No CrossRef data available.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 24 August 2021
Domestic support disciplines under the Agreement on Agriculture are controversial, to say the least. The aggregate measurement of support (AMS) restricts Members’ policy space to provide product-specific support. The structural flaws in the determination of AMS further compel Members to explore alternatives. In contrast to the Amber Box, the Blue Box offers certain flexibilities for Members to exempt product-specific support from AMS calculation. The Blue Box reflects several elements which are seemingly typical to the Amber Box, except that it has certain production-limiting features. This article explores the legal bounds of the Blue Box measures, and its similarities and dissimilarities with the Amber Box. Towards this end, the article builds on a fresh legal understanding of the Blue Box based on its negotiating history and interpretative bounds, and also offers a fuller appreciation of market price support (MPS) and non-exempt direct payments under the Amber Box. While the calculation methodology for non-exempt direct payments bears a close resemblance to the calculation of MPS, the article argues that direct payment and MPS measures are fundamentally distinct types of product-specific support which makes the interchangeability of Blue and Amber Boxes seemingly difficult.
All opinions and errors in this article are the authors’ own.
Current address: An LL.M Candidate at Columbia Law School (2020–2021).
1 See J.A. McMahon (2011) The Negotiations for a New Agreement on Agriculture, Vols. 7, New York: Brill. See also K.C. Kennedy (2001) ‘Reforming Farm Trade in the Next Round of WTO Multilateral Trade Negotiations’, Journal of World Trade 35, 1061, at 1063.
2 See GATT, Article XI:2 and Article XVI. Article XI:2(c) of the GATT provides certain specific exceptions to the obligations under Article XI:I in relation to agriculture products. Article XVI, however, provides certain unique treatment to primary agricultural products in relation to subsidies.
3 McMahon, supra note 1, at 1877.
4 See ‘Agriculture’, WTO Agreement Series, www.wto.org/english/res_e/booksp_e/agric_agreement_series_3_e.pdf at 10.
5 See, generally, J. Nedumpara and S. Janardhan (2020) ‘Developing Countries and Domestic Support Measures in Agriculture: Walking a Tightrope’, Journal of World Trade 54, 81–102, at 83.
6 See M.D. Ingco and J. Croome (2004) ‘Trade Agreements: Achievements and Issues Ahead’, in M.D. Ingco and J.D. Nash (eds.), Agriculture and the WTO: Creating a Trading System for Development. Washington, DC: World Bank and Oxford University Press, at 31.
7 See WTO Agreement on Agriculture, Annex 2. Examples of measures in Annex 2 include public stockholding for food security purposes, decoupled income support, payments under environmental programs etc.
8 Ibid., Articles 6 and 7 read with Annex 3.
9 Ibid., Article 6.5.
10 Ibid., Article 6.2.
11 See M. Trebilcock, R. Howse, and A. Eliason (2013) The Regulation of International Trade, 4th edn. Abingdon, OX: Routledge, at 450.
12 See J. McMahon and M.G. Desta (eds.) (2012) Research Handbook on the WTO Agriculture Agreement: New and Emerging Issues in International Trade Law. Cheltenham: Edward Elgar, at 5–20.
13 See ‘Green Box: Phase 1’, Domestic support: Amber, Blue and Green Boxes, Agriculture Negotiations: Backgrounder, WTO, www.wto.org/english/tratop_e/agric_e/negs_bkgrnd13_boxes_e.htm.
14 See WTO Agreement on Agriculture, Article 6.1 provides that domestic support reduction commitments of each Member contained in the Schedule of Concessions (Part IV) is applicable to all of its domestic support measures in favour of agricultural producers with the exception of domestic measures that are exempt in terms of the criteria set out in Article 6 and in Annex 2.
15 See ‘De Minimis’, WTO Glossary, www.wto.org/english/thewto_e/glossary_e/glossary_e.htm; see also WTO Agreement on Agriculture, Article 6.4. De minimis is the minimal amount of domestic support allowed under the AoA even though it could distort trade. If the domestic support is within the de minimis levels, it does not have to be included in the calculation of AMS.
