8 - Green box subsidies and trade-distorting support: is there a cumulative impact?

Summary

Introduction

In the General Agreement of Tariffs and Trade (GATT), and now in the World Trade Organization (WTO), members have been constructing a set of rules and regulations to limit trade policies and other policies with equivalent effects – that is, policies that favour local production instead of the purchase of imported products.

GATT rules first put limits on subsidies for industrial products, and then prohibited them. For agricultural products, limits appeared for the first time in the Uruguay Round. Because agricultural subsidies were limited but not prohibited, agriculture was incorporated into the multilateral rules in a privileged way.

In the Agreement on Agriculture (AoA) approved during the Uruguay Round, agricultural subsidies were classified into different “boxes” according to their influence on producers' decisions.

Since 1994, the terms “amber”, “blue” and “green” have been used to describe the different kinds of support. The original idea was to repeat the colours of traffic lights – red for prohibited subsidies, yellow for limited subsidies and green for permitted subsidies – but a softer treatment prevailed.

The amber box includes measures related to production level or selling price; these payments are limited rather than prohibited, and a compromise for reducing them was agreed. The AoA also created a special category of amber box measures excluded from the reduction commitments because of their low level: de minimis payments. The blue box includes direct payments – like those included in the amber box – but “under production-limiting programmes” and was not subject to reduction commitments.