Japan Reports Fall in Trade-Distorting Farm Subsidies in New WTO Figures

13 July 2017

Japan’s levels of trade-distorting agricultural support showed a slight drop in 2013 and 2014, according to new data that the country reported to the global trade body earlier this month.

At just over ¥900 billion (US$9 billion at historical exchange rates for that period), trade-distorting support was about eight percent lower in 2014 than it had been two years earlier, the government figures show. (See Bridges Weekly, 10 April 2014)

In 2014, two-thirds of the trade-distorting support provided by Tokyo counted towards its ceiling on the aggregate measure of support (AMS). This refers to highly trade-distorting payments such as input and output subsidies or market price support, dubbed “amber box” under WTO rules. Japan has agreed to respect a maximum limit of just under ¥4 trillion for these types of payments.

Also significant was “de minimis” support. These are similarly trade-distorting payments, both for specific products as well as support that is not product-specific. The new figures show that these payments fell below the ceiling of five percent of the value of production which applies to developed countries.

The remainder of the government support was made up of ¥75 billion in “blue box” payments. This refers to production-limiting payments that are considered less trade-distorting than the amber box, and therefore not currently subject to any limit under WTO rules.

 

Pork and beef in particular benefited from large amounts of product-specific support, the new data shows, with support amounting to ¥326 billion and ¥228 billion respectively.

Sugar, starch, and milk received lower levels of trade-distorting support, while payments for eggs, vegetables, and fruit fell below the de minimis threshold, the new figures show.

Some WTO members have called for tighter disciplines on product-specific support in the run-up to the organisation’s ministerial conference in Buenos Aires, Argentina, this December. (See Bridges Weekly, 24 May 2017)

Rice farming

Japan also reported that it spent ¥1.6 trillion on “green box” support, which are payments that are not capped under WTO rules under the condition that they cause no more than minimal trade distortion.

In 2014, two categories of payments for “general services” accounted for the lion’s share of green box payments: infrastructure services, such as irrigation and drainage facilities or rural roads; and environmental programmes, including payments for conversion from rice production. These accounted for ¥391 billion and ¥277 billion respectively.

WTO rules allow infrastructure payments to be reported as green box payments so long as they relate to off-farm facilities and do not cover inputs or operating costs.

Tokyo made available another ¥120 billion in the form of farmers’ pension programmes, which are counted under another green box category related to structural adjustment assistance. Policymakers in Japan have consistently struggled to bring younger workers into the farming sector, which has become increasingly dominated by elderly, part-time farmers.

Road to Buenos Aires

Japan’s trade-distorting support remains relatively high compared to most other WTO members, although widespread delays in reporting subsidies to the global trade body make meaningful comparisons difficult.

China and India have not reported domestic support figures to the WTO for the years since 2010, while the EU has only provided data up to 2013, and Brazil and the US have not reported data for the years since 2014. Russia submitted figures for 2015 earlier this year.

Significant reforms have taken place in all major economies since then, including implementation of the 2014 US Farm Bill and the EU’s new Common Agricultural Policy, and fresh approaches to farm policy in China and India. Both the US and the EU are preparing to update their existing farm support schemes. (See Bridges Weekly, 6 February 2014, 27 June 2013, 23 February 2017, and 12 March 2015)

The most recently submitted figures to the WTO indicate that China provides the most trade-distorting support, with Beijing indicating that it provided around US$18 billion (¥123 billion) in 2010. The US provided approximately US$14 billion in 2014, while the EU provided €10.6 billion in the 2013-2014 marketing year. (See Bridges Weekly, 13 May 2015, 26 January 2017, and 16 February 2017)

Although Japan provides less in trade-distorting support than these three trading powers, its trade-distorting farm subsidies exceed those provided by Russia. According to Moscow, this support amounted to US$3.3 billion (₽200 billion) in 2015. (See Bridges Weekly, 9 February 2017)

Japan’s trade-distorting subsidies also surpassed Brazil’s, with the latter amounting to US$1.9 billion in 2014. Brazil also provided another US$1.3 billion in input and investment support for low-income, resource-poor farmers, which developing countries are allowed to provide under Article 6.2 of the WTO’s Agreement on Agriculture. (See Bridges Weekly, 3 November 2016)

India also reported that it provided US$2 billion in trade-distorting support in 2010-11. This figure excludes US$31.6 billion in input and investment subsidies for low-income, resource-poor farmers. This type of support is reported as Article 6.2 subsidies, as described above. (See Bridges Weekly, 18 September 2014)

Developing countries and farm exporting nations have called for stronger disciplines on trade-distorting agricultural support in ongoing talks at the WTO, with many suggesting that a cap or other constraints should be agreed at the trade body’s upcoming ministerial conference in Buenos Aires, Argentina, this December.

At a negotiating meeting on 1 June, the chair of the farm trade talks told members that there was “near universal” consensus on the importance of an outcome in this area at the ministerial – while acknowledging that these efforts may need more time to come to fruition, such as through a post-Buenos Aires work programme. (See Bridges Weekly, 8 June 2017)

ICTSD reporting.

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