GATT and Agriculture
The GATT prohibition on quantitative restrictions contains exceptions for agricultural products. Restrictions may be placed on imports of agricultural or fisheries products for the purpose of policies of restricting quantities of like domestic products on the market or to remove temporary surpluses of such domestic products.
The restriction is not to be such as reduces the total imports relative to domestic production, relative to what might reasonably be expected to apply in the absence of restrictions. The provisions are commonly used to underpin market management schemes which restrict supply and maintain the domestic price of agricultural products.
GATT allows prohibitions and restrictions on a temporary basis on exports, in order to prevent or reduce shortages of critical food or other essential products.
Article XVI of GATT provides that states parties should seek to avoid the use of subsidies on exports of primary products. If they are applied, they must not do so in a manner which results in the state having more than the equitable share of the world export trade for that product, having regard to the relevant proportions and shares during the previous representative period.
Under the above provisions, which predate the Uruguay Round, a series of waivers were granted in respect of many products, even in respect of these relatively light obligations.
Most states, including, in particular, the European Union have used mechanisms to maintain and stabilise the market in primary agricultural and fishery products. These measures consist of guaranteed intervention prices, rebates on exports below the set price, and import levies to bring the price of imports to the set/ target price. These measures significantly affect third party importers, in this context, into the European Union.
Uruguay Round and Agricultural Support
In recent decades, the focus of Agricultural policy has shifted from intervention and price maintenance to direct payments and aids. The Uruguay Round concluded in 1993, following significant differences in approach by the USA and EU in relation to their respective treatment of agriculture. The EU attempted to defend the principal features of the Common Agricultural Policy. A compromise was reflected in the 1993 Agreement, which sought to reduce distortions in trade in agricultural products.
The Agreement sought to quantify and embody domestic agricultural support measures in a single measure, the aggregate measure of support.
The Agreement on Agriculture in the Uruguay Round prohibits import quotas, variable import levies, minimum import licensing, nontariff measures maintained whether by the state or state enterprises, voluntary export restraints and measures other than customs duties.
The measure of protection offered by a quota or licensing scheme is measured by reference to the difference between the domestic and world price. The Agreement sought that quotas and equivalent arrangements replaced by a tariff giving equal protection and subject to the obligations of reduction.
The Agreement on Agriculture provides for the aggregate measurement of support which applies both to government aid and support for agricultural production in general. It is determined by comparing prices of products which benefit from supports against average world prices. Domestic price supports are not prohibited but are to be reduced over a period of six years.
The Agreement on Agriculture did not completely prohibit export subsidies. It required them to be set out in binding schedules. They could not be increased. They were to be reduced over a six-year period in respect of government expenditure and quantity for each product.
If an export subsidy complies with the terms of the Agreement, it may be subject to countervailing measures, only provided there is a determination of injury or a threat of injury.
States undertook to deliver a 20% reduction in the level of support from the 1986 base. Subsidies were to be reduced by 21% over a six-year period in terms of the volume of products receiving subsidies, and 36% in value of those subsidies. States agreed not to increase export subsidies beyond that level after the six years. This provision was to take precedence over Article XVI of GATT.
The Agreement required state parties to convert non-tariff measures, such as quotas, into tariffs and reduce agricultural tariffs by those proportions. There was to be a minimum of a 15% reduction in each product category.
New tariff measures were prohibited. Border measures were to be reduced to increase access for foreign producers to up to 3% rising to 5%, during the six-year period.
Certain types of supports were exempted. Domestic supports were either in the “yellow” box, “blue” box or “green” box. Yellow box are those measures which distort the market including subsidies and price supports. Reduction commitments apply.
Green box subsidies are those which support research, domestic food aid, disaster assistance, training, advisory, and infrastructure. They are deemed not to have an effect on trade or production and are exempt from the requirements for reduction.
Blue box subsidies are direct payments to farmers under programmes for limiting production and certain payments in developing countries to encourage production. They are not subject to reduction, provided that they follow certain criteria.
Domestic supports exempted from the commitments and reductions were not actionable during the so-called peace clause, which ran until 2003. Due restraint was to be applied in initiating countervailing duty investigations in blue box subsidy cases.
Additional duties may be applied where the level of imports is above a certain trigger level or where the prices fall below a trigger price. There is separate treatment for developing countries with phasing in provisions.
The Doha Declaration permits states parties to build on the Uruguay Agreement on Agriculture. It seeks substantial improvements in market access, reductions, all with a view to phasing out all forms of export subsidies and substantial reductions in trade-distorting domestic support. It provides special treatment for developing countries.
There has been some agreement on reducing export subsidies but not on reducing domestic support. Many countries have changed to tariff rate quotas for previous quantitative restrictions. However, the out of quota tariffs may be multiples of the value of the goods and have the effect of maintaining the pre-existing quota system to a large extent.
The Bali Package in December 2013 does not contain legally binding commitments in relation to agriculture. However, Member parties commit themselves to dealing with quota under filling through simplification procedures in relation to tariff quota administration.
In relation to food stockpiles, a peace clause applies by which states agree to temporarily refrain from lodging complaints if a developing country exceeds its Amber Box limit (10% of production at which domestic supports are capped), where it is as a result of food security. This is to apply pending a longer-term solution.