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Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda

Report by Musselli, Irene/UNCTAD, 2016

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There is a need to move beyond existing metrics in agricultural trade governance. This on account of major changes in farm support policies and in the overall policy framework. The way ahead requires a pragmatic and ground-breaking approach. A comprehensive approach is needed to improve coherence between farm support policies and sustainability concerns. The boundaries of the Green Box have to be redefined accordingly. Specifically, Green Box transfers have to be made conditional on the respect of specific agri-environmental practices. Decoupled income support not subject to agrienvironmental “cross-compliance” conditions should only be available to low-income or resource-poor producers. It is also important to acknowledge the fact that different developing countries have different agricultural profiles and different needs for farm support, and to give operational meaning to these differences. Overall, trade policy in agriculture should be re-oriented towards context-specific, circumstantial assessments, informed by equitable considerations and sustainability imperatives.

U n i t e d n at i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t


FARM SUPPORT AND TRADE RULES:
TOWARDS A NEW PARADIGM UNDER


THE 2030 AGENDA


POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES
RESEARCH STUDY SERIES No. 74












POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


RESEARCH STUDY SERIES No. 74








FARM SUPPORT AND TRADE RULES:


TOWARDS A NEW PARADIGM UNDER THE 2030 AGENDA






by






Irene Musselli


The Graduate School of Economic Globalisation


and Integration, World Trade Institute


University of Bern















New York and Geneva, 2016


U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T





ii POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Note




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UNITED NATIONS PUBLICATION


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© Copyright United Nations 2016
All rights reserved






Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda iii




Abstract


There is a need to move beyond existing metrics in agricultural trade governance. This on account of


major changes in farm support policies and in the overall policy framework. The way ahead requires a


pragmatic and ground-breaking approach. A comprehensive approach is needed to improve


coherence between farm support policies and sustainability concerns. The boundaries of the Green


Box have to be redefined accordingly. Specifically, Green Box transfers have to be made conditional


on the respect of specific agri-environmental practices. Decoupled income support not subject to agri-


environmental “cross-compliance” conditions should only be available to low-income or resource-poor


producers. It is also important to acknowledge the fact that different developing countries have


different agricultural profiles and different needs for farm support, and to give operational meaning to


these differences. Overall, trade policy in agriculture should be re-oriented towards context-specific,


circumstantial assessments, informed by equitable considerations and sustainability imperatives.




Keywords: International Trade Law, Green Box Subsidies; Agriculture in International Trade;


Sustainable Development


JEL Classification: K33, O13, Q17, Q01


















iv POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES





Acknowledgements



I am particularly grateful to Miho Shirotori for critical inputs on many parts of this report, and
to Thomas Cottier, Christian Häberli and Simonetta Zarrilli for helpful comments on a previous version
of the report.


This paper represents the personal views of the author only, and not the views of the UNCTAD


secretariat or its member States. The author accepts sole responsibility for any errors remaining.







Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda v




Contents






1 INTRODUCTION .......................................................................................................................... 1




2 THE URUGUAY ROUND'S "IMBALANCED OUTCOME":


THE UNFINISHED NATURE OF REFORM ................................................................................. 2


2.1 Not so much liberalization ................................................................................................. 2


2.2 An imbalanced outcome .................................................................................................... 3




3 THE DOHA DRAFT TERMS: TOWARDS REDRESSING EXISTING IMBALANCES ................ 5


3.1 The Green Box escape ...................................................................................................... 6


3.2 Domestic support in key emerging economies ................................................................. 9




4 CONCLUSION: THE WAY AHEAD ........................................................................................... 13


4.1 "Greening" the Green Box ............................................................................................... 13


4.2 Making the Green Box work better for social inclusiveness ............................................ 14




REFERENCES ......................................................................................................................................... 16








vi POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


List of figures




Figure 1. Amber and Green Box subsidies in the EU ........................................................................... 8


Figure 2. PSE in selected emerging economies and the EU ($ mn) .................................................. 10








List of tables




Table 1. Number of Members with scheduled commitments, grouped by category .......................... 5


Table 2. OECD: Estimates of support to agriculture ........................................................................... 7


Table 3. Agricultural producer support estimates, as a percentage of gross farm receipts ............. 10








Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 1


1. INTRODUCTION


After more than two decades since the conclusion of the Uruguay Round, producer support remains a


structural, systemic issue in agriculture. Most important, the playing field is far from level, due to factual


and formal discriminations across countries. The Doha Round, if concluded, would redress these


imbalances but only partially. The “historic” Nairobi Package on agriculture, agreed at the 10th


Ministerial Conference of the World Trade Organization (WTO) in December 2015, eliminates


agricultural export subsidies.1 But important distortions and imbalances in the area of domestic support


would stay. In particular, the proposed Doha disciplines would not obstruct the main gateways through


which producer support is channeled today. How then to move forward in this setting? Where to set


limits to farm support policies, beyond the terms of the Doha Draft? And how to arbitrate trade-offs


between “policy space” and “trade fairness”?


Efforts to define the way ahead should take into account three important developments, compared to


the 1980 scenario. First, the forms by which farm support is provided in the advanced market-based


economies have altered significantly since the mid-1980s: from market price support to income


support “decoupled” from current production and prices. This type of support, largely notified under


the WTO Green Box, is exempted from reduction commitments. Second, producer support is no longer


a North issue: in nominal terms and as a percentage of farm receipts, farm support has increased


appreciably in key emerging economies. In a few of them, producer support is now provided at a level


comparable with the OECD average. Third, the international normative environment has evolved: the


2030 Agenda for Sustainable Development, 2 the Addis Ababa Action Agenda, 3 and the Paris


Agreement 4 have outlined a new development pathway that places social inclusiveness and


environmental sustainability at the center of policy design. This, still evolving, framework sets an


inescapable normative reference, including for WTO law.


Given the changed scenario, and given that agricultural production accounts for about a quarter of all


human-caused greenhouse gas emissions,5 the way ahead requires a pragmatic and ground-breaking


pathway. Trade rules in general and domestic support disciplines in particular are to be reorganized


around sustainable development outcomes. The boundaries of the Green Box have to be redefined


accordingly. This re-orientation is needed if trade policy is to fit into the new programmatic framework


shaped by the 2030 Agenda for Sustainable Development, the Addis Ababa Action Agenda, and the


Paris Agreement. This paper elaborates on this move. It first briefly highlights the unfinished nature of


trade policy reform under the Uruguay Round. It then moves on to consider the major limits of the


proposed Doha disciplines on domestic support, as outlined in the Revised Daft Modalities for


Agriculture of 6 December 2008 (hereafter, the Doha Draft).6 As a conclusion, it outlines options for the


way ahead.



1 The WTO's 10th Ministerial Conference was held in Nairobi, Kenya, from 15 to 19 December 2015. Its most significant
outcome on agriculture was the elimination of agricultural export subsidies (Decision on Export Competition
(WT/MIN(15)/W/47)). Other agriculture-related decisions covered public stockholding (WT/MIN(15)/W/46 ) and a special
safeguard mechanism (SSM) for developing countries (WT/MIN(15)/W/45).


2
See the outcome document of the United Nations Sustainable Development Summit 2015 (25 - 27 September 2015, New


York): Transforming our world: the 2030 Agenda for Sustainable Development (GA Res. 70/1 adopted on 25 September
2015) (downloadable at https://sustainabledevelopment.un.org/frameworks).




3
The outcome document of the Third International Conference on Financing for Development (GA Res. 69/313 adopted on


27 July 2015) (downloadable at https://sustainabledevelopment.un.org/frameworks).


4
Outcome document of the twenty-first session of the Conference of the Parties to the United Nations Framework


Convention on Climate Change (Paris, 30 November to 11 December 2015) (downloadable at
https://sustainabledevelopment.un.org/frameworks).




5
IPCC, 2014: Summary for Policymakers, in O. Edenhofer et al., eds, Climate Change 2014: Mitigation of Climate Change.


Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change
(Cambridge University Press: Cambridge, United Kingdom and New York), at 24.


6 WTO document TN/AG/W/4/Rev.4 of 6 December 2008.





2 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




2. THE URUGUAY ROUND'S "IMBALANCED OUTCOME":


THE UNFINISHED NATURE OF REFORM


The WTO Agreement on Agriculture (AoA)7 was welcomed as a “breakthrough” in the multilateral


framework for agricultural trade policy. It was indeed a major advance in technical terms. To some


extent, it crystallized a shift in trade policy “paradigm”: domestic farm stabilization policies, until then a


matter for domestic discretion, became an international concern because of their trade-distorting


effects. The gains were notable in terms of increased transparency and accountability: domestic farm


policies, an area of regulatory greyness,8 became framed by tight multilateral rules. Yet “reforms proved


modest in substance”.9 In particular, liberalization commitments under the WTO AoA added little to the


breadth of reforms that would have been undertaken without the Agreement.10 Nor did the WTO AoA


provide a “level playing field” among countries. To the contrary, it froze inequalities, in more than one


respect.