16 See L. Brink and D. Orden (2020) ‘Taking Stock and Looking Forward on Domestic Support under the WTO Agreement on Agriculture’, IATRC Commissioned Paper 23 (April 2020), at 13. According to domestic support schedules of WTO Members, only 32 Members are subject to a positive BTAM while 103 Members have no or nil BTAMs.
17 See generally L. Brink (2014) ‘Support to Agriculture in India in 1995–2003 and the Rules of the WTO’, International Agricultural Trade Research Consortium, Working Paper, 14-01, at 20. See also T. Jostling (2015) Rethinking the Rules for Agricultural Subsidies, E15 Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum.
18 See WTO Agreement on Agriculture, Article 6.5(a).
19 Ibid., Article 6.5(b).
20 Members that are using, or have used, the Blue Box in the past are: the EU, Iceland, Norway, Japan, the Slovak Republic, Slovenia, and the US; see UNCTAD Secretariat (2003), ‘An Analysis of the Agricultural Domestic Support Under the Uruguay Round Agreement on Agriculture: The Blue Box’, https://unctad.org/en/docs/ditccom20036_en.pdf , at 4.
21 See generally European Union's DS Notifications, WTO Doc. G/AG/N/EU/55; Norway's DS Notifications, WTO Doc. G/AG/N/NOR/108/Corr.1; Japan's DS Notifications, WTO Doc. G/AG/N/JPN/236; Iceland's DS Notifications, WTO Doc. G/AG/N/ISL/41.
22 See China's notifications to the Committee on Agriculture, WTO Doc. G/AG/N/CHN/48, G/AG/N/CHN/49.
23 See WTO Agreement on Agriculture, Article 6.5(a).
24 See R. Steenblik (2007) A Subsidy Primer, Global Subsidies Initiative of International Institute of Sustainable Development, www.iisd.org/gsi/sites/default/files/primer.pdf, at 18.
25 Several WTO Members have provided deficiency payments as part of their Blue Box programmes. For instance, in 1995, the US had notified deficiency payments for wheat, rice, corn, sorghum, barley, oats, and cotton (see United States’, Domestic Support Notification, WTO Doc. G/AG/N/USA/10, 12 June 1997). The amount of payments was based on the difference between a pre-set target price and the world price (UNCTAD Study, supra note 20, at 21). Similarly, the European Union had introduced ‘compensatory payments’ for arable crops, bovine cattle, and sheep and goats. The amount of support was calculated as the difference between a forecast-based price for the coming year and the actual market price (UNCTAD Study, supra note 20, at 11). In 1998, Japan provided support to its rice farms through the Rice Farming Income Stabilisation Programme. This support measure was introduced to compensate producers’ losses in income due to low market prices. The support was provided on a maximum volume of 85% of the base level of production, and the payments were based on the gap between the market price and the standard price (average market price of the preceding three years) (UNCTAD Study, supra note 20, at 19).
26 See T.P. Stewart (1999) The GATT Uruguay Round: A Negotiating History (1986–1994), Vol. 4. Kluwer Law International, at 7.
27 See GATT Panel Report, European Economic Community – Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, GATT Doc. L/6627 – BISD 37S/86, adopted on 25 January 1990.
28 See GATT Panel Report of Members of Original Oilseeds Panel, Follow-Up on the Panel Report, European Economic Community – Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, GATT Doc. DS28/R – BISD 39S/91.
29 See USITC, 44th Annual Report of the United States International Trade Commission on the Year in Trade, ‘Operation of the Trade Agreements Programme’, No. 2640, 1992, section 44, at 47–49.
30 See ‘Conclusion of the bilateral talks between Mr Steichen and Mr Espyon the agricultural section of the Uruguay Round’, European Commission, press release dated 7 December 1993, Doc. MEMO/93/53, https://ec.europa.eu/commission/presscorner/detail/en/MEMO_93_53.
31 Stewart, supra note 26, at 3–4.
32 See Economic Research Service (USDA), ‘1996 FAIR Act Frames Farm Policy for 7 Years’, Agricultural Outlook Supplement (1996) at 2. See also L. Erdman and C. Ford Runge (1990), ‘American Agricultural Policy and the 1990 Farm Bill’, Review of Marketing and Agricultural Economics 58(0203), 109–126. The Food, Agriculture, Conservation and Trade Act of 1990 continued the practice of providing deficiency payments based on the participation in ARP. The Act however introduced ‘flexibility’ for producers to plant other crops in 15% of the base acreage. For the purpose of the deficiency payment, a ‘flexible base’ concept was introduced in the ARP which was to comprise of 15% of the total permitted acreage. On this flexible base, any program crop except fruits and vegetables could be cultivated, however, these were ineligible to receive deficiency payments.
