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TWN Info Service on WTO and Trade Issues (Jan05/3)

24 January 2005

Third World Network

G20 statement on need for disciplines on Blue Box subsidies

During the agriculture negotiations at the WTO in mid-December 2004, the Group of 20 countries presented a number of statements, one of which was on the issue of blue box domestic support measures.

Below is a brief report by Goh Chien Yen of TWN of this G20 statement followed by the full statement.

 

With best wishes

Martin Khor

Third World Network

 

 

 

 

G20 statement on criteria for Blue Box agriculture domestic subsidies

Report by Goh Chien Yen, Third World Network

 

At the agriculture session of negotiations in mid-December 2004, the Group of 20 issued a number of statements.   One of the statements that it presented was on the question of the blue box domestic support measures.

The G20 statement reiterated the importance of having effective disciplines on the trade-distorting domestic support of blue box measures. In this regard, according to the G20, the July Package (decision of the WTO General Council on 1 August 2004) obliges members to do the following:

·        That the blue box payments should not exceed 5% of the average total value of agricultural production during a historical period to be determined, at the start of the implementation period.

·        This level of blue box support will then be cut according to a tiered formula. 

·        Negotiation of criteria for the Blue Box as mandated in paragraphs 13-15 of the Framework Agreement 

·        Negotiate criteria to ensure that Blue Box payments are indeed less trade-distorting than AMS support as contained in paragraph 14. 

·        Given that Blue Box support has been used by some Members in a manner that has increased the levels of production, the centrality of limitation on production must be explicitly provided for in this negotiation of criteria for Blue Box payments.

 

The G20 statement said that it is also of fundamental importance to ensure that the reform process will, among other things:

·        ensure that Members will not circumvent their reduction commitments by simply changing the labels of their notifications; and

·        reflect a real movement away from trade-distorting AMS programmes towards those which are proven to limit production and can be genuinely considered less trade-distorting than AMS measures.

To achieve these critical elements, the G20 believes that criteria which could be considered, among others are:

·        introduce product-specific caps and reduction commitments, by establishing criteria to disaggregate support at a product-specific level. 

·        price linkages should be disciplined to ensure that there is no incentive to increase production. 

·        to prevent mere shifting of support between boxes without changing its trade-distorting effect, and based on the results of the comprehensive review, disciplines to offset transfers from Amber Box or de minimis to the Blue Box will be necessary; and 

·        the comprehensive review and further negotiation must address the requirements of developing countries in order to ensure that the Blue Box does not merely provide accommodation for the programmes of some developed countries, as is currently the case. 

·        the monitoring and surveillance mechanism, (as envisaged in paragraph 48), must ensure that Blue Box programmes conform to the criteria to be agreed.

 

Below is the full text of the G20 statement.

 

Annex

BLUE BOX CRITERIA

G20 Statement

 

The magnitude of support allowed under the Blue Box category will certainly affect the extent to which the “overall reduction” will really substantial as sought for in the Framework agreement. It will affect international trade in the beneficiary products, and consequently the entire membership. Therein lies the importance of having disciplines on the provision of this support.

The July Framework envisages that all Blue Box payments, at the beginning of the implementation period, will be subject to an overall cap of 5% of the average total value of agricultural production during a historical period. The overall base level of all trade-distorting domestic support whose measurement will include Blue Box payments at this level will be reduced according to a tiered formula. Discussions on various technical aspects of these cuts are being taken up separately and the G-20 will enunciate its position as required.

Furthermore, the negotiation of criteria is set out in paragraph 13 and additional criteria for the Blue Box are mandated in paragraphs 13-15 of the Framework Agreement. The G-20 work on detailed criteria is not yet finalised.

During the Uruguay Round, Article 6.5 of the AoA was negotiated with the intention that Blue Box payments would be less trade-distorting than those under the Amber Box (or AMS payments), as a result of its production-limiting effect. Limiting production was sine qua non for Blue Box payments. Therefore, they were exempted from the AMS calculations during the Uruguay Round. 

Paragraph 14 of the Framework agreement mandates the Membership to negotiate criteria to ensure that Blue Box payments are indeed less trade-distorting than AMS support. Therefore, the G-20 is of the view that our first course of action must be to comprehensively review how Article 6.5 has been used by Members, and how measures have effectively limited production, which is the most important element for fulfilling the condition of “less trade-distorting than the AMS measures”.

This review is necessary as there is not enough information to ascertain whether the key concept behind the Blue Box is being respected, namely their “production-limiting” nature. Lists of these programmes have been received over the years from those Members who have used the instrument, including how the measures have evolved, but this has been far from enough. The review process should, therefore, include inter alia information on the evolution of prices and production levels of the products concerned. This will allow us to verify whether the intended purpose of the Blue Box is being met.

Our initial analysis shows that Blue Box support is being used by some Members in a manner that has increased the levels of production. As an example, in the case of the EC, production levels have increased since the introduction of these measures after 1992. According to EUROSTAT,  production levels of cereals have increased between 1992 and 2003 by 4% or 8 million tons; rapeseed by almost 39%; and rice, by almost 24%. It is thus evident that the production-limitation obliged by Article 6.5 has not been achieved.

In view of this, the centrality of limitation on production must be explicitly provided for in this negotiation of criteria for Blue Box payments., This will ensure that Blue Box does effectively limit production, and would be, therefore, truly less trade-distorting than the AMS measures. It is also of fundamental importance to ensure that the reform process will, among other things:

a)   ensure that Members will not circumvent their reduction commitments by simply changing the labels of their notifications; and

b)   reflect a real movement away from trade-distorting AMS programmes towards those which are proven to limit production and can be genuinely considered less trade-distorting than AMS measures.

To achieve these critical elements, the G20 believes that criteria which could be considered, among others are:

Firstly, introduce product-specific caps and reduction commitments, by establishing criteria to disaggregate support at a product-specific level. This is necessary primarily to (i) prevent circumvention of product specific caps in Amber Box; (ii) provide transparency (including appropriate monitoring) on the amount of support provided to each product; and (iii) discipline coupled payments, in particular where products receive payments under other trade-distorting categories of support as well;

Secondly, price linkages should be disciplined to ensure that there is no incentive to increase production. For example, in 1996, in combination with high international prices for wheat the reduction of the compulsory set-aside area from 12% to 10%, , resulted in an incentive to plant cereals as opposed to other crops. Other situations where linkages between prices and production occur, would need to be addressed within this context. ;

Thirdly, to prevent mere shifting of support between boxes without changing its trade-distorting effect, and based on the results of the comprehensive review, disciplines to offset transfers from Amber Box or de minimis to the Blue Box will be necessary; and

Noting that special and differential treatment for developing countries is an integral to all aspects of the agriculture negotiations, the comprehensive review and further negotiation must address the requirements of developing countries. This exercise would basically, therefore, be designed to ensure that the Blue Box does not merely provide accommodation for the programmes of some developed countries, as is currently the case.

Last, but not least, the monitoring and surveillance mechanism, (as envisaged in paragraph 48), must ensure that Blue Box programmes conform to the criteria to be agreed.

The G-20 would like to reiterate that these are our views at this stage, regarding the scoping of the discussion on Blue Box. These views are without prejudice to any proposal regarding additional criteria which we may submit at the conclusion of the comprehensive review of the nature and efficacy of the Blue box to deliver on the agreed objective of limiting production and providing an avenue for support which is truly less trade-distorting than AMS measures.

 


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