2.1 NOT SO MUCH LIBERALIZATION


As regards the Uruguay Round achievements, it was argued that liberalization commitments under the


WTO AoA “added little or nothing to the pace or content of reforms that would have been undertaken”


without the WTO.11 Eventually, the OECD countries showed remarkable pragmatism in protecting their


interests in agriculture. As discussed in Häberli and Paarlberg, their concessions were flawed, in three


important respects.12


First, data periods and base points were carefully selected to artificially inflate baseline levels of


support (domestic farm support and export subsidization) and border protection in key advanced


economies. In particular, the outdated 1986-88 base period did not count reductions in domestic


support and export subsidization that had been implemented unilaterally in the United States (US) and


the European Economic Community (EEC), outside the WTO, in the late 1980s and early 1990s.13 Both


the European Union (EU) and the US could count these reforms towards their Uruguay Round


commitments (Box 1).


Second, disciplines on domestic support and market access allowed massive “product support


focusing”.14 Domestic-support reduction commitments were not on an individual commodity basis, but


on a sector-wide basis: politically sensitive commodities, such as sugar, dairy products and meat


continued to receive substantial support, offset by high cuts in support for less sensitive products. The


tariff cut was likewise “unweighted” (though not sector-wide, a minimum 15 per cent cuts were



7 Contained in Annex 1A to the Final Act of the 1986–1994 Uruguay Round of trade negotiations.


8 Though not exempted from the General Agreement on Tariffs and Trade (GATT), agriculture was to some extent carved
out from key disciplines, through country-specific derogations from GATT obligations, low level of tariff bindings and resort
to restrictive measures not expressly regulated under the GATT.


9 Robert Paarlberg, ‘Agricultural Policy Reform and the Uruguay Round: Synergistic Linkage in a Two-Level Game?’, 51 (3)
International Organization 413 (1997), 427.


10 Ibid., at 428. For a critical assessment of the reach of WTO disciplines on agriculture, see also Christian Häberli, ‘Food
Security and WTO Rules’, in Boris Karapinar and Christian Häberli (eds), Food Crises and the WTO (Cambridge University
Press, 2010), 297-322; Christian Häberli, ‘Do WTO Rules Improve or Impair the Right to Food?’, in Melaku Desta and Joe
McMahon, eds., Research Handbook on International Agricultural Trade (Cheltenham/UK and Northampton/US: Edward
Elgar, 2012), 50–72; Christian Häberli, ‘The WTO and Food Security: What's Wrong with the Rules?’, in Rosemary Rayfuse
and Nicole Weisfelt, eds., The Challenge of Food Security: International Policy and Regulatory Frameworks (Edward Elgar,
2012), 191–216.


11 Paarlberg, above n 9, at 428.


12 For a detailed assessment, Paarlberg, above n 9. See also Häberli, above n 10.


13 As detailed by Paarlberg (above n 9, at 428-433 and 434-439).


14 For a detailed assessment, Paarlberg, above n 9, at 429-30.





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 3


required for each line), which allowed continued protection for sensitive items. As regards current and


minimum access opportunities,15 sensitive products could be aggregated with less sensitive items


(rather than measuring tariff access line by line, at a very disaggregated level); and special trading


relationships could be counted.16


Finally, the Amber Box of trade-distorting support – the Aggregate Measurement of Support (AMS)


category – was “carefully written to exclude some key domestic policy support instruments” in the EU


and the US.17 In particular, most kinds of direct cash payments to farmer were set aside as not


counting towards the AMS, if made under certain conditions.18 In practice, major instruments of farm


support in the EU and the US (in the form of direct payments to producers) were exempted from


reduction commitments.


All together, these expedients significantly undermined the meaningfulness of liberalization


commitments under the AoA, and introduced a number of loopholes in regulation.


Box 1: Domestic support reductions in the EU


The 1986-88 base period allowed the EU to count, towards its Uruguay commitments, domestic


support (DS) reductions that had been implemented unilaterally outside the WTO framework. By


1995/96 (the first year of implementation of the AoA), AMS support in the EU had already fallen from


73.53 billion ECU (1986-88 Base Total AMS) to 50.181 billion ECU. This was well below the Final Bound


Total AMS (FBTAMS) of 61.20* billion ECU that the EU had committed to achieve by 2000. These cuts


had been implemented under the enhanced “stabilizers” reform (marketing year 1987/88) and the


MacSharry reform of the CAP (gradually implemented from the 1993/94 to the 1995/96 marketing


years). The DS cuts (a reduction of about 23 billion ECU in Amber Box support level between 1986-88


and 1995) were cushioned by “compensation payments” (around 21 billion ECU in 1995 alone) to


farmers. Such payments essentially consisted of area and headage payments on the land sown or the


number of beef cattle kept (“coupled” payments, outside the Green Box). Subject to set-aside


requirements (e.g., to withdraw land from production) and other accompanying measures, they were


declared as Blue Box payments, and exempted from reduction commitments. Everything changed,


and at the same time, nothing changed, if not in the instrumentalities of support (Box "shifting").


Source: Notification G/AG/N/EEC/12/Rev.2 of 11 May 2009 (Table DS:1) (Current Total AMS for the marketing year
1994/95); Schedule LXXX – European Communities, annexed to the Marrakesh Protocol, and G/AG/AGST/EEC,
supporting table 9a (Base Total AMS and FBTAMS); WTO Agriculture Information Management System, Datasets of
notified information - Domestic support, Production-limiting programmes notified under Article 6.5 of the
Agreement on Agriculture (level of Blue support for 1995, as notified). Note*: Following enlargement, the final bound
AMS was revised and fixed at 67.2 billion €.




2.2 AN IMBALANCED OUTCOME


Conceived as a first step towards a more equitable order, the AoA eventually froze up imbalances.


Indeed, there was (and is) some unfairness in the resulting subsidy set-up.19 Developed countries were



15 As part of the tariffication package, WTO Members were required to maintain, for tariffied products, import access
opportunities at levels existing during the 1986-88 base period (“current” access). Where “current” access levels had been
less than 5 per cent of domestic consumption of the product in question in the base period, an (additional) “minimum”
access opportunity had to be granted on a most-favoured-nation basis.


16 Paarlberg, above n 9, at 430.


17 Ibid, at 428.


18 Direct payments to farmers were excluded from counting towards the AMS if made under “production limiting
programmes”, based on historical/fixed areas/yields, and made on 85 per cent or less of base production (Blue Box
exclusion, AoA Art. 6.5).


19 The focus is here on domestic support. Unfairness was also claimed for market access. It has been observed in this
respect that the “tariffication” process (i.e. the conversion of non-tariff border protection measures into the tariff equivalent)
resulted in artificially high tariffs. This outcome (known as “dirty tariffication”) was largely due to the use of a reference
period when the difference between the world market price and the domestic price was wide (the tariff equivalent to a non-





4 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


allowed to continue to provide substantial domestic support and export subsidies to their farm sector,


while developing countries were constrained by comparatively more stringent disciplines.20 This is due


to the fact that only those countries that originally subsidized their farm sector (for the most part,


developed countries) have scheduled domestic support/export subsidy commitments under the AoA.


These commitments provide a legal basis to maintain subsidies - albeit at reduced level from a


(historically high) base level. The other Members (mostly developing countries) should keep domestic


support within the de minimis threshold, and were prevented from introducing export subsidies. Here


are some examples:


˗ About 90 per cent of developed country Members have scheduled AMS commitments and can


continue to provide substantial domestic support, beyond the de minimis level. For example,


the EU ceiling was set at 67.2 billion EUR (about 22 per cent of the reported value of total


agricultural production in the EU in 2009); the US capped AMS support at 19.10 billion $ (7 per


cent of the total value of production in 2009); Japan at 3,972 billion ¥ (48 per cent of the value


of agricultural production in 2009). Though in all these countries Current Total AMS levels


(CTAMS) are well below these ceilings (an instance of “subsidy overhang”), countries could


freely adjust their current AMS within their bindings.


˗ Until Nairobi, more than three-fourths of developed country Members could continue to use


export subsidies, within the limits specified in their schedules. For example, the EU could use


export subsidies for 20 different product groups.21 Though most export refund schemes in the


developed economies were set to zero in recent years, countries were not legally prevented


from reintroducing them – in spite of strong political language not to do so.22


˗ Of 111 developing country Members, only 16 (14 per cent) have AMS commitments and can


continue to provide Amber Box (AMS) subsidies above their de minimis ceilings. Most of them


are emerging/newly industrialized economies, in the high- or middle-income group. All other


developing countries (including all the Least Developed Countries (LDCs) and all sub-Saharan


African countries – except South Africa) have to keep within 10 per cent23 of the value of


agricultural production (non-product-specific (NPS) support) and of the value of production of


the commodity concerned (product-specific (PS) support).


