for farmers, and environmental protection and regional development programmes. The developing country group (G20), Canada and Australia suspect that subsidies currently included in the green box subsidies do in fact cause trade and production distortions, and so have called for new rules on cuts, disciplines and strict notification requirements. The EU, US, Japan and other major agricultural subsidisers, on the other hand, emphasise the importance of the green box as a means to address various 'non-trade concerns' such as the protection of the environment, poverty alleviation and food safety, and have opposed calls for reform.

Making the green box "development-friendly"

In its paper, the G20 spelled out their ideas for reforming the green box to ensure that it remains minimally trade-distorting and becomes more useful for developing countries. Arguing that the complex rules under the current green box discriminate against developing countries, the group called for an expert discussion to propose ways to make green box provisions, including for safety nets and natural disasters, more development-friendly.

They also said that additional kinds of government policies should be included for exemption under the green box, such as payments associated with land reform; developing country government purchases of food from low-income or resource-poor farmers to establish public stockpiles for food security purposes; and the subsidised sale of food procured from such farmers "with the objective of fighting hunger and rural poverty". Although the first category received broad support, some Members were concerned about what the scope of the latter two categories could include. The G20 also indicated they could consider expanding the range of green box programmes to include payments to farms in the event of sanitary and phytosanitary emergencies caused by natural disasters -- on condition that the production affected is destroyed.

Furthermore, the G20 argued that to qualify for inclusion in the green box, subsidies to farmers who have stopped agricultural production on their land should also not involve the agricultural use of land, labour or any other factor of production. They argued for the inclusion of the language on halting use of land, labour or machines to make sure that farmers receiving green box subsidies for stopping their agricultural production do not then use the land, labour or machines to earn income. However, in reaction to complaints from the EU and others that this could prevent their green box-subsidised farmers from performing minimal tasks to take care of the land, the G20 clarified at the meeting that their proposal would certainly allow for minimal usage of the factors of production necessary to avoid environmental degradation.

De-linking subsidies from production

Payments to farmers will be trade distorting, the G20 argued, so long as they are linked to the amount that is produced and the inputs to production. Although payments eligible for inclusion in the green box must be, by definition, not directly linked to how much a farmer is growing, the G20 argues that changes in the way farmers qualify for payments nonetheless encourages them to expand their production. Many governments make frequent updates for the criteria used to update eligibility, such as income and production level, which can raise farmers' hopes of receiving more government grants in the future, which would in turn influence their production decisions -- even though these payments are supposed not to be linked to production.

To remedy this problem, the G20 suggested that Members need to establish "fixed and unchanging" reference points for areas, yields and animal numbers required to qualify for government payments allowed under the green box. Reducing the number of times governments ask their subsidised producers how much they are producing would ensure that the government does not take into account these amounts when deciding how much to subsidise each year -- and instead just considers the public policy goals independently from production. However, Switzerland and other Members have said that fixing the base level of production forever, which would effectively happen if countries could not ask their producers more than once, could in the long run prevent them from giving appropriate green box subsidies to appropriate types of agricultural enterprises. For example, if the Swiss said today that to qualify for subsidies to support rural culture they wanted to know if a farmer owned more than 20 cows, a WTO requirement to not ask farmers again how many cows they have would prevent the Swiss from stopping payments to the same farmer in thirty years, when as a result of reproduction and investment he owns 100 cows and has a major mechanised commercial operation.

The Chair of the discussions, Ambassador Crawford Falconer (New Zealand), said that he would make changes to his "reference paper" that summarises positions on the issue, but noted that more discussions were necessary.

The Chair's reference paper, G-20 reactions, the G-20 proposal from 2005 and other key resources are available at http://www.agtradepolicy.org/page/resource/domestic.htm#green

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