EU Reports Trade-distorting Farm Subsidies Unchanged for 2013-14 Marketing Year

16 February 2017

The EU has reported that its trade-distorting farm subsidies remained essentially unchanged at €10.6 billion in the 2013-14 marketing year, according to new official figures submitted by the bloc to the WTO.

The data covers the last year of support before the 2014 reform of the Common Agricultural Policy (CAP) was implemented.

Highly trade-distorting “amber box” payments amounted to €6 billion, the new data shows. The EU has agreed at the WTO that this category of support should not exceed €72.4 billion.

The EU also reported that it provided €2 billion in trade-distorting payments which would otherwise have been counted as amber box payments, but which fell below a “de minimis” ceiling set at five percent of the value of production.

Another €2.7 billion was provided in the form of production-limiting “blue box” support. Although seen as trade-distorting, these payments are not subject to any cap or ceiling at the WTO.

"I'm not particularly surprised by the numbers," said Alan Swinbank, Emeritus Professor of Agricultural Economics at the University of Reading, in comments emailed to Bridges. Swinbank added that the only substantive amber box notifications concern common wheat, skim milk powder, and butter.


Supporting farm incomes

After successive policy reforms aimed at improving the market orientation of farming in the EU, the bloc now classifies the bulk of its support as “green box,” a WTO category for payments which are not meant to cause more than minimal trade distortion.

The bloc notified €68.7 billion as green box payments for the 2013-14 marketing year, the new figures show.

Of these payments, the lion’s share was made up of payments to support farm incomes which are considered to be “decoupled” from production. These represented €31.8 billion in 2013-14, according to the new figures.

The EU has introduced successive reforms in recent decades which have moved the bloc away from direct intervention in agricultural markets through instruments such as price support, and towards direct payments to producers.

Another €7.9 billion was provided to support environmental programmes, the bloc indicated. The 2014-20 support package emphasised the importance of addressing environmental concerns, such as maintaining permanent grassland, protecting "ecological focus areas," and crop diversification. (See Bridges Weekly, 27 June 2013)

However, as WTO rules require payments under environmental programmes to be limited to the extra costs or loss of income incurred in complying with a government scheme, experts expect that many of these payments will be reported to the WTO as decoupled income support payments.

The new EU figures complement other recent farm subsidy notifications from Russia and the US, as well as new data from Washington correcting previously submitted data. (See Bridges Weekly, 9 February 2017 and 26 January 2017)

Brussels consultations

The new farm subsidy data comes shortly after the European Commission announced a new consultation process aimed at soliciting views for the bloc’s post-2020 farm policy.

“We are asking all stakeholders and those interested in the future of food and farming in Europe to participate in shaping a policy for all the people of Europe,” said EU Agriculture and Rural Development Commissioner Phil Hogan, in apress statement.

Sources told Bridges that the consultation on the future of the EU’s Common Agricultural Policy would take place in parallel to talks on the bloc’s next seven-year budget framework.

New priorities such as migration and climate change are likely to be among the issues competing for scarce resources, as the EU charts a course for future action without the UK. (See Bridges Weekly, 19 January 2017)

“2017 is a big year for CAP reform,” said Tom Quinn, EU Agriculture and Bioenergy Policy Officer with the environmental agency Birdlife International.

Quinn said that environmental groups would continue to call for the new policy to ensure that public money is spent on public goods.

In previous rounds of CAP reform, environmentalists in the EU have supported the move away from trade-distorting payments linked to production, and towards a focus on rewarding farmers for protecting the environment.

ICTSD reporting.

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