˗ Only 9 developing countries (8 per cent of developing country Members) could use scheduled


export subsidies, within bound levels. 24 All other developing countries were prevented from


using export subsidies, except subsidies consistent with the special and differential treatment


(S&DT) provision for developing country Members (Article 9.4 of the Agreement). Article 9.4


sets a temporary exemption for developing countries, allowing them to subsidize marketing,




tariff barrier being calculated as the difference between the average domestic price and the average world market price).
Tariff “peaks” and “escalation” were other drawbacks. UNCTAD, Module 3.15. WTO: Agriculture
(UNCTAD/EDM/Misc.232/Add.32), Course on Dispute Settlement in International Trade, Investment and Intellectual
Property (United Nations, 2003).


20 For a critical assessment, Abhijit Das, ‘Aussie Spin on Trade Reform’, The Economic Times Mumbai, 18 November 2011
(online edition); ‘The Doha Deal: More Harm than Good to Developing Countries?’, published in South Bulletin 123, 1 May
2006 (South Centre); Martin Khor, ‘WTO Food Fight Before and at the Bali Ministerial’, 78 South Bulletin, 4 March 2014, at
5-9, at 6. See also various South Centre Experts’ Reports in South Bulletin, Issue 78, 4 March 2014.


21 Wheat and wheat flour, coarse grains, rice, rapeseed, olive oil, sugar, butter and butter oil, skim milk powder, cheese,
other milk products, beef meat, pig meat, poultry meat, eggs, wine, fruit and vegetables, fresh fruit and vegetables,
processed, raw tobacco, alcohol, incorporated products (Section II of Part IV, EC Schedule).


22 As mentioned, this is no longer the case: under the Nairobi Decision on Export Competition, developed countries
undertook to immediately eliminate their remaining scheduled export subsidy entitlements. An exception was provided for
notified scheduled export subsidies on processed products, dairy products, and swine meat, to be eliminated by the end
of 2020.


23 Unless specified differently for more recently acceded members (e.g., 8.5 per cent in the case of China).


24 Under the Nairobi Decision on Export Competition, developing countries agreed to eliminate their export subsidy
entitlements by the end of 2018. They retained the right to use export subsidies for transport and marketing (covered by
Article 9.4 of the Agreement on Agriculture) until the end of 2023 (least developed countries and net food-importing
developing countries until the end of 2030).





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 5


cost reduction and transport during the Uruguay Round phase-in period. Some developed


countries argue that the exemption no longer holds, absent a legally-binding decision by the


WTO to extend the application of Article 9.4 of the AoA.


Table 1: Number of Members with scheduled commitments, grouped by category
(developing, transition and developed economies)


Economic


group DS ES TQ SSG Total WTO Members


Developing
LDC 0 0 0 0 34


ExLDC 16 9 25 23 77


Transition 7 0 5 0 11


Developed 34 32 35 32 38


Source: Authors’ computation as at 11/01/2015, based on the List of Members with scheduled commitments (WTO
Members’ Transparency Toolkit) and author’s compilation. Note: Developing, transition and developed economies
as defined by UNCTAD (UNCTAD Handbook of Statistics 2013). DS, ES, TQ and SSG indicate the right to use
domestic support (AMS) above de minimis (DS), export subsidies (ES), tariff quotas (TQ) and special safeguard
measures (SSG).


This imbalanced outcome is explained by the “unfinished” nature of reform under the AoA. It was felt at


that time that further cuts in support, leading to a more balanced outcome, would be agreed in


following trade rounds. Because the subsequent WTO's Doha Round staggered to a stalemate, the


reform agenda “built-in” the AoA has remained largely unaccomplished. Some provisions of the AoA –


conceived as a first step towards further liberalization – eventually maintained imbalances and


safeguarded existent distortions.




3. THE DOHA DRAFT TERMS: TOWARDS REDRESSING


EXISTING IMBALANCES?


The Doha Round, if concluded, would partially redress these imbalances. Specifically, the Doha


proposals (Box 2 and Annex 2), if agreed upon, would significantly constrain producer support policies


(AMS and Blue Box subsidies) in the advanced economies. However, the Doha Round would not


ensure a level and fair playing field where small developing countries would be able to compete. Even if


the Doha Round were concluded, important distortions and imbalances would stay. In particular, the


proposed Doha disciplines would not obstruct the main gateways through which producer support is


channeled today, as discussed below. The post-Doha scenario is still one where farm producers in


LDCs and small vulnerable economies (SVEs) have to compete, at home and abroad, with the export


dynamism of large countries that subsidize heavily their agricultural sector.








6 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Box 2: Domestic support disciplines under the Doha terms


The Doha Draft envisaged a three-pronged approach to domestic support.


First, a new constraint would be established on actual support levels: the Overall Amount of Trade-


Distorting Support (OTDS). Members would establish a “base” OTDS, equal to the Final Bound AMS


specified in a Member’s Schedule + combined PS and NPS de minimis in the base period25 + the


higher of average Blue Box payments or 5 per cent of the average total value of agricultural production


in the base period.26 The Base OTDS would be reduced in accordance with a tiered formula, with cuts


ranging from 80 to 55 per cent (with steeper cuts for higher levels of support).27 For developing


countries with scheduled FBTAMS, the reduction would be two-thirds of the agreed rates for


developed countries.28 Developing countries with no FBTAMS commitments (e.g., India and China), net


food-importing developing countries (NFIDCs) and some recently acceded members (RAMs) would not


be required to undertake reduction commitments in their Base OTDS.29 Yet they would schedule (bind)


their Base OTDS.


Second, traditional categories of support (FBTAMS, Blue Box payments and de minimis) would be cut


or limited: the FBTAMS sharply reduced in accordance with a tiered formula (with cuts ranging from 70


to 45 per cent); the de minimis thresholds significantly lowered for developed countries and developing


countries with AMS commitments;30 and Blue Box payments capped.


Third, product-specific caps/limits would be set for AMS and Blue Box payments (then subject to


overall and product-specific ceilings).31 Green Box support and support under Article 6.2 would remain


unconstrained.


Source: WTO document TN/AG/W/4/Rev.4. A synopsis of the domestic support disciplines of the Doha Draft is set
out in Annex 2.




3.1 THE GREEN BOX ESCAPE


Green Box subsidies (a notified 71.1 billion € in the EU in 201232 and 125.1 billion $ in the US in


201133) are left unconstrained by the draft Doha disciplines on domestic support. Even if the Doha


Round were concluded, transfers to producers under the Green Box would remain comprehensively


carved out from reduction commitments. Considering that the bulk of support in the advanced


economies is now provided under the Green Box, this comprehensive exemption significantly limits the


reach of the Doha proposals. Indeed, the forms by which support is provided in OECD countries have


evolved significantly since the mid-1980s. In terms of producer support estimate (PSE) sub-



25 For developed countries, 10 per cent of the average total value of agricultural production in the 1995-2000 base period
(5 per cent of the average total value of production for PS and NPS AMS respectively); for developing countries, 20 per
cent of the average total value of agricultural production in the 1995-2000 or 1995-2004 period. WTO document
TN/AG/W/4/Rev.4, paras. 1(b) and 2.


26 WTO document TN/AG/W/4/Rev.4, paras. 1 and 2.


27 TN/AG/W/4/Rev.4, paras. 3 and 4. The EU, the US and Japan – with the largest support programmes in absolute terms –
would reduce their OTDS by between 80 and 70 per cent.


28 TN/AG/W/4/Rev.4, para. 7.


29 TN/AG/W/4/Rev.4, paras. 6, 7 and 9.


30 Developing countries with no FBTAMS commitments or with AMS commitments, but that either allocate almost all that
support for subsistence and resource-poor producers, or that are NFIDCs would keep their de minimis entitlements as
provided for in Article 6.4(b) of the AoA (TN/AG/W/4/Rev.4, para. 32).


31 See December 2008 revised draft modalities, paras. 21-29 (product-specific AMS limits) and paras. 40-47 (product-
specific limits on Blue Box entitlements).


32 Notification G/AG/N/EU/26, 2 November 2015 (MY 2012/13).


33 Notification G/AG/N/USA/93, 9 January 2014 (MY 2011/12).





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 7


categories,34 support has moved from market price intervention to a policy mix of area and headage


payments and income supplements, variously decoupled from current production (Table 2). Overall,


what has occurred is more a change in intervention tools and strategies (“box shifting”, or the “re-


instrumentalization” of support, in OECD jargon), than a substantial reduction in overall support.


