Determining Winners and Losers from a GATT Agreement: The Importance of Base Periods and Rules

To identify the winners and the losers from the General Agreement on Tariffs and Trade (GATT) in agriculture, it is necessary to know which countries will be required to reduce which subsidies by what amounts. Rules that seem fair may actually impose very different future obligations on the parties to the negotiations. The base period from which reductions must be made, the manner in which export subsidies are measured, and the exchange rate used to determine tariff-reduction requirements are examples of technical issues that determine the policy implications of a GATT agreement. The paper estimates credits that countries have earned for policy changes already enacted and for changes in the world market conditions under various sets of rules. These credits vary greatly across countries and commodities and are extremely dependant on the specific rules assumed. Thus, an agreement requiring a 30 percent subsidy reduction from a particular base period may result in no required policy changes for some commodities in some countries and very large subsidy reductions for other commodities in other countries.