The WTO Agreement on Agriculture: boxes and pillars
The 1995 WTO Agreement on Agriculture: market access, domestic support and export competition, amber, blue and green boxes, de minimis, and an AMS sum.
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For most of the twentieth century, agriculture was largely left out of the rules of world trade. Rich countries protected their farmers with import quotas, high and variable levies, price support and export subsidies, which depressed world prices and hurt exporters in developing and food-exporting countries. The Uruguay Round of trade negotiations (1986–1994) brought agriculture into the rules for the first time, through the Agreement on Agriculture (AoA), which came into force with the creation of the World Trade Organization (WTO) on 1 January 1995.
The structure of the AoA, its three pillars and its "boxes" of domestic support are frequently examined in agricultural economics, trade and policy courses.
The three pillars
1. Market access
- Tariffication: non-tariff barriers such as import quotas and variable levies were converted into equivalent tariffs.
- Tariff reductions: developed countries agreed to cut agricultural tariffs by an average of 36 per cent over six years (at least 15 per cent for each product); developing countries by 24 per cent over ten years (at least 10 per cent). Least-developed countries were exempt from cuts.
- Tariff-rate quotas (TRQs): a quantity of imports enters at a low tariff, with a higher tariff above the quota, to guarantee minimum access.
- A special safeguard allows extra duties on tariffied products when imports surge or prices fall sharply.
2. Domestic support
Support to farmers is classified by how much it distorts production and trade:
- Amber box: trade-distorting support, such as market price support and input subsidies linked to production. It is measured by the Aggregate Measurement of Support (AMS) and capped; developed countries agreed to cut it by 20 per cent over six years and developing countries by 13.3 per cent over ten.
- De minimis: small amounts of amber support are exempt: up to 5 per cent of the value of production (product-specific or non-product-specific) in developed countries and 10 per cent in most developing countries.
- Blue box: payments under production-limiting programmes, based on fixed areas, yields or animal numbers. Not capped.
- Green box (Annex 2): support with no, or minimal, trade distortion, such as research, extension, pest control, infrastructure, public stockholding for food security (with conditions), domestic food aid, decoupled income support, disaster relief and environmental programmes. Not capped.
- Development box (Article 6.2): investment subsidies and input subsidies to low-income or resource-poor farmers in developing countries.
3. Export competition
- Developed countries agreed to cut the value of export subsidies by 36 per cent and the volume of subsidised exports by 21 per cent over six years; developing countries by two-thirds of those amounts over ten years.
- At the Nairobi Ministerial Conference in 2015, members agreed to eliminate agricultural export subsidies, with developed countries acting immediately for most products and developing countries given longer periods. Disciplines were also agreed on export credits, food aid and state trading enterprises.
Continuing issues
- Public stockholding for food security: when governments buy at administered prices, the difference from an old reference price counts as amber support. A 2013 Bali decision gave developing countries an interim "peace clause" protecting such programmes from legal challenge while a permanent solution is negotiated.
- Cotton subsidies and their effect on West African producers.
- Special safeguard mechanism for developing countries.
- Fisheries subsidies, addressed in a separate 2022 agreement.
- Negotiations under the Doha Round, launched in 2001, have largely stalled, so many issues remain open.
Calculating market price support and AMS
A country's administered (support) price for wheat is 300 dollars per tonne. The fixed external reference price, the average world price in the base period 1986–88, is 200 dollars per tonne. Production eligible for the support price is 1 million tonnes, and total wheat production is valued at 280 million dollars.
- Market price support = (administered price − fixed external reference price) × eligible production = (300 − 200) × 1,000,000 = 100 million dollars.
- As a share of the value of production: 100 ÷ 280 ≈ 35.7 per cent.
- This far exceeds the 10 per cent de minimis for a developing country, so the whole 100 million counts toward the country's amber box AMS.
Because the reference price is fixed at 1986–88 levels while actual prices have risen with inflation, a support price can appear as large "support" in WTO terms even if it is close to today's world price; this is central to the public stockholding debate.
Key points
- The AoA (1995) brought agriculture under WTO rules through three pillars: market access, domestic support and export competition.
- Market access: tariffication, tariff cuts (36 per cent developed, 24 per cent developing), tariff-rate quotas and special safeguards.
- Domestic support: amber box (AMS, capped), de minimis (5 per cent developed, 10 per cent developing), blue box, green box and development box.
- Export subsidies were cut and, by the 2015 Nairobi decision, are being eliminated.
- MPS = (administered price − fixed external reference price) × eligible production.
- The SPS Agreement governs food safety and plant and animal health measures.
What the exams ask
- School-leaving and entrance papers: what the WTO is and the three pillars of the Agreement on Agriculture.
- Degree and research-fellowship entrances: the boxes and their contents, de minimis, AMS calculation, special and differential treatment, and the SPS Agreement.
- Professional and policy examinations: public stockholding and the peace clause, implications for national support programmes, and current negotiations.
Described in general terms: the kind of examination, not a past paper. Laisha never reproduces exam questions.
Questions people ask
Why is the green box not limited?
Its measures, such as research, extension and decoupled income support, are judged to have little or no effect on production and trade, so they are allowed without limit.
Does the WTO forbid support prices?
No. Support prices are allowed but count as amber box support, which is limited by each country's commitments and the de minimis thresholds.
What is a tariff-rate quota?
A two-level tariff: imports within a set quantity pay a low tariff, and imports above it pay a higher one.
Sources
- World Trade Organization. Agreement on Agriculture. In The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations. WTO, 1994.
- WTO. Nairobi Ministerial Decision on Export Competition (WT/MIN(15)/45). WTO, 2015.
- WTO. Bali Ministerial Decision on Public Stockholding for Food Security Purposes (WT/MIN(13)/38). WTO, 2013.
- Josling, T., Tangermann, S. and Warley, T. K. Agriculture in the GATT. Macmillan, 1996.
- Anderson, K. and Martin, W. (eds) Agricultural Trade Reform and the Doha Development Agenda. World Bank and Palgrave Macmillan, 2006.
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