Furthermore, producer support has been increasingly presented as “market-correcting”, as a way to


remunerate farmers for the provision of public goods associated with agriculture, with a shift in


emphasis from “a paradigm of justice” to “a paradigm of sustainability”.35




Table 2: OECD: Estimates of support to agriculture ($ mn and %)


Category Unit 1986-88 1995-97 2012-14


Total value of production (at farm gate) $ mn 592,135 771,656 1,262,987


Producer Support Estimate (PSE)
$ mn 238,465 252,958 250,881
% TSE 83.6 78.0 72.2




Support based on commodity output
$ mn 195,598 177,496 119,657
% PSE 82.0 70.2 47.7


of which MPS
$ mn 183,000 170,461 113,958
% PSE 76.7 67.4 45.4


Payments based on input use
$ mn 20,197 24,053 31,509
% PSE 8.5 9.5 12.6


Payments based on current A/An/R/I, production required
$ mn 18,736 41,779 33,691
% PSE 7.9 16.5 13.4


Payments based on non-current A/An/R/I, production required
$ mn 533 459 1'949
% PSE 0.2 0.2 0.8


Payments based on non-current A/An/R/I, production not
required


$ mn 2,080 6,626 57,995
% PSE 0.9 2.6 23.1


Payments based on non-commodity criteria
$ mn 1,077 3,135 5,609
% PSE 0.5 1.2 2.2


Miscellaneous payments
$ mn 243 -589 471


% PSE 0.1 -0.2 0.2
Percentage PSE (%) 36.9 29.6 17.9


General Services Support Estimate (GSSE)
$ mn 26,881 45,886 47,012
% TSE 9.4 14.2 13.5


Transfers to consumers from taxpayers
$ mn 19,875 25,291 49,421
% TSE 7.0 7.8 14.2


Total Support Estimate (TSE) 285,221 324,134 347,314
Percentage TSE (% of GDP) 2.8 1.5 0.8


Source: Data extracted on 13 Nov 2015 from OECD.Stat. Note: TSE = PSE + GSSE + Transfers to consumers from


taxpayers.


For example, in the EU between 1986-88 and 2011-13, market price support36 and payments based on


output37 dropped on average from around 91 per cent of PSE to 20 per cent. Over the same period, the


part of income support (area and headage payments, and transfers based on non-commodity criteria)


increased from 4 per cent (average 1986-88) to 65 per cent of PSE (2011-13). Income support has


become increasingly “decoupled” from current market parameters: “coupled” payments, about 36 per



34 The OECD PSE broadly captures market price support (including indirect price support, from border protection), input
subsidies and direct payments to producers (decoupled or not). It straddles across the WTO Amber, Blue and Green
Boxes.


35 Martin Petrick, ‘The Co-evolution of Semantics and Policy Paradigms: 50 Years of Europe’s Common Agricultural
Policy’, 43 (4) Intereconomics 246 (2008). As discussed in the concluding part of this report, there is a disconnect, in some
instances, between the “sustainability” objectives of farm support policies and the modalities of farm support.


36 As defined by the OECD, “market price support” (MPS) arises from policy measures (e.g., price controls and tariffs) that
create a gap between domestic market prices and border prices.


37 As defined by the OECD, “payments based on output” include policy measures based on current output of a specific
agricultural commodity (e.g., compensation payments and loan deficiency payments).





8 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


cent of PSE in 2003, only accounted for 17 of PSE in 2001-13; while “decoupled” payments, virtually


non-existent until the mid-2000s, increased to an average 45 per cent of support in 2011-13.38


These policy changes are reflected in support figures as notified to the WTO. The EU’s trade-distorting


support, as measured by its Amber Box notifications, fell from 55 per cent to 8 per cent of total support


(Amber + Blue + Green) between 1995-97 and 2010-12. On the other hand, Green Box support rose


significantly, from 22 per cent of overall support in 1995-97 to 88 per cent in 2010-12 – which may


indicate “box shifting”. The surge of Green Box subsidies was largely driven by the rapid increase in


direct payments to producers, the most controversial form of Green Box support - accounting for about


86 per cent of all EU Green Box subsides during 2010-12. Similar patterns (shift from market price


intervention to direct payments) are observable for other large subsidizers in the OECD region,


including Switzerland, the USA, Japan (since the mid-2000s) and Norway - with notable variations


though.




Figure 1: Amber and Green Box subsides in the EU (€ millions)




Data source: Domestic support data was sourced from the WTO Members’ Transparency Toolkit (Datasets of


Notified Information, Table DS:1, data extracted on 15 November 2015 from http://agims.wto.org). For the


marketing years 2010, 2011 and 2012, the dataset was complemented by recent DS:1 notifications (G/AG/N/EU/17,


13 February 2014 (MY 2010/11), G/AG/N/EU/20, 22 October 2014 (MY 2011/12), and G/AG/N/EU/26, 2 November


2015 (MY 2012/13)).


The Green Box (Annex 2 of the AoA) contains subsidies allegedly “no, or at most minimal, trade-


distorting”, which can be increased without limit. As a separate requirement, the chapeau to Annex 2


requires that the exempted measures be at most minimally trade-distorting. Yet a short-hand


interpretation has prevailed, whereby all the schemes defined in the Annex 2 of the AoA are by default


determined to be non-trade distorting. Covered schemes include, among other, decoupled income



38 OECD.Stat (data extracted on 21 Nov 2014). The first development (from price to “coupled” income support) largely
reflects policy changes under the 1992 Mac Sharry reform. The second development (“decoupling” of area and headage
payments) was instigated by the Fischler Reforms of 2003.


0.0


10'000.0


20'000.0


30'000.0


40'000.0


50'000.0


60'000.0


70'000.0


80'000.0


Current Total AMS Green Box





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 9


support, certain income insurance and safety net programmes, specific types of credit subsidies,


environmental payments, regional assistance payments and other direct transfers to producers.


This common shorthand (Green Box = non-trade distorting) is in question. There is increasing


theoretical and empirical evidence that Green Box expenditures have a bearing on production and


prices, by providing incentives for resource use that may be inconsistent with market signals.39 In the


end, as pointed out by a commentator, “any subsidy […] is increasing the competitiveness of the


benefitting product and hence has a dumping effect when it is exported and a protective effect vis-à-


vis imported products”.40 As a matter of fact, the hierarchy between different types of agricultural


support in the AoA was not based on agreed metrics on what is minimal or non-trade distorting support.


The exercise was highly political in nature. As discussed, the contours of the Boxes reflected the


relative negotiating capabilities and leverage of the various parties, and codified specific power


dynamics.




3.2 DOMESTIC SUPPORT IN KEY EMERGING ECONOMIES


A second form of support that would remain largely unconstrained is trade-distorting producer support


in a few large emerging economies that are significant exporters of agricultural commodities. In nominal


terms, farm support – as captured by the PSE – has increased appreciably in key emerging economies,


including China, Turkey and Russia. Most remarkably, since the late 1990s, there has been a steady


rise in farm support in China, with a rapid increase since 2008. In 2010, China reportedly spent $147


billion on agricultural subsidies, outranking the EU.41 This rising trend in subsidies reflects a policy shift


from taxing to supporting the farm sector, in response to pressing equity and food security concerns.42









39 It is argued theoretically that subsidies, even if unrelated to prices and output, may have significant production (and
trade) distorting effects. This by means of their income effects, when a guaranteed income stream encourages farmers to
plant, or through their risk/insurance effects, by reducing the perceived risks associated with farming. Even the most
undisputed schemes – general services – have an obvious bearing on the famous “level-playing field” between countries,
as a country’s agricultural competitiveness is proactively shaped by the extent and quality of its supply-side services.
Some empirical studies corroborate this insight. According to a recent impact assessment, over the 1995-2007 period
agricultural productivity would have increased around 60 per cent in the EU and 51 per cent in the US on account of Green
Box subsidies (Rashmi Banga, ‘Impact of Green Box Subsidies on Agricultural Productivity, Production and International
Trade’, UNCTAD Background Paper No. RVC-11, 2014). See also Ricardo Meléndez-Ortiz, Christophe Bellmann, Jonathan
Hepburn (eds.), Agricultural Subsidies in the WTO Green Box (Cambridge University Press, 2009); Apelu Tielu and Ivan
Roberts, ‘Farm Income Support: Implications for Gains from Trade of Changes in Methods of Support Overseas’, ABARE
Current Issues, No. 98.4, 1998; WTO document G/AG/NG/W/14 of 23 June 2000 (Cuba, Dominican Republic, Honduras,
Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka and El Salvador: Green Box/Annex 2 Subsidies).


40 Comments by Jacques Berthelot on WTO Conference, 15 September 2011, at
http://solidarite.asso.fr/IMG/pdf/WTO_disciplines_on_agricultural_support_J-_Berthelot_comments-3.pdf.


