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Rethinking Agricultural Domestic Support under the World Trade Organization

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This paper focuses on the third pillar of the Uruguay Round Agreement on Agriculture (URAA) of the World Trade Organization (WTO), the discipline of agricultural domestic support. The paper examines the current definition of agricultural domestic support used by the WTO, focusing on the Aggregate Measure of Support (AMS) and other forms of support that are less to least distorting (Blue and Green Box payments). The analysis looks at the recent experience of four member states (the United States, the European Union, Japan, and Brazil). The structure of recent support varies considerably by country. Some countries, notably the United States, have strategically used the de minimis exemption to deflate their support figures substantially in order to remain within AMS limits, even though total support has exceeded these limits. The paper investigates the possible effects of changing the definition of the AMS so that it better reflects current support conditioned by market forces. If market prices (world and/or domestic) were to be used to compute current market support, a greater variability of the AMS would result, and violations of AMS limits would be more likely given the anticyclical nature of policies included in the AMS, especially for the United States and European Union. We also identify possible changes that would lead to more substantial trade reforms. In particular, we argue for phasing out the de minimis exemption and Blue Box support, adding a generous Green Box definition, which would allow countries to move quickly away from trade-distorting policies (Amber Box and the most trade-distorting Blue Box policies), followed by a phase-down of Green Box payments over time. The recent reforms of the European Union's Common Agricultural Policy (CAP) exemplify the spirit of the first part of the recommendation, while resistance to phase-down of Green Box payments may be overcome by a "reasonable" reduction schedule.

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Bibliographic Info

Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 04-bp43.

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Date of creation: Nov 2004
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Handle: RePEc:ias:cpaper:04-bp43

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Keywords: aggregate measure of support; agricultural domestic support; amber box; AMS; blue box; Doha; green box; World Trade Organization; WTO.;

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References

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  1. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Finger, J. Michael & Schuknecht, Ludger, 1999. "Market access advances and retreats : the Uruguay Round and beyond," Policy Research Working Paper Series 2232, The World Bank.
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  6. Hoekman, Bernard & Ozden, Caglar, 2005. "Trade preferences and differential treatment of developing countries : a selective survey," Policy Research Working Paper Series 3566, The World Bank.
  7. L. Alan Winters & Terrie L. Walmsley & Zhen Kun Wang & Roman Grynberg, 2003. "Liberalising Temporary Movement of Natural Persons: An Agenda for the Development Round," The World Economy, Wiley Blackwell, vol. 26(8), pages 1137-1161, 08.
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  10. John Baffes, 2005. "The "Cotton Problem"," World Bank Research Observer, World Bank Group, vol. 20(1), pages 109-144.
  11. Wacziarg, Romain & Seddon, Jessica, 2000. "Trade Liberalization and Intersectoral Labor Movements," Research Papers 1652, Stanford University, Graduate School of Business.
  12. Martin, Will & Warr, Peter G, 1993. "Explaining the Relative Decline of Agriculture: A Supply-Side Analysis for Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 381-401, September.
  13. Hoekman, Bernanrd & Ng, Francis & Olarreaga, Marcelo, 2003. "Reducing agrcultural tariffs versus domestic support : what's more important for developing countries?," Policy Research Working Paper Series 2918, The World Bank.
  14. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  15. Finger, J M, 1974. "GATT Tariff Concessions and the Exports of Developing Countries-United States Concessions at the Dillon Round," Economic Journal, Royal Economic Society, vol. 84(335), pages 566-75, September.
  16. Thomas W. Hertel & L. Alan Winters, 2006. "Poverty and the WTO : Impacts of the Doha Development Agenda," World Bank Publications, The World Bank, number 7411, January.
  17. Sébastien Jean & David Laborde & Will Martin, 2005. "Consequences of Alternative Formulas for Agricultural Tariff Cuts," Working Papers 2005-15, CEPII research center.
  18. Antoine Bouët & Lionel Fontagné & Sébastien Jean, 2005. "Is Erosion of Tariff Preferences a Serious Concern?," Working Papers 2005-14, CEPII research center.
  19. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, 01.
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Citations

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Cited by:
  1. Philippidis, George & Hubbard, Lionel J. & Renwick, Alan W., 2006. "A CGE Analysis of the Harbinson Proposal: Outcomes for the EU25," Working Papers 45992, Scottish Agricultural College, Land Economy Research Group.
  2. Will Martin & Kym Anderson, 2006. "Agricultural Trade Reform and the Doha Development Agenda," World Bank Publications, The World Bank, number 6889, January.
  3. Dobson, William D., 2005. "Free Trade Agreements and The Doha Round of WTO Negotiations -- Implications for the U.S. Dairy Industry," Discussion Papers 37464, University of Wisconsin-Madison, Babcock Institute for International Dairy Research and Development.
  4. Godo, Yoshihisa, 2012. "Evaluation of Japanese Agricultural Policy Reforms Under the WTO Agreement on Agriculture," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125101, International Association of Agricultural Economists.
  5. Godo, Yoshihisa, 2012. "Evaluation of Japanese Agricultural Policy Reforms Under the WTO Agreement on Agriculture," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125102, International Association of Agricultural Economists.
  6. Jean-Pierre Butault & Jean-Christophe Bureau, 2006. "WTO Contstaints and the CAP: Domestic Support in EU 25 Agriculture," The Institute for International Integration Studies Discussion Paper Series iiisdp171, IIIS.
  7. Keith Walsh & Martina Brockmeier & Alan Matthews, 2005. "Implications of Domestic Support Disciplines for Further Agricultural Trade Liberalization," The Institute for International Integration Studies Discussion Paper Series iiisdp99, IIIS.
  8. Daisuke Takahashi, 2009. "Quantitative evaluation of the Japanese rice policy reforms under the WTO agreement on agriculture," Economics Bulletin, AccessEcon, vol. 29(2), pages 712-725.
  9. Godo, Yoshihisa & Takahashi, Daisuke, 2008. "Japan: Shadow WTO Agricultural Domestic Support Notifications," IFPRI discussion papers 822, International Food Policy Research Institute (IFPRI).
  10. Acmoody, Jacob & Balagtas, Joseph Valdes & Gray, Allan W., 2006. "Farm Level Incidence of the U.S. Farm Policy Proposal to the WTO," 2006 Annual meeting, July 23-26, Long Beach, CA 21260, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Takahashi, Daisuke, 2012. "The distributional effect of the rice policy in Japan, 1986–2010," Food Policy, Elsevier, vol. 37(6), pages 679-689.
  12. Takahashi, Daisuke & Honma, Masayoshi, 2009. "Evaluation of the Japanese Rice Policy Reforms under the WTO Agreement on Agriculture," 2009 Conference, August 16-22, 2009, Beijing, China 51421, International Association of Agricultural Economists.

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