Total EU Farm Subsidies Grow Despite Drop in Production-Linked Payments

10 February 2010

New subsidy figures from the EU show a sharp increase in total support levels, to over €90 billion in the 2006/2007 marketing year - despite a drop in production-linked payments that are deemed to distort trade.

The latest official notification to the WTO shows that total EU support levels have returned to levels not seen since the previous decade, with €90.7 billion of support being reported to the global trade body for 2006/2007 - up from €75.6 billion in 2002, when support was at its lowest in the last fifteen years.

The most trade-distorting payments, classed as 'amber box' at the WTO, are however at a historical low, with the EU reporting only €26.6 billion under this category. Amber box payments have been falling steadily and now stand at about half the level they were at a decade previously.

The sharpest decline in the latest figures is in the 'blue box' category of production-limiting payments, which have dropped to €5.7 billion from €13.4 billion in the 2005/2006 marketing year, and from €27.2 billion the year before that. While still considered to be 'trade-distorting' at the WTO, blue box payments are generally seen as less damaging than amber box support.

The drop in blue box support has been more than compensated for by an increase in 'green box' payments, which are meant to have no, or at most minimal, effects on trade or production. These have increased to €56.5 billion - up from €40.3 billion the previous year, and over twice  2004/2005 levels.

A small amount of trade-distorting support is also exempt from reduction commitments at the WTO, so long as the support amounts to no more than 5 percent of the total value of production. According to the new notification, in the 2006/2007 marketing year, the EU provided €1.85 billion of this type of support, which is known as 'de minimis'.

The dramatic changes in the structure of EU subsidies reflect the gradual implementation of the most recent reforms to the bloc's Common Agricultural Policy (CAP). The 2003 Fischler reforms, named after the EU agriculture commissioner of the time, continued a process of 'decoupling' farm support from production - leading to a shift away from 'amber' to 'green' support in the EU's notifications to the WTO.

The latest draft agreement tabled under the Doha Round of trade talks would establish a new €22 billion ceiling for the EU's overall trade-distorting support (OTDS) - composed of its amber box, blue box and de minimis spending. Although the latest notification suggests that the EU's OTDS was as high as €34 billion in 2006/2007, ongoing CAP reforms are expected to reduce this figure to close to the proposed ceiling by the time the new OTDS cap would actually apply.

Exporting countries in Geneva expressed concern about the growth in the EU's green box subsidies, with one delegate noting warily that these payments "appear to be providing an awful lot of support to the farming community."

ICTSD reporting.

Details of ICTSD's research project on green box subsidies are also available online at http://ictsd.org/programmes/agriculture/greenbox/

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