Aileen Kwa and Walden Bello | Focus on the Global South
Agreement on Agriculture. Part of the Uruguay Round agreement covering issues related to agriculture — e.g., market access, export subsidies, and internal support.
Aggregate Measure of Support (AMS). An index that measures the monetary value of the extent of government support to an economic sector. As defined in the Agreement on Agriculture, the AMS includes both direct and indirect government supports to the sector, if they are judged to create distortions in the market. For example, it includes both direct payments to farmers, such as payments to guarantee them a higher than world market price, as well as indirect payments such as taxes on food at the point of sale to consumers that are used to support farm programmes. The AMS is different from another broader concept of agricultural support called the Producer Subsidy Equivalent (PSE) because certain PSE policies are excluded from the AMS, and because of the methodology used to compute direct payments and market price support benefits.
Amber Box. A popular expression referring to the set of domestic supports which are considered to be production and trade distorting and are measured by an index termed the Aggregate Measure of Support (AMS).
Bound Tariff Rates. Tariff rates resulting from GATT negotiations or accessions that are incorporated as part of a country’s schedule of concessions. Bound rates are enforceable under Article II of GATT. If a GATT contracting party raises a tariff above the bound rate, the affected countries have the right to retaliate against an equivalent value of the offending country’s exports or receive compensation, usually in the form of reduced tariffs of other products they export to the offending country. However, countries are free at any time to reduce their bound tariffs still further. Bound tariffs can be lowered but not raised.
Blue Box. A popular expression to represent the set of provisions in the Agreement on Agriculture that exempts from reduction commitments those program payments received under production limiting programmes — if they are based on fixed area and yields or a fixed number of head of livestock, or if they are made on 85 per cent or less of base level of production. US’ Deficiency payments were exempt under this provision as compliance with acreage reduction programmes was required for eligibility, and payments were made on no more than 85 per cent of established base acreage, and individual farm yields had been fixed since 1996. Blue box policies are contained in Article 6.5 of the Agreement on Agriculture.
Cairns Group. A group of nations formed in 1986 at Cairns, Australia. The group seeks the removal of trade barriers and substantial reductions in subsidies affecting agricultural trade. These goals were in response to depressed commodity prices and reduced export earnings stemming from subsidy wars between the US and the EU. The members account for a significant portion of the world’s agricultural exports. The group includes major food exporters from both developed and developing countries: Argentina, Australia, Brazil, Canada, Chile, Colombia, Indonesia, Malaysia, New Zealand, the Philippines, South Africa, Thailand, and Uruguay. The Cairns Group was a strong coalition in the Uruguay Round of multilateral trade negotiations.
Country Schedules. The official schedules of subsidy commitments and tariff bindings as agreed to under GATT for member countries.
Decoupled Payments. These supports paid to producers are not dependent on prices or production levels. In theory, no production is required to receive these payments, though in reality, production continues while payments are made based on some other criteria. In the AoA, decoupled payments are deemed to be non-trade distorting and are allowable under the green box.
De Minimis Provision. This provision allows countries to maintain a certain level of AMS. For developed countries this level can be up to 5 per cent of the value of production for individual products (product specific support), and 5 per cent of the value of a country’s total agricultural production (non-product specific support). For developing countries, support can be up to 10 per cent. Within the Agreement on Agriculture, however, countries can only provide these levels of support if they are within the 1992 support levels because of the due restraint clause.
Deficiency Payment. This was allowed under the blue box since, in the US, compliance with acreage reduction programmes was required for eligibility. It is a direct government payment made to US farmers who participated in wheat, feed grain, rice, or cotton programmes prior to 1996. Deficiency payments bridged the gap between a the national average market price and a politically determined target price to support farm incomes which were set by the US Department of Agriculture (USDA). The total payment to a farmer was equal to the payment rate, multiplied by a farm’s eligible payment acreage and the programme yield established for the particular farm. Deficiency payment programmes in the US were eliminated in the 1996 Farm Act and have since been replaced by another subsidy programme, the production flexibility contract payment.
