Bridges Weekly Trade News Digest • Volume 13 • Number 11 • 25th March 2009
EU Reports Drop in Trade-Distorting Payments, but Farm Support Still High
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New figures that the EU has recently submitted to the WTO show a dramatic fall in the overall trade-distorting support that the bloc provides. However, as minimally trade-distorting ‘green box’ payments have increased by a similar amount, total support remains largely unchanged.
Green box subsidies, which are meant to cover payments that cause not more than minimal trade distortion, have practically doubled in recent years, suggest the notifications, which cover marketing years 2004-05 and 2005-06. The dramatic increase corresponds to the introduction of the Single Payment Scheme, and is part of the EU’s move to ‘decouple’ farm subsidies from production levels.
Payments that are directly linked to production have been heavily criticised for contributing to over-production, harming farmers in developing countries, damaging the natural environment, and shielding farmers from market signals, which leads them to take inefficient production decisions . In the current Doha Round of trade negotiations, Members have agreed to reduce overall-trade distorting support (OTDS), by cutting the total amount of payments in the WTO’s ‘amber box’, ‘blue box’ and ‘de minimis’ categories.
The new EU figures suggest that OTDS dropped from 60.5 billion euros in 2004/05 to 43.1 billion euros in 2005/06. However, because green box spending increased from 24.39 billion to 40.3 billion over the same period, total subsidy spending has remained roughly constant, at around 84 billion euros.
The bulk of the reduction has been in the production-limiting ‘blue box’, where subsidies dropped from a historic high of 27.2 billion euros in 2004/05 to 13.44 billion euros in 2005/06. EU subsidies in the highly-distorting ‘amber box’ have fallen steadily from around 50 billion euros in 1995 to 31.2 billion in 2004/05 and 28.4 billion in 2005/06.
While green box payments have hovered around the 20 billion euro mark since 1995 until 2004, total payment levels have fluctuated: these rose to 95.4 billion in 1996 before falling to 75.6 billion in 2002, and then rising again to 83.4 billion in 2005/06. While green box payments represent about half of all farm support in the EU, they constitute over ninety percent of support in the US (see Bridges Weekly, 18 March 2009, http://ictsd.net/i/news/bridgesweekly/43463/).
The OTDS reduction during the notification period is “still not enough,” said Isabel Mazzei of Oxfam International, who argued that the continued total support levels meant “business as usual” for the EU. The latest draft text from the chair of the agriculture negotiations proposes an 80 percent cut in the EU’s base level of overall trade-distorting support, bringing this down to 22.1 billion euros over a five-year implementation period – still considerably lower than the 43.1 billion reported in the notification.
Developing country delegates cautiously welcomed the shift away from trade-distorting support in the amber and blue boxes, whilst also warning that many of the payments being reported in the green box could still have trade-distorting effects. The move towards rural development and environmental programmes was “a positive thing,” said one negotiator, who nonetheless cautioned that the large amounts of green box support would still affect the competitiveness of EU producers.
In separate developments, an informal meeting of the regular committee on agriculture was reportedly due to be held on 26 March, at which Members would discuss how to improve the timeliness and completeness of notifications.
The chairs of the General Council and of the Dispute Settlement Body were also reported to be holding consultations on possible a replacement for the chair of the agriculture negotiations committee, who will be returning to capital in April (see Bridges Weekly, 18 March 2009, http://ictsd.net/i/news/bridgesweekly/43437/). The ambassadors of New Zealand, Uruguay and Brazil were reportedly being considered for the role at present.
ICTSD reporting.
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