41 OECD, Dataset: 2011 E) Emerging Economies: Producer Support Estimate by country.


42 For a detailed assessment, Fuzhi Cheng, ‘China: Shadow WTO Agricultural Domestic Support Notifications’, IFPRI
Discussion Paper 00793, September 2008.





10 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Figure 2: PSE in selected emerging economies and the EU ($ mn)




Source: OECD, Dataset: 2011 E) Emerging Economies: Producer Support Estimate by country. Note: India is not
included as it does not report data to the OECD.


In a few emerging and transition economies (including Turkey, Indonesia, China and the Russian


Federation), producer support as a percentage of gross farm receipts (%PSE) is provided at a level


comparable with the OECD average.




Table 3: Agricultural producer support estimates, as a percentage of gross farm receipts (%PSE)


Country 1986-88 1995-97 2010-12


South Africa 11.1 2.5


Chile 8.0 3.0


Brazil -12.0 4.6


Mexico 3.2 4.9 12.5


China 2.5 15.0


Russian Federation 17.7 16.6


Indonesia 3.3 18.8


Turkey 20.4 25.9 23.7


Korea 69.6 67.0 48.6


OECD 37.0 29.7 18.7


United States 21.9 12.3 7.5


EU28 39.2 33.6 18.9


Source: OECD Factbook 2014: Economic, Environmental and Social Statistics. Note: India is not included as it
does not report data to the OECD.


Common types of farm support provided by emerging economies include market price interventions,


compensatory/deficiency payments (“coupled”) and input subsidies. In China, for example, market


-20'000


0


20'000


40'000


60'000


80'000


100'000


120'000


140'000


160'000


19
95


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


China
Russia
Korea


Turkey
European Union





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 11


price support (effected through tariffs, minimum guaranteed prices and intervention purchases) is the


main channel for providing support to Chinese farmers: it accounts for as high as 79 percent of PSE


(2012-14 average).43 In Indonesia, support is provided almost exclusively through market price support


and input subsidies (98 per cent of PSE in 2012-14).44 India has also been increasing its support to


agriculture, including through government-led interventions at pre-determined prices intended to


stabilize market prices and to ensure adequate supplies.45 China, Indonesia and India have committed


zero AMS in the WTO. Yet, existing WTO disciplines allow substantial room for potentially trade-


distorting subsidies under other venues, namely: the de minimis entitlements;46 S&DT support as


provided in Article 6.2 of the AoA;47 and the notification of some schemes under the Green Box (e.g.


expenditures for public stockholding for food security purposes, income-support payments and


investment subsidies).


Box 3: “Box painting” or (unintended) policy space?


For a few large emerging and transition economies, there is an apparent mismatch between WTO and


OECD domestic support data concerning the potentially most production and trade distorting policies.


Overall, OECD data report higher levels of trade-distorting support compared to the WTO system. How


can these discrepancies be explained?


The WTO and OECD domestic support measurement systems differ in some important respects. In


particular, the PSE sub-categories for the potentially most distorting support (market price support,


production-linked payments and variable inputs subsidies) cannot be used as a proxy for Amber box


(AMS) support. There are notable differences in terms of policy coverage. For example, the OECD


market price support subcategory includes indirect price support provided through tariffs, tariff rate


quotas (TRQ) and state trading. In the WTO context, this type of support is captured under the market


access pillar of the AoA and does not count against a country's AMS limits. Note also that the PSE


sub-categories for the potentially most distorting support include support channeled through policies or


programmes that in the WTO have been exempted from counting against the AMS, not necessarily on


economic grounds (Art. 6.2 investment and input subsidies; de minimis AMS ceilings; Blue box


payments under Art. 6.5 of the AoA, and certain Green Box transfers). In some cases, these differences


in terms of policy coverage result in a higher level of trade-distorting support reported under the OECD


system compared to the WTO system.


Computation methods also differ across the two systems. In the OECD, market price support is


calculated using current prices (domestic producer and reference prices relative to the year in


question), while for WTO purposes (AMS calculation), MPS is calculated using the gap between


domestic administrative support prices and a fixed reference price (border prices in a base period,


generally the three-year 1986-88 average). Overall, the OECD system tries to gauge support in


economic terms. The WTO Amber Box (AMS category) is a political measure of support, carefully


crafted to accommodate various sensitivities, in an effort to strike a balance between competing


interests.





43 OECD.Stat (data extracted on 13 Nov 2015).


44 Ibid.


45 For a review, Orden et al, ‘WTO Disciplines on Agricultural Support: Experience to Date and Assessment of Doha
Proposals’, IFPRI Research Brief, May 2011; Panos Konandreas and George Mermigkas, ‘WTO Domestic Support
Disciplines: Options for Alleviating Constraints to Stockholding in Developing Countries in the Follow-up to Bali’, FAO
Commodity Trade Policy Research Working Paper No. 45, January 2014; DTB Associates, ‘Domestic Support and WTO
Obligations in Key Developing Countries’, September 2011; DTB Associates, ‘Agricultural Subsidies in Key Developing
Countries: November 2014 Update’; Sudha Narayanan, ‘The Balance: The National Food Security Act vis- à -vis the WTO
Agreement on Agriculture’, Indira Gandhi Institute of Development Research, Mumbai, December 2013; Lars Brink,
‘Support to Agriculture in India in 1995-2013 and the Rules of the WTO’, IATRC Working Paper 14-01, 13 April 2014.


46 10 per cent of the VOP (8.5 per cent in China). When the value of production is large, these thresholds do not impose
real constraints.


47 China does not have recourse to Article 6.2.





12 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Flexibility for trade-distorting (AMS) support in large emerging economies raises particularly intractable


trade-offs. On the one hand, many developing countries would justifiably require significant policy


space for agricultural development, for socio-economic developmental purposes such as poverty


alleviation, rural development and food security. For a few large developing economies, the current


flexibilities enshrined in multilateral disciplines are under strain. In particular, a number of developing


countries are at risk of exceeding their product-specific AMS limits.48


Note also that de minimis threshold of permissible price support, 10 per cent of the value of that crop


production, would mean little if the current agricultural output is minimal.49 Technical flaws add to


current strictures. Under existing price support disciplines, administered prices are not assessed


against current market prices, but against the “base-period” price, i.e. the average 1986-88


international price for the product in question.50 This external fixed reference price tends to be lower


than the current market prices, which results in inflated figures on domestic support.51


On the other hand, farm support in a developing country can encroach upon the right of peasant


farmers in other developing countries to compete on fair terms in third markets (or at home). Overall,


large developing countries’ domestic price support policies can adversely hit more vulnerable countries.


These latter include LDCs and SVEs heavily dependent on one or at best two cash crops for the bulk of


their export proceeds. “Price-takers” on the export side, they are hostage of the policy decisions of the


larger exporters (Annex 4). Eventually, the reality of interdependence limits a developing country’s


policy space to pursue agricultural policies supportive of rural livelihood and food security at home


without harming livelihood concerns in equally vulnerable countries.





48 India, China, Pakistan, Egypt, Turkey, and The Philippines, among other countries, face compliance problems, as
reported in a few studies based on publicly available data. Note that different computation methods (e.g., to account for
deflation /exchange rate movements) lead to different results. Cf Konandreas and Mermigkas, DTB Associates,
Narayanan, and Brink, above n 45.


49 Sophia Murphy, ‘Trade and Food Reserves: What Role Does the WTO Play?’, Institute for Agriculture and Trade Policy,
2010.


50 The average export (f.o.b.) price notified for 1986-88, in the case of a net exporters; and the average import (c.i.f.) price
in the case of a net importer. AoA Annex 3 (Calculation of Aggregate Measurement of Support).


51 A few countries have argued for a revision of the price gap methodology to account for inflation. In October 2013, two
interim options were brought to the table by some G-33 members for consideration at Bali: a revision of the external
reference price, to reflect changing market conditions (e.g., based on a moving average of market prices, or the previous
year reference price); the possibility to deflate the administered price at which foodstuffs are procured. See G-33 Non-
paper, WTO document JOB/AG/25, 3 October 2013, Geneva.





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 13


4. CONCLUSION: THE WAY AHEAD


More than a decade after the launch of the Doha Round, countries are yet to deliver on the Doha Work


Programme in agriculture. Certainly, there has been some progress in certain areas, notably, a steady


decline in export subsidies in countries with scheduled commitments, and a reduction in Amber Box


support in the advanced market economies. The “Nairobi Package”, i.e. the outcome of WTO 10th


Ministerial Conference in Nairobi achieved the elimination of agricultural export subsidies immediately


by developed countries52 and within 3 years by developing countries, alongside the agreements on


export credits. Yet, the Nairobi Package provided no hard commitment as regards domestic support.


