Trade-distorting Farm Payments Fall to New Low, EU Says

28 November 2012

Overall trade-distorting farm support in the EU fell to a fresh low of €15.5 billion in marketing year 2009-10, according to new data provided by the bloc. The new numbers, which are substantially below the €22 billion cap proposed in the WTO's ongoing Doha Round of trade talks, come as governments in the region debate the future direction of farm policy in the 2014-20 budget cycle (see related article, this issue).

According to the report, the most trade-distorting subsidies - classed as ‘amber box' payments at the WTO - fell to €8.8 billion, while an additional €5.3 billion were reported as production-limiting payments that nonetheless affect trade (‘blue box' payments in WTO jargon). Amber box payments are capped at €72.2 billion under the EU's current WTO commitments.

The bloc also reported that €1.4 billion were provided in trade-distorting payments that fell below five percent of the value of production. Governments do not have to count these subsidies towards the amber box ceiling under a special ‘de minimis' provision at the WTO.

Decoupled farm support in the WTO's ‘green box', which is exempt from any ceiling on the basis that it causes no more than minimal trade distortion, continued to account for the bulk of agricultural subsidies in the 27-member bloc. At around €63.8 billion, payments in this category have remained steady since 2007, after increasing dramatically in the wake of the 2003 reform of the bloc's Common Agricultural Policy (CAP).

The centrepiece of this reform, the single payment scheme, continued to overshadow other forms of ‘green box' payments, with the EU reporting its decoupled income support to farmers at €31.5 billion. The scheme provides for a ‘single farm payment' to be made to producers, without reference to current levels of production.

Other significant categories of green box support included investment aids and environmental programmes, each of which accounted for around €6 billion. ‘General services' - including research, pest, and disease control, and marketing and infrastructure services - accounted for over €7 billion. Support to disadvantaged regions and payments to farmers made under the bloc's Single Area Payment Scheme accounted for around €4.5 billion each.

Butter, wheat, sugar, and milk were among the products continuing to receive substantial amounts of trade-distorting support.

The new subsidy notification comes just seven months after the EU submitted its previous report, for marketing year 2008-09. (See Bridges Weekly, 25 April 2012)

The EU's complete subsidy notification (G/AG/N/EU/10) is available online at: http://docsonline.wto.org.

ICTSD reporting.

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