Dispute Settlement Body (DSB). The General Council of the WTO, composed of representatives of all member countries, convenes as the Dispute Settlement Body to administer rules and procedures agreed to in various agreements. The DSB has authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions or other obligations under the various agreements.
Due Restraint Provision. The UR Agreement on Agriculture provision that sets a 9-year period during which domestic support policies and export subsidy arrangements are exempt from GATT challenges.
EU (European Union). Established by the Treaty of Rome in 1957 and known previously as the European Economic Community and the Common Market. Originally composed of six European nations, it has expanded to 15. The EU attempts to unify and integrate member economies by establishing a customs union and common economic policies, including the Common Agricultural Policy. Member nations are Austria, Belgium, Denmark, Germany, Greece, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. The European Commission, the secretariat of the EU, represents the 15 member countries at the WTO where the group speaks as a block.
Export Subsidies. Special incentives, such as cash payments, extended by governments to encourage increased foreign sales; often used when a nation’s domestic price for a good is artificially raised above world market prices.
Final Act. Formally called the “Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations,” the Final Act is the legal document containing the texts of all provisions agreed upon during the UR. The signing and adoption of the Final Act initiated the transition from the GATT to the WTO.
Food Aid Convention (FAC). First negotiated in 1967 and administered by the Secretariat of the International Grains Council, the Food Aid Convention administrators audit food aid donor members to verify that they have complied with their FAC commitments. According to the 1995 Convention, these commitments range from 2.5 million tons of wheat equivalents for the United States, to 20,000 tons for the smallest FAC donor member. Current FAC members are the US, the 15 members of the European Union, Canada, Japan, Australia, Switzerland, Norway, and Argentina. The FAC itself does not deliver international food aid or co-ordinate the food aid programmes of its members. At the WTO Singapore Ministerial Conference in 1996, it was agreed that the food aid component of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food Importing-Developing Countries be forwarded to the Food Aid Convention for consideration.
Formula-based Tariff Reductions. A method of negotiating tariff reductions using an agreed-upon formula applied to tariff rates (with limited exceptions being granted for very sensitive items) by all contracting parties.
GATT (General Agreement on Tariffs and Trade). An agreement originally negotiated in Geneva, Switzerland in 1947 among 23 countries, including the US, to increase international trade by reducing tariffs and other trade barriers. The agreement provides a code of conduct for international commerce and a framework for periodic multilateral negotiations on trade liberalization and expansion.
Green Box. A colloquial term that describes domestic support policies that are not subject to reduction commitments under the Agreement on Agriculture. These policies are said to affect trade minimally, and include support such as research, extension, food security stocks, disaster payments, and structural adjustment programmes.
Market Access. The extent to which a country permits imports. A variety of tariff and nontariff trade barriers can be used to limit the entry of foreign products, thereby reducing market access.
Most-favored-nation (MFN) Status. An agreement between countries to extend the same trading privileges to each other that they extend to any other country. The MFN rule is a founding principle of the WTO. Under a most-favored-nation agreement, for example, a country will extend to another country the lowest tariff rates it applies to any third country. A country is under no obligation to extend MFN treatment to another country, unless they are both members of the WTO, or unless MFN is specified in an agreement between them. The WTO allows some exceptions to the rule, for instance to allow developed countries to extend more favourable trading terms to least developed countries.
Non-tariff Barriers. Regulations used by governments to restrict imports from, and exports to, other countries, including embargoes, import quotas, and technical barriers to trade. These include health and environmental standards.
Notification Process. The annual process by which member countries report to the WTO information on commitments, changes in policies, and other related matters as required by the various agreements.
OECD (Organization for Economic Cooperation and Development). An organization founded in 1961 to promote economic growth, employment, a rising standard of living, and Financial stability; to assist the economic expansion of member and nonmember developing countries; and to expand world trade. The member countries are Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the US.
Peace Clause. See Due Restraint Provision.
Producer Subsidy Equivalent (PSE). A broadly defined aggregate measure of support to agriculture that combines into one total value aggregate, all the transfers which arise from the different instruments of agricultural support, both trade and supposedly non-trade distorting. In the US, these include direct payments to producers financed by budgetary outlays, such as deficiency payments, budgetary outlays for certain other programmes assumed to provide benefits to agriculture (such as research and inspection and environmental programmes) and the estimated value of revenue transfers from consumers to producers as a result of policies that distort market prices. The PSE seeks to reflect the full range of economic distortions arising from agricultural policies.
Production Control. Any government program or policy intended to limit production. In agriculture these have included acreage allotments, acreage reduction, set-asides, and diverted acreage.
Production Flexibility Contract Payments (PFCP). Direct payments to US farmers for contract crops through 2002 under the US 1996 Farm Act. Payments for each crop are allocated each fiscal year based on fixed percentage shares specified in the act. The percentages were based on the Congressional Budget Office’s March 1995 forecast of what deficiency payments would have been for 1996 to 2002 under the 1990 farm legislation. PFCPs were initially higher than deficiency payments paid to farmers. However, they have been set on a descending scale, heading for zero payments by 2002.
Sanitary and Phytosanitary (SPS) Measures. Technical barriers designed for the protection of human health or the control of animal and plant pests and diseases.
Special Safeguard provisions. Provisions within the UR Agreement on Agriculture designed to protect the products that were subject to tariffication (as a result of implementation of the Agreement) from surges in imports or large price declines.
Special Treatment Clause. A clause in the UR Agreement on Agriculture that gives countries the option of foregoing tariffication on some commodities and instead requires minimum imports above the minimum access commitments of 3-5 percent of consumption. This clause was added to temporarily placate Japan and South Korea by providing protection for their rice sectors. In the case of Japan, for instance, the minimum import requirements for rice are at 4 percent of consumption in 1995, rising to 8 percent in 2000.
Tariff. A tax imposed on imported products by a government which consumers have to pay. A tariff may be either a fixed charge per unit of product imported (specific tariff) or a fixed percentage of value (ad valorem tariff). Tariffs are generally imposed when governments do not want imported products to compete with locally made ones. Tariffs are also sometimes used to tax exports, in order to generate revenue, or to keep certain products available on the domestic market.
Tariff Escalation. When import duties are higher on semi-processed products than on raw materials, and higher still on finished products. This escalation serves to keep the global market open for raw materials but ensures that the countries producing higher-end processed products are insulated from competition. Effectively, this entrenches developing countries in the position whereby they remain exporters of cheap raw products since their processed products, if any, are barred from entering the global market.
Tariff Peaks. High tariffs (far above the average tariffs of a country) used to shelter some ‘sensitive’ industries or products, such as textiles, leather goods, and food products.
Tariff-rate Quota. Quantitative limit (quota) on imported goods, above which a higher tariff rate is applied. A lower tariff rate applies to any imports below the quota amount.
Tariffication. The process of converting nontariff trade barriers to bound tariffs. This is done under the UR agreement in order to improve the transparency of existing agricultural trade barriers and facilitate their proposed reduction.
Trade Liberalization. A term which describes the complete or partial elimination of government policies or subsidies that restrict trade. The removal of trade-distorting policies may be done by one country (unilaterally) or by many (multilaterally).
UR (Uruguay Round) Agreement. The Uruguay Round of multilateral trade negotiations, conducted under the auspices of the GATT, is a trade agreement designed to open world markets. The Agreement on Agriculture is one of the 29 individual legal texts included in the Final Act under an umbrella agreement establishing the WTO. The negotiation began at Punta del Este, Uruguay in September 1986 and concluded in Marrakesh, Morocco in April 1994.
World Trade Organization (WTO). Established on January 1, 1995 as a result of the Uruguay Round, the WTO replaces GATT as the legal and institutional foundation of the multilateral trading system of member countries. It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations. And it is the platform on which trade relations among countries evolve through collective debate, negotiation, and adjudication.