33 See L.A. Patterson (1997) ‘Agricultural Policy Reform in the European Community: A Three-Level Game Analysis’, International Organization 51(1), at 137.
34 See WTO Agreement on Agriculture, Article 13.
35 Stewart, supra note 26, at 25.
36 See Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, 27 June 2005, para. 108; See also Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, 19 January 2004, para. 52.
37 See WTO Agreement on Agriculture, Annex 2, paras. 5–13 and Annex 3.
38 See Understanding on the Rules and Procedures for the Settlement of Disputes, Article 3.2.
39 See O. Dorr and K. Schmalenbach (eds.) (2018) Vienna Convention on the Law of Treaties: A Commentary, 2nd edn, Springer, at 580–589.
40 Ibid.; at 579.
41 Ibid.; at 580; See generally Case Concerning the Territorial Dispute (Libyan Arab Jamahiriya v. Chad), judgement of 3 February 1994, ICJ Reports (1994) 6, at 41; Case Concerning Legality of the Use of Force (Serbia and Montenegro v. Belgium), judgement of 15 December 2004, ICJ Reports (2004) 279, at 100; Article 31(1) Vienna Convention of Law of Treaties 1969.
42 See ‘Direct’, Shorter Oxford English Dictionary, 6th edn, at 691.
43 See ‘Payment, Shorter Oxford English Dictionary, 6th edn, at 2129; This interpretation has also been shared by the Appellate Body: see European Communities – Export Subsidies on Sugar, WT/DS266/AB/R, 28 April 2005, para. 259; Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products (Canada–Dairy), WT/DS103/AB/R, 13 October 1999, para. 107.
44 See Vienna Convention of Law of Treaties 1969, Article 31(1).
45 Dorr and Schmalenbach, supra note 39, at 582.
46 See WTO Agreement on Agriculture, Annex 2, paras. 5–13.
47 The terms ‘payments-in-kind’ also finds mention in Article 9.1(a) of the Agreement on Agriculture which concerns the provision of export subsidies by governments or their agencies. Canada–Dairy, supra note 43, at 84–92.
48 See Appellate Body Report, United States – Tax Treatment for ‘Foreign Sales Corporations’, WT/DS/AB/R, 20 March 2000, para. 138.
49 Ibid.
50 See WTO Agreement on Agriculture, Annex 2, paragraph 6(b) to (e).
51 See WTO Agreement on Agriculture, Annex 3, para. 2 states that subsidies such a market price support, non-exempt direct payments, or any other subsidy ‘shall include both budgetary outlays and revenue foregone by governments or their agents’.
52 See ‘Agriculture’, WTO Agreement Series, www.wto.org/english/res_e/booksp_e/agric_agreement_series_3_e.pdf at 22.
53 See M.G. Desta, The Law on International Trade in Agriculture Products: From GATT 1947 to the WTO Agreement on Agriculture (2002), at 411; See also Cairns Group's Submission to the Negotiating Group on Agriculture, MTN.GNG/NG5/W/128, at 5.
54 Ibid.
55 See T. Josling (1998) Agricultural Trade Policy: Completing the Reform. Institute for International Economics, at 27.
56 See the Food, Agriculture, Conservation and Trade Act of 1990 (Pub. Law 101-624) as amended by Omnibus Budget Reconciliation Act of 1990 (Pub. Law 101-508); See ‘Provisions of the Federal Agricultural Improvement and Reform Act of 1996’, ERS, USDA, Agricultural Information Bulletin 729, September 1996. The ARP limited the acreage on which participating producers were permitted to plant to the programme crop.
57 See S. Evans, ‘Acreage Reduction Programs’, Issues for the 1990s: Commodity Programs, USDA ERS Agriculture Information Bulletin No. 664-44 (May 1993). Authorized by the Agriculture and Food Act 1981, ARP replaced the previous set-aside programs to allow the government to implement acreage control by idling land on a commodity-specific basis. ARPs served to limit the program benefits such deficiency payments by cutting the acreage eligible for payments.
