EU: Trade-Distorting Farm Support Drops to Record Low

25 April 2012

The EU's trade-distorting farm subsidies dropped to record lows during marketing year 2008-09, according to figures that the 27-member bloc recently submitted to the WTO.

Trade-distorting ‘amber box' payments fell to €11.8 billion, official figures indicate - just below levels reported for the previous year, but less than half the level provided in 2006-07.

‘Green box' payments, which are not capped under WTO rules on the grounds that they cause not more than minimal trade distortion, remained steady at €63 billion, according to the official data.

The EU has historically sought to ‘decouple' support from production by moving away from trade-distorting payments in the WTO's amber box - such as market price support - and towards less harmful forms of subsidies such as direct payments to farmers.

The EU continued to provide around €5.4 billion in production-limiting payments to farmers, seen as moderately trade-distorting under WTO rules and dubbed by negotiators as ‘blue box' support.

A small amount of trade-distorting ‘de minimis' payments - which for developed countries are not allowed to exceed five percent of the value of production - were also provided, amounting to just over one billion euros.

Decoupled income support payments continue to account for the lion's share of green box payments, at €32 billion - representing around half of all support notified in this category. However, the single area payment scheme, which also provides direct payments to farmers, was reported under a separate category labelled ‘other'.

Green box programmes that continued to be important include investment aids, at 7.7 billion euros; general services, which cover areas such as research, or pest and disease control at 6.9 billion euros; and environment programmes at 5.7 billion euros.

Products that continue to benefit from trade-distorting support, despite successive rounds of reforms, include butter, barley, wheat, sugar, skimmed milk powder, and maize, as well as tobacco and wine.

Total farm support levels dropped to just over €81 billion, after reaching a historic peak of €91 billion in 2006.

Overall trade-distorting support - a category including amber, blue, and de minimis support - reportedly fell to €18.3 billion, a figure that is below the €22 billion cap that would be established under the draft Doha agriculture accord.

New farm policy proposals that the European Commission tabled last October are now being debated in the European Parliament; experts are also continuing to discuss how these relate to WTO rules, and their implications for subsidy notifications in the post-2013 budgetary period. Alan Matthews of Trinity College Dublin has argued that the downward trend in the EU's amber box payments will probably continue, "assuming there is no challenge to the Commission's proposed basic income payment and, more particularly, the proposed new green payment."

The EU's complete subsidy notification (G/AG/N/EU/7) is available online at: http://docsonline.wto.org.

ICTSD reporting.

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