WTO 2004 Agriculture Framework: Disciplines on Distorting Domestic Support

The July 2004 Agriculture Framework is the basis for negotiations of modalities in agriculture in the WTO. The significant new ideas on domestic support include an Overall Reduction applying to the sum of Total Aggregate Measurement of Support (Total AMS), de minimis AMSs, and blue box payments (i.e., all non-green support), tiered harmonizing reductions of overall distorting support and Total AMS, caps on product-specific AMSs, cap on and criteria for blue box payments, lower de minimis, and review of green box criteria. This paper assesses how several of these provisions might constrain the future (2014) distorting domestic support of USA, EU, Japan, Canada, Brazil, and China. Future support is projected, paying particular attention to U.S. and EU support. The analysis uses a hypothetical 90-80-70-60 reduction scenario to estimate the remaining entitlements to support and calculates the cuts the six Members can accommodate without affecting projected future support. It also estimates the maximum support that can be used within the commitments, considering that simply summing the Total AMS commitment and all de minimis allowances overestimates the amount of support that can be provided (a product's AMS can not at the same time be de minimis and counted in Current Total AMS). The six Members can accommodate large cuts in commitments on overall distorting support and Total AMS. A cut of 75 percent would not bite into the U.S. future support and a 79 percent cut would not constrain future EU-15 support. Large cuts would not force the other four Members to reduce support from what they have notified or provided in recent years. Large cuts will prevent reversals of support reductions. Harmonizing tiered cuts can effectively address the support entitlements of the large subsidizers. Altogether the provisions of the 2004 Framework allow for substantial reductions in distorting support, and the Overall Reduction can be particularly effective. The reduction scenario examined for the six Members reduces their combined usable entitlements to all distorting support by about half (from $301 bill. in the base period to $148 bill. in 2014) when applied to Total AMS, de minimis, and blue entitlement separately. Applying also the Overall Reduction reduces the combined usable entitlements by a further $84 bill., bringing their allowed distorting support down to $65 bill. However, this requires that Members agree to sizeable percentage cuts in the commitments on Overall Reduction and on Total AMS.