58 See S. Pollack and L. Lynch (eds.), Provisions of the Food, Agriculture, Conservation, and Trade Act of 1990, Agriculture and Trade Analysis Division, Economic Research Service, US Department of Agriculture. Agriculture Information Bulletin No. 624 at 133.
59 Ibid.; Producers also had the option of flexing an additional 10% of the farm's base (called optional flex acreage) as provided under the 1990 Act.
60 UNCTAD Study, supra note 20, at 14. See also Domestic Support Notification of EEC, WTO Doc. G/AG/N/EEC/12, 8 May 1998; EU (then EEC) had notified Blue Box payments on maize, cereals, soya beans, colza seeds and sunflower seeds, peas, beans, field beans, sweet lupines, and non-textile flax seeds. Compensatory payments to farmers of these products on per hectare basis was made on the condition that they participate in a set-aside scheme. According to Council Regulation 1765/92, the rate of rotating set-aside was set at 15% of the farmer's declaration of land under production. Non-food crops were permitted on set-aside land. Small farmers – producing less than the equivalent of 92 tonnes of cereals – were exempt from the set-aside requirement. See CAP – Agricultural Information: Subject: Set-Aside – A Brief Guide to the Existing Rules, European Commission Memo No. MEMO/93/43 dated 19 October 1993, https://ec.europa.eu/commission/presscorner/detail/en/MEMO_93_43.
61 See Domestic Support Notification of Norway, WTO Doc. G/AG/N/NOR/103 The payment is made per milk cow, to farms that have at least six or more cows, independently of the yield per cow. A fixed amount per cow is paid from cow 1 to cow 23. The maximum amount of support is granted to farms with 23 cows. As from cow 24, the total amount is reduced per additional cow. Farms with more than 50 milk cows do not receive any payment through this measure.
62 See Canada's Question to Norway at the Committee on Agriculture ID 91108 with respect to its DS Notification of Article 6.5 measure for milk notified under WTO Doc. G/AG/N/NOR/103.
63 Brink and Orden, supra note 16, at 9; Members’ practice with respect to production-limiting aspect of Blue Box is varying. For instance, Norway has been implementing a Blue box programme ‘Quality Incentive Support Programme for Beef’ since 2014. Under this programme, the payments are based on 8% or less of the base level of production and are made on per kg basis of beef meeting the required quality standards. No explicit production-limiting condition has been mentioned. Similarly, China initiated a Blue Box programme for cotton for the period between 2017 and 2019. The subsidy is made on the amount of cotton within 85% of the average cotton production in the base period. Even in this case, no explicit or any standalone condition for limiting production has been laid down. However, Member's practice reflected in their notification is not determinative of the legal interpretation of the provision in Article 6.5. See Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, 3 March 2005, para. 625.
64 See ‘The Blue Box: Phase 1’, WTO Agriculture Negotiations: The Issues, and Where We Are Now (1 December 2004), www.wto.org/english/tratop_e/agric_e/agnegs_bkgrnd_e.pdf at p.56.
65 See R. Schnepf, ‘Agriculture in the WTO: Rules and Limits on US Domestic Support’, CRS Report No. 45305, United States Congressional Research Service, (2019), https://crsreports.congress.gov/product/pdf/R/R45305.
66 Several Members have sought data on the production trends under notified Blue Box Programmes. See AGIMS IDs 87126, 87122, and 91197.
67 See WTO, ‘Domestic Support in Agriculture: The Boxes’, www.wto.org/english/tratop_e/agric_e/agboxes_e.htm.
68 Other non-exempt policies include input subsidies and measures such as marketing cost-reduction measures. See WTO Agreement on Agriculture, Annex 3, para. 13.
69 See WTO Agreement on Agriculture, Annex 3, Para. 2.
70 See J. McMahon (1992) Agriculture Trade, Protectionism and the Problem of Development: A Legal Perspective. University of Leicester Press, at 1.; See also Negotiating Group on Agriculture, ‘Options in the Agriculture Negotiations’, Note by the Chairman, MTN.GNG/AG/W/1, 24 June 1991, para 18. See also Trade and Agricultural Directorate, ‘Producer Support Estimate and Related Indicators of Agricultural Support: Concepts, Calculations, Interpretation and Use’ (The PSE Manual), March 2016, OECD, para. 100.
