WTO Agreement on Agriculture

The domestic support systems in agriculture are governed by the Agreement on Agriculture (AoA), which entered into force in 1995 and was negotiated during the Uruguay Round (1986-1994). The long-term goal of the AoA is to establish a fair and market-oriented agricultural trading system and to initiate a reform process through the negotiations of commitments on support and protection, and through the establishment of strengthened and more operationally effective rules and discipline. Agriculture is therefore special because the sector has its own agreement, whose provisions prevail.

Legal basis

In regard to the General Agreement on Tariffs and Trade (GATT), signed in Geneva in 1947, and the Agreement establishing the World Trade Organization (WTO), signed in Marrakesh in 1994 (OJ L 336, 23.12.1994), the European Union and its Member States act pursuant to Article 207 (common commercial policy) and Articles 217 and 218 (international agreements) of the Treaty on the Functioning of the European Union (5.2.2).

External aspects of the CAP — General framework

The entire Common Agricultural Policy (CAP) has been subject to WTO discipline since 1995, including a dispute settlement body (DSB) with a stringent procedure for disputes, which ensures that signatory states comply with the new multilateral rules.

The CAP is also affected by agricultural concessions granted to a wide range of countries under several multilateral and bilateral agreements and by unilateral waivers granted under the Generalised System of Preferences (GSP). These preferential agreements explain the high level of European Union agricultural imports from developing countries (please see table below on EU agri-food trade).

WTO Agreement on Agriculture

Agriculture has special status in the WTO’s Agreements and Memoranda of Understanding on trade (which were signed in 1994 and entered into force on 1 January 1995) because the sector has a specific agreement, the Agreement on Agriculture (AoA), whose provisions prevail. In addition, some provisions of the Agreement on the Application of Phytosanitary Measures (SPS) also involve agricultural production and trade. The same is true of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in relation to the protection of geographical designations. Furthermore, the provisions of the Agreement on Agriculture are supplemented by the Agreement on technical barriers to trade (TBT), as well as by technical assistance mechanisms.

These agreements contain a certain degree of flexibility as regards their implementation by both developing country, WTO members (special and differential treatment) and least developed countries (LDCs) and net food-importing developing countries (special provisions).

On the basis of the AoA, WTO Member States undertook to implement an agricultural policy reform agenda that lays down specific binding commitments in three major areas: market access, domestic support and export subsidies. The AoA sought to improve access to markets by requiring that all border protection measures be converted into customs duties (tariff equivalents) and that third country ‘minimum access commitments’ be established for specific products not subject to tariffication. The AoA makes provision for support volumes to be reduced. The extent of this reduction depends on the nature of the aid. Aid is categorised in different ‘boxes’ depending on the effect it has in terms of distorting trade on agricultural markets. The ‘amber box’, also known as the ‘Aggregate Measure of Support’ (AMS), combines price support with aid coupled to production and not exempt from reduction commitments. The ‘blue box’ covers aid linked to supply control programmes which are exempt from reduction commitments. The ‘green box’ comprises two support groups: public services programmes and direct payments to producers which are fully decoupled from production.

The table below shows statistics on agri-food trade for exports and imports – European Union – Extra EU27[1].

TABLE: EU AGRI-FOOD TRADE WITH EXTRA EU27

Source: European Commission, DG AGRI, Agri-food trade statistical factsheet, 18.04.2023.

The Doha Round and Agriculture

The Doha Round is the latest round of WTO trade negotiations, also called the Doha Development Agenda. Launched at the Fourth WTO Ministerial Conference held in Doha in 2001, it marked the beginning of new agricultural negotiations. WTO members committed themselves to securing substantial improvements in market access and to the gradual withdrawal of all forms of export subsidies in trade-distorting domestic support, with due account taken of the need for developing countries to be granted special and differential treatment.

The 10th Ministerial Conference, which took place in Nairobi in 2015, adopted four new decisions for agriculture concerning export competition, public stockholding for food security purposes in developing countries, cotton and special safeguarding mechanisms for developing countries. The 12th WTO Ministerial Conference in Geneva in 2022 secured negotiated outcomes on a series of agreements (the ‘Geneva package’) which comprised, among other things, a ministerial declarationon the emergency response to food insecurity and a ministerial decisionon exempting World Food Programme humanitarian food purchases from export prohibitions or restrictions.

The consequences for the CAP of the Agreement on Agriculture

The CAP reform in 1992 was partly intended to facilitate the signing of the AoA as part of the Uruguay Round. As a result, the European Union has to a large extent complied with the commitments signed in Marrakesh.

Most subsidised exports notified to the WTO used to originate from the European Union before they were abolished as part of the 2013 CAP reform. They fell to zero in 2017. However, it should be borne in mind that a number of practices used by our main competitors (e.g. food aid, export credits and commercial state enterprises) are not subject to WTO rules. The EU will now use export refunds in exceptional cases in order to overcome serious crises affecting the markets. Reductions for some European Union products have been considerable: butter, rape, cheese, fruit and vegetables, eggs, wine, and meat in general have been particularly affected by this. In its most recent notification to the WTO for 2021-2022 (G/AG/N/EU/83 of 10 March 2022), the EU confirmed that export subsidies were not granted to agricultural products during the marketing year from 1 July 2021 to 30 June 2022. It also notified that no in-kind food aid was provided during this period.

The 2003 CAP reform, which decoupled most of the existing direct aid, and subsequent sectoral reforms have meant that most of the support under the amber box and the blue box has been moved to the green box (EUR 68.5 billion in 2019-2020, see table below). Aid under the ‘amber box’ (AMS, or Aggregate Measurement of Support) fell heavily from EUR 81 billion at the start of the agreement period to EUR 5.3 billion in 2019-2020, even with the successive waves of enlargement. The European Union is thus largely complying with the commitments given in Marrakesh (EUR 72.37 billion per year) for the AMS. Moreover, the ‘blue box’ reached EUR 4.8 billion in the same notification period.

The European Parliament has always watched the progress of multilateral negotiations in general, and agricultural negotiations in particular, extremely closely. Each WTO Ministerial Conference has been accompanied by a resolution, the latest being the resolution of 25 November 2021 following the 12th WTO Ministerial Conference in Geneva. The European Parliament has always called on the European Commission to safeguard the interests of European producers and consumers as well as the interests of farmers in those countries with which the European Union has historically had particularly close relations (African, Caribbean and Pacific (ACP) countries). In 1999, at the start of the ‘millennium round’, it expressed its support for the approach adopted by the European Union’s negotiators in championing the European agricultural model based on the multi-functionality of the agricultural business. It reiterated this support in several resolutions which also highlighted the importance of expressly acknowledging ‘non-trade concerns’ and taking into account the public’s demands regarding food safety, environmental protection, food quality and animal welfare.

The priority given to bilateralism by the United States after the presidential elections in 2016 has damaged the multilateral trading system, as evidenced, for example, by the tariff war with China or the shutdown of the WTO’s appellate body in 2019. Faced with this state of affairs, the European Union and the European Parliament took care to preserve the achievements of the multilateral system within the WTO, in particular with regard to agricultural trade (in December 2019, the Union thus already proposed to WTO member countries a provisional appeal procedure to replace the appellate body). The WTO’s appellate body is still not functioning today.

 

Vera Milicevic

10-2023