During the implementation of the AoA, what has occurred in practice is a re-instrumentalizion of


support in the traditional subsidizers (under the Green Box cover), and a dramatic increase in exempt


farm support in a number of emerging economies under de minimis entitlements or development


(Article 6.2) exemptions which can be trade-distorting to agricultural producers in other developing


countries. These are the main gateways for producer support today that are likely to remain


unconstrained even if the Doha round were successfully concluded. How then to move forward in this


setting? Where to set limits to farm support policies, beyond the Doha terms? And how to arbitrate


trade-offs between the need for policy space and considerations of trade fairness?


The way ahead requires a pragmatic and ground-breaking approach. Time has come to consider new


options for bringing the agricultural trade regime in line with a changed trading environment and with


pressing sustainability concerns. Agricultural production is said to account for around a quarter of all


human-caused greenhouse gas emissions. 53 A comprehensive approach is needed to improve


coherence between trade policy on the one hand and the sustainability agenda enshrined in the 2030


Agenda framework and the Paris Agreement on the other hand.


This involves a rethinking of the Green Box. As discussed, there is increasing evidence that Green Box


subsidies have a bearing on production and prices, by providing incentives for resource use that may


be inconsistent with market signals.54 The dichotomous trade-distorting versus non or minimal trade-


distorting choice has a somewhat legalistic flavour. This challenges the legitimacy of Green Box


subsidies, and invites to re-orient the policy objectives upon which green box subsidies depend. A new


rationale is needed.


In the 2030 Agenda framework, the legitimacy of Green Box transfers is to be re-assessed through a


sustainable lens that reflects considerations of environmental sustainability and social inclusiveness.


The new rationale for Green Box support is to be furnished by the sustainability paradigm: the need to


capture the externalities and public goods generated by agriculture (environmental sustainability); and


support to the welfare of poor farmers, men and women (social inclusiveness). In order to functionally


link the Green Box to sustainability concerns, the boundaries of the Green Box have to be redefined


accordingly. The solution is twofold.




4.1 “GREENING” THE GREEN BOX


First, Green Box transfers have to be made conditional on the respect of specific agri-environmental


practices, with the exception of transfers that are specifically geared towards subsistence /


disadvantages producers (see section two below). Under the existing Green Box, there is no


requirement in this direction. More precisely, out of twelve substantive Green Box headings, only one


includes environmental conditionalities (Annex 2, para. 12 - Payments under environmental



52 Scheduled export subsidies on processed products, dairy products, and swine meat will be eliminated by the end of
2020.


53
IPCC, 2014: Summary for Policymakers’, above n 5.


54 See above, note Error! Bookmark not defined. and text at p. 8.





14 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


programmes). All the other Annex 2 policies meet the criteria for exemption whatever their


environmental impact.


A closer look at the composition of support under the Green Box sheds further light on the current


disconnect between Green Box payments and environmental sustainability. In the EU, environmental


payments accounted for just 12 per cent of total Green Box subsidies in the marketing year 2012/13. 55


All other Green Box-notified direct payments to producers (74 per cent of all Green Box transfers) were


de-linked from agri-environmental and animal welfare conditions.56 Skewed towards the large, highly


capitalized, intensive farms, these payments eventually support a business model (commercial


agribusiness) that generates significant environmental externalities.


A “greened” Green Box should thus be reorganized around what is now paragraph 12 of Annex 2


(environmental programmes). This heading provides the interface through which sustainability concerns


are factored into the trade regime. This means that, to meet the criteria for Green Box exemption,


support to producers through direct payments, revenue foregone or any payment in kind (apart from


decoupled payments to peasant /disadvantaged producers - see below) should be part of a clearly


defined government environmental programme, and made dependent on the fulfilment of specific


conditions related to production methods and inputs.


In Green Box terms, decoupled income support, 57 subsidized income insurance and safety-net


programmes, 58 investment aids59 should be linked to heading 12 (payments under environmental


programmes). This heading should be flexibly scoped to cover a wide array of otherwise non-exempt


measures, including: “coupled” payments conditional on the adoption of production practices that


improve animal welfare or environmental sustainability (for example, payments to organic crop farming


and agri-environmental grass premium); long-term resource retirement schemes (afforestation,


conservation); input subsidies subject to agri-environmental constraints (i.e. that limit the total amount


used or the type of input used); subsidized credit and insurance schemes conditional on complying


with agri-environmental criteria. As already specified in paragraph 12, these transfer should be


meaningfully structured as environmental payments. This means that Green Box payment should be


proportionate to the extra cost or income loss involved in complying with the environmental programme,


or the (estimated) environmental benefit generated by farmers who adopt eco-friendly activities.


4.2 MAKING THE GREEN BOX WORK BETTER FOR SOCIAL INCLUSIVENESS


A second normative objective is social inclusiveness, or the objective of supporting low-income,


subsistence or resource-poor producers, as distinctly articulated in the WTO AoA (Article 6.2) and the


Doha Draft (para 32, Annex B, para. 6 of Annex F, para. 12 of Annex L). Even in this respect, there is an


evident disconnect between Green Box payments and sustainability objectives. In the US, for example,


the distribution of decoupled income support has been skewed towards the large farms: as reported in


de Gorter, in 2005, the largest farms, defined as those with over 500,000 $ in sales (7 per cent of all


farms) received 35 per cent of all decoupled payments, while the smaller units, with less than 50,000



55 These are payments linked to the “protection of environment and preservation of the countryside, aid for environmentally
sensitive areas; support and protection of organic production by creating conditions of fair competition; aid for forestry
measures in agriculture; conservation and improvement of rural heritage”. Notification G/AG/N/EU/26, 2 November 2015
(MY 2012/13).


56 Data extracted from Notification G/AG/N/EU/26, 2 November 2015 (MY 2012/13).


57 AoA, Annex 2, para. 6.


58 AoA, Annex 2, para. 7.


59 AoA, Annex 2, para. 11.





Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 15


$ in sales (39 per cent of total farms), received only 2 per cent of decoupled payments.60 A similar


distributional pattern was observed for Europe.61


Social inclusiveness concerns need to be more explicitly worked into the Green Box, through a better


targeting of Green Box transfers. The approach is twofold: provide some leeway for direct payments


not subject to agri-environmental “cross-compliance” conditions, but narrow eligibility to “low income,


resource poor, or subsistence farmers, including disadvantaged or vulnerable communities and


women”. 62 Two inroads are available for targeting support to subsistence-oriented peasants in


developing countries and disadvantaged rural communities in the advanced economies: a revision of


the paragraph 6 expenditure category of the green box (decoupled income support); and paragraph 13


(payments under regional assistance programmes).


Decoupled income support not subject to agri-environmental “cross-compliance” conditions should


only be available to low-income or resource-poor producers in low to middle income countries.


Paragraph 6 should be amended in this direction. Decoupled payments to commercial farmers,


whatever the income level of the country, would still be covered by the Green Box, but conditioned on


the fulfilment of specific conditions related to production methods and inputs, as discussed above.


Paragraph 13 should be retained as such and leveraged to sustain the livelihood of disadvantaged or


vulnerable rural communities in the advanced economies (e.g., upland farming in the Alpine region).


Note also that general services with a public good character (the most important Green Box category,


with direct payments) would continue to fall under the Green Box coverage.


The reform outlined above would improve coherence between domestic support disciplines and the


sustainability agenda. It would also close a loophole in the existing trade regime that allows unlimited


(Green Box disguised) income support to highly capitalized, large-sized commercial farmers.


Finally, for social inclusiveness seen from the global perspective, it is important to acknowledge the


fact that different developing countries have different agricultural profiles, different vulnerabilities to


external price shocks in agriculture, and different needs for farm support.63 Furthermore, as discussed,


farm support increasingly involves trade-offs between competing interests across developing countries:


measures intended to serve peasant interests in a developing country can well hit the interests of small


farmers in another developing country.


This concern has been to an extent reflected in the WTO Nairobi Ministerial Decision on Cotton


(WT/Min(15)/W/48). As Annex Table 3 shows, the combined cotton exports of three low-income cotton


exporters – Mali, Burkina Faso and Benin – was just below 8 per cent of world cotton exports in


2011/2012, compared to 26 per cent by the US and 15.5 per cent by India. As a share of a country’s


total merchandise exports, however, the earnings from cotton exports accounted for 30 per cent in Mali


and Burkina Faso and 22 per cent in Benin, compared to 0.5 per cent for the US and 1.2 per cent for


India. Any reduction in cotton exports of these three low-income countries, resulting from significant


domestic support received by producers in “large exporters” would have little significance in the world


cotton market. But such a reduction could significantly reduce these countries’ income gains from


trade, which could reduce the speed of improving socioeconomic conditions needed for sustainable


development. These aspects are to be accounted for by the multilateral trade regime.





60 Harry de Gorter, ‘The Distributional Structure of US Green Box Subsidies’, in Meléndez-Ortiz et al. Agricultural Subsidies
in the WTO Green Box (Cambridge University Press, 2009), 304.


61 Teresa Cavero, ‘Subsidy Reform in the EU Context: Options for Achieving Change’, in Meléndez-Ortiz et al. Agricultural
Subsidies in the WTO Green Box (Cambridge University Press, 2009), 583.


62 Drawing from the list of indicators for the designation of special products (TN/AG/W/4/Rev.4, Annex F).


63 In this direction, Mauritius, ‘Developing Countries and Non-trade Concerns’, International Conference on Non-Trade
Concerns in Agriculture, Ullesvang, Norway, 2-4 July 2000, Discussion Paper Five rev.1, WTO Doc. G/AG/NG/W/36/Rev.1,
9 November 2000.





16 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES




REFERENCES


Banga, Rashmi. “Impact of Green Box Subsidies on Agricultural Productivity, Production and
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Paper 14-01, April 13, 2014.


Cavero, Teresa. “Subsidy Reform in the EU Context: Options for Achieving Change.” In Agricultural
Subsidies in the WTO Green Box, edited by Ricardo Meléndez-Ortiz, Christophe Bellmann, and
Jonathan Hepburn, 583–603. Cambridge, UK and New York: Cambridge University Press,
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Cheng, Fuzhi. “China: Shadow WTO Agricultural Domestic Support Notifications.” IFPRI Discussion
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Das, Abhijit. “Aussie Spin on Trade Reform.” The Economic Times Mumbai, November 18, 2011.


———. “Bali, Post-Bali and Beyond Doha.” Geneva, 2014.


de Gorter, Harry. “The Distributional Structure of US Green Box Subsidies.” In Agricultural Subsidies in
the WTO Green Box, edited by Ricardo Meléndez-Ortiz, Christophe Bellmann, and Jonathan
Hepburn, 304–26. Cambridge University Press, 2009.


DTB Associates. “Agricultural Subsidies in Key Developing Countries: November 2014 Update,” 2014.
http://www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf.


———. “Domestic Support and WTO Obligations in Key Developing Countries,” September 2011.


Edenhofer, Ottmar, Ramon Pichs-Madruga, Youba Sokona, Ellie Farahani, Susanne Kadner, K. Seyboth,
A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von
Stechow, T. Zwickel and J.C. Minx (eds). Climate Change 2014: Mitigation of Climate Change.
Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental


Panel on Climate Change. Cambridge, UK and New York: Cambridge University Press, 2014.


Häberli, Christian. “Do WTO Rules Improve or Impair the Right to Food?” In Research Handbook on the
WTO Agriculture Agreement: New and Emerging Issues in International Agricultural Trade Law,
edited by Joseph A. McMahon and Melaku Geboye Desta, 70–103. Cheltenam, UK and
Northampton, MA: Edward Elgar, 2012.


———. “Food Security and WTO Rules.” In Food Crises and the WTO, edited by Baris Karapinar and
Christian Häberli, 297–322. Cambridge, UK and New York: Cambridge University Press, 2010.


———. “God, the WTO – and Hunger.” In Poverty and the International Economic Legal System, Krista
Nadakavukaren Schefer., 79–106. Cambridge, UK and New York: Cambridge University Press,
2013.


———. “The WTO and Food Security: What’s Wrong with the Rules?” In The Challenge of Food
Security: International Policy and Regulatory Frameworks, edited by Rosemary Rayfuse and
Nicole Weisfelt, 191–216. Cheltenham, UK and Northampton, MA: Edward Elgar, 2012.


———. “After Bali: WTO Rules Applying to Public Food Reserves.” presented at the Expert Meeting on
Reserves/Stocks and Specifically their Potential Role in Market/Price Stabilization, FAO, Rome,
January 30, 2014.


Keck, Alexander, and Patrick Low. “Special and Differential Treatment in the WTO: Why, When and
How?” Staff Working Paper. WTO Economic Research and Statistics Division, January 2004.


Khor, Martin. “WTO Food Fight Before and at the Bali Ministerial.” South Bulletin 78 (March 4, 2014): 5–
9.


Konandreas, Panos, and George Mermigkas. “WTO Domestic Support Disciplines: Options for
Alleviating Constraints to Stockholding in Developing Countries in the Follow-up to Bali.” FAO
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Meléndez-Ortiz, Ricardo, Christophe Bellmann, and Jonathan Hepburn. “Agricultural Subsidies in the
WTO Green Box: Ensuring Coherence with Sustainable Development Goals.” Cambridge, UK
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Murphy, Sophia. “Trade and Food Reserves: What Role Does the WTO Play?” Institute for Agriculture
and Trade Policy, 2010.


Narayanan, Sudha. “The Balance: The National Food Security Act vis- à -vis the WTO Agreement on
Agriculture.” Indira Gandhi Institute of Development Research, December 2013.


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Orden, David, David Blandford, Tim Josling, and Lars Brink. “WTO Disciplines on Agricultural Support:
Experience to Date and Assessment of Doha Proposals.” IFPRI Research Brief. IFPRI, May
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18 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Annex 1: WTO AoA disciplines – Ceilings and escapes/exemptions



Developed Developing


Market access


Ceilings
Bound levels (1986-88 base
period, reduced by 36 per
cent)


Bound levels (often ceiling bindings,
above previously applied tarrifs)


Safeguards
Special safeguard (SSG) mechanism (only on “tariffied” products for
which the SSG right reserved in a Member’s schedule) (Art.5 AoA)


Domestic support (DS)


Ceilings


Members with AMS
commitments


FBTAMS (1986-88 base level,*
reduced by 20 per cent) (de
minimis excluded)


FBTAMS (1986-88 base level,*
reduced by 13 per cent) (de minimis
excluded)


Members with no AMS
commitments (FBTAMS
nil/blank/zero)


Up to the de minimis
thresholds: For PS support, 5
per cent of the VOP of the
product concerned; for NPS
support, 5 per cent of the total
VOP


De minimis thresholds: For PS
support, 10 per cent** of the
product’s VOP; for NPS support,
10* per cent of the total VOP


Permissible DS
Blue Box; Green Box; de
minimis.


Blue Box; Green Box; de minimis;
Art. 6.2 (general investment
subsidies; input subsidies generally
available to resource-poor/low-
income farmers; incentives to
diversify from illicit narcotic crops)**


Export subsidies (ES) (until Nairobi)


Ceilings


Members with ES
reduction commitments


Could subsidize exports up to
bound levels (1986-90 level,
reduced by 36 per cent
(outlays) and 21 per cent
(volumes))


Could subsidize exports up to
bound levels (1986-90 level,
reduced by 21 per cent (outlays)
and 14 per cent (volumes))


Members without ES
commitments


Could not introduce export
subsidies


Could not introduce export
subsidies


Permissible ES -


Art. 9.4 subsidies (transitional
exemption) to cover marketing costs
/ preferential internal transport and
freight for export shipments




Source: Author’s compilation, based on the WTO AoA. Note: * With few exceptions for countries that joined after 1995.**
Some developing countries that acceded at a later stage agreed on different terms (e.g., China agreed on a 8.5 per cent de
minimis and gave up the Art. 6.2 exclusion).








Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 19


Annex 2: Revised draft modalities for agriculture of 6 December 2008 (Doha Draft) –
Domestic support disciplines




Category Developed countries
Developing countries


(with blank/zero FBTAMS)
(e.g., China and India )


Developing countries
(with scheduled FBTAMS)
(e.g., Argentina, Brazil,


Mexico )


Other S&D


OTDS


Base OTDS


FBTAMS + 10% base
period (bp) VOP + higher of
average Blue Box payments
or 5% of bp VOP


20% base period (bp) VOP
+ higher of average bp Blue
Box payments or 5% of bp
VOP


FBTAMS + 20% base
period (bp) VOP + higher of
average Blue Box
payments or 5% of bp VOP




Reduction


Tiered formula:
- 1st tier (Base OTDS > $60
bn, e.g. EU): 80% reduction
- 2nd tier (Base OTDS > $10
bn ≤ $60 bn, e.g. US): 70%
- 3rd tier (Base OTDS ≤ $10
bn e.g. Norway): 55%
reduction


No reduction (only required
to schedule their Base
OTDS)


Gentler cuts: Two-thirds of
the relevant rate for
developed country
Members


No reduction (even if
with AMS
commitments):
NFIDCs; very RAMs;*
small low-income
RAMs with
economies in
transition


FBTAMS


Reduction


Tiered formula:
- 1st tier (FBTAMS> $40 bn):
70% reduction
- 2nd tier (FBTAMS > $15 bn
≤ $40 billion): 60%
- 3rd tier (FBTAMS ≤ $15
bn): 45% reduction


No reduction, as FBTAMS
already set to 0


Gentler cuts: two-thirds of
the reduction applicable for
developed country
Members


No reduction (even if
with AMS
commitments):
Developing countries
with FBTAMS levels ≤
$ 100 million;
NFIDCs; very RAMs;
small low-income
RAMs with
economies in
transition


PRODUCT-SPECIFIC (PS) AMS LIMITS


Caps
Average PS AMS during the
base period (specific terms
for USA)


Average PS AMS during
the base period / or two
times the Member's PS de
minimis level during the
base period


Average PS AMS during
the base period / or two
times the Member's PS de
minimis level during the
base period / or 20% of the
Annual Bound Total AMS in
the year




DE MINIMIS


Reduction 50% (i.e. 2.5% of the VOP) No reduction
Gentler cuts: two-thirds of
the reduction rate specified
for developed countries


No reduction (even if
with AMS
commitments):
Developing country
Members that
allocate almost all
AMS support for
subsistence and
resource-poor
producers; NFIDCs;
Very RAMs;* small
low-income RAMs
with economies in
transition


BLUE BOX


Overall cap
2.5% of average VOP in the
base period


5% of average VOP in the
base period


5% of average VOP in the
base period


RAMs: 5%


PS cap


Average PS Blue Box
support during the base
period (different terms for
US)


Average PS Blue Box
support during the base
period (if no support
provided, up to 10% of the
overall Blue Box limit)


Average PS Blue Box
support during the base
period (if no support
provided, up to 10% of the
overall Blue Box limit)




BASE


PERIOD VOP
1995-2000 average 1995-2000 or 1995-2004 1995-2000 or 1995-2004




Source: Author's compilation based on TN/AG/W/4/Rev.4. Note*: Recently acceded members (RAMs) are countries that negotiated and
joined the WTO after 1995.










20 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Annex 3: Large exporters and minor (but heavily dependent) exporters, average 2011-12 exports


Products and Category Country
Share of world commodity


exports (value)


Share of the country export earnings
% total


merchandise
% total


agricultural
[061] Sugar, molasses and honey


Largest exporters
Brazil 28.51 5.56 16.05
Thailand 9.19 1.71 8.75
India 4.9 0.72 5.56


Minor exporters, heavily export
dependent on the commodity


Cuba 2.03 16.21 48.74


Swaziland 0.64 16.4 45.57


Mauritius 0.61 11.05 35.88


Algeria 0.48 0.33 68.18


Guyana 0.33 11.33 33.28


[071] Coffee and coffee substitutes


Largest exporters


Brazil 15.97 3.05 8.79
Germany* 9.12 0.26 4.21
Viet Nam 9.08 3.08 14.29
Colombia 5.45 4.04 37.65


Minor exporters, heavily export
dependent on the commodity


Ethiopia 2.2 31.56 37.4


Uganda 1.04 20.65 32.15


El Salvador 0.77 7.62 30.53


Rwanda 0.25 17.67 45.17


Burundi 0.15 47.04 74.35


Timor-Leste 0.00 5.36 89.89


[072] Cocoa


Largest exporters


Ghana 20.14 29.39 65.92
Côte d'Ivoire 17.36 31.24 57.96
Netherlands* 16.47 0.56 3.13
Nigeria 5.8 0.86 21.73
Malaysia 5.55 0.5 3.14
Indonesia 5.27 0.58 2.46


Minor exporters, heavily export
dependent on the commodity


Cameroon 2.2 11.07 28.47


Sierra Leone 0.26 6.04 21.65


Togo 0.18 10.15 30.57


Sao Tome and Principe 0.04 42.01 91.41


[263] Cotton



Largest exporters




United States 26.16 0.49 4.39
India 15.51 1.23 9.44
Australia 11.19 1.02 7.04
Brazil 8.74 0.75 2.16
Uzbekistan 7.19 16.62 57.47


Minor exporters, heavily export
dependent on the commodity


Mali 4.06 29.85 81.97
Burkina Faso 2.84 32.32 67.77
Turkmenistan 1.73 3.15 61.67
Benin 1.13 21.73 40.49
Tajikistan 0.87 17.26 73.19
Chad 0.7 3.11 70.65




Source: UNCTAD GlobStat Database. SITC Rev. 3. Note: * Re-exports/exports in semi-processed forms.








Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 21




UNCTAD Study Series


POLICY ISSUES IN INTERNATIONAL TRADE
AND COMMODITIES














No. 30 Sam Laird, David Vanzetti and Santiago Fernández de Córdoba, Smoke and mirrors:
Making sense of the WTO industrial tariff negotiations, 2006, Sales No. E.05.II.D.16.




No. 31 David Vanzetti, Santiago Fernandez de Córdoba and Veronica Chau, Banana split: How
EU policies divide global producers, 2005, 27 p. Sales No. E.05.II.D.17.




No. 32 Ralf Peters, Roadblock to reform: The persistence of agricultural export subsidies,
2006, 43 p. Sales No. E.05.II.D.18.




No. 33 Marco Fugazza and David Vanzetti, A South–South survival strategy: The potential
for trade among developing countries, 2006, 25 p.




No. 34 Andrew Cornford, The global implementation of Basel II: Prospects and outstanding
problems, 2006, 30 p.




No. 35 Lakshmi Puri, IBSA: An emerging trinity in the new geography of international
trade, 2007, 50 p.




No. 36 Craig VanGrasstek, The challenges of trade policymaking: Analysis, communication
and representation, 2008, 45 p.




No. 37 Sudip Ranjan Basu, A new way to link development to institutions, policies and
geography, 2008, 50 p.




No. 38 Marco Fugazza and Jean-Christophe Maur, Non-tariff barriers in computable general
equilibrium modelling, 2008, 25 p.




No. 39 Alberto Portugal-Perez, The costs of rules of origin in apparel: African preferential
exports to the United States and the European Union, 2008, 35 p.




No. 40 Bailey Klinger, Is South–South trade a testing ground for structural
transformation?, 2009, 30 p.




No. 41 Sudip Ranjan Basu, Victor Ognivtsev and Miho Shirotori, Building trade-relating
institutions and WTO accession, 2009, 50 p.




No. 42 Sudip Ranjan Basu and Monica Das, Institution and development revisited: A
nonparametric approach, 2010, 26 p.






22 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


No. 43 Marco Fugazza and Norbert Fiess, Trade liberalization and informality: New stylized
facts, 2010, 45 p.




No. 44 Miho Shirotori, Bolormaa Tumurchudur and Olivier Cadot, Revealed factor intensity
indices at the product level, 2010, 55 p.




No. 45 Marco Fugazza and Patrick Conway, The impact of removal of ATC Quotas on
international trade in textiles and apparel, 2010, 50 p.




No. 46 Marco Fugazza and Ana Cristina Molina, On the determinants of exports survival,
2011, 40 p.




No. 47 Alessandro Nicita, Measuring the relative strength of preferential market access,
2011, 30 p.




No. 48 Sudip Ranjan Basu and Monica Das, Export structure and economic performance in
developing countries: Evidence from nonparametric methodology, 2011, 58 p.




No. 49 Alessandro Nicita and Bolormaa Tumurchudur-Klok, New and traditional trade flows
and the economic crisis, 2011, 22 p.




No. 50 Marco Fugazza and Alessandro Nicita, On the importance of market access for trade,
2011, 35 p.




No. 51 Marco Fugazza and Frédéric Robert-Nicoud, The ‘Emulator Effect’ of the Uruguay
round on United States regionalism, 2011, 45 p.




No. 52 Sudip Ranjan Basu, Hiroaki Kuwahara and Fabien Dumesnil, Evolution of non-tariff
measures: Emerging cases from selected developing countries, 2012, 38p.




No. 53 Alessandro Nicita and Julien Gourdon, A preliminary analysis on newly collected data
on non-tariff measures, 2013, 31 p.




No. 54 Alessandro Nicita, Miho Shirotori and Bolormaa Tumurchudur Klok, Survival analysis
of the exports of least developed countries: The role of comparative advantage, 2013,
25 p.




No. 55 Alessandro Nicita, Victor Ognivtsev and Miho Shirotori, Global supply chains: Trade
and Economic policies for developing countries, 2013, 33 p.




No. 56 Alessandro Nicita, Exchange rates, international trade and trade policies, 2013, 29 p.


No. 57 Marco Fugazza, The economics behind non-tariff measures: Theoretical insights and
empirical evidence, 2013, 33 p.




No. 58 Marco Fugazza and Alain McLaren, Market access, export performance and survival:
Evidence from Peruvian firms, 2013, 39 p.




No. 59 Patrick Conway, Marco Fugazza and M. Kerem Yuksel, Turkish enterprise-level
response to foreign trade liberalization: The removal of agreements on textiles and
clothing quotas, 2013, 54 p.




No. 60 Alessandro Nicita and