71 See ‘Agriculture’, WTO Agreement Series, www.wto.org/english/res_e/booksp_e/agric_agreement_series_3_e.pdf at 22.
72 Brink and Orden (2020), supra note 16 at 107.
73 See C.E. Hart and J.C. Beghin (2004) ‘Rethinking Agricultural Domestic Support under the World Trade Organization’, http://documents.worldbank.org/curated/en/202871468318342109/841401968_200510313024626/additional/34206.pdf. In contrast, the market price support component of the Producer Support Estimate (PSE), prepared by the OECD, relies on actual market data to compute the price gap leading to the MPS component of the PSE.
74 See J.N. Bhagwati, P. Krishna, and A. Panagariya (eds.) (2019) The World Trade System: Trends and Challenges. Cambridge, MA: MIT Press, at 219.
75 See Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from United States, WT/DS414/R, 12 June 2012, para. 7.85.
76 Ibid., at 7.87.
77 See WTO Agreement on Agriculture, Annex 3, paras. 10 and 12. Under the OECD PSE, Direct Payments measures entail budgetary transfers to agricultural producers based on various factors such as output, input, current production, historical production etc. PSE Manual, supra note 70, para. 52, Box 3.2.
78 See ‘Agriculture’, WTO Agreement Series, www.wto.org/english/res_e/booksp_e/agric_agreement_series_3_e.pdf at 22.
79 See WTO Agreement on Agriculture, Annex 3, para. 12.
80 See United States Domestic Support Notification, ST DS:6 (Product-Specific Aggregate Measurement of Support: Non-Exempt Direct Payments), WTO Doc. G/AG/N/USA/123, 31 October 2018.
81 See USDA, Agriculture Risk Coverage & Price Loss Coverage, Fact Sheet, August 2019, www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/FactSheets/2019/arc-plc_overview_fact_sheet-aug_2019.pdf.
82 See WTO Agreement on Agriculture, Annex 3, para. 9, further provides that ‘[t]he fixed reference price may be adjusted for quality differences as necessary’.
83 See Panel Report, China – Domestic Support for Agricultural Producers (China–Agricultural Producers), WT/ DS511/R, 28 February 2019, para 7.181.
84 Ibid., at 7.182.
85 Ibid., at 7.197.
86 Ibid., at 7.202.
87 Ibid., at 7.275.
88 See WTO Agreement on Agriculture, Annex 3, para. 11.
89 Desta, supra note 53, at 400.
90 See Panel Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/R, 31 July 2000, paras. 357–358.
91 Ibid., at 371.
92 Ibid., at 827.
93 Ibid., at 827.
94 China–Agricultural Producers, supra note 83, at 7.101.
95 Ibid., at 7.174.
96 Ibid., at 7.176; Article 1(a), AoA provides that the AMS is to be calculated in accordance with the provisions of Annex 3 and taking into account the constituent data and methodology (CDM) used in the tables of supporting material incorporated by reference in Part IV of the Member's Schedule. According to China, the CDM included ‘(i) the base period, (ii) the fixed external reference prices, (iii) a methodology for the determination of eligible production, and (iv) the choice between a price gap methodology or budgetary outlays for non-exempt direct payments in para. 10 of Annex 3 of the Agreement on Agriculture’.
97 China–Agricultural Producers, supra note 83, at 7.177.
98 For, otherwise, it would not be a ‘price support’ for the producer, but for the consumer. See T. Gylfason (1998) ‘Prospects for Liberalization of Trade in Agriculture’, Journal of World Trade 32, at 35.
99 See R. Barents (1994) The Agricultural Law of the EC. Kluwer Accademic, at 77.
100 PSE Manual, supra note 70.
101 PSE Manual, supra note 70.
102 See GATT, Second Report of Committee II, p. 116.
103 Desta, supra note 53, at 312.
104 See Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, 8 September 2004, para 7.1302. The Panel opined that ‘due to their market-price contingency, counter-cyclical payments may influence production decisions indirectly by reducing total and per unit revenue risk associated with price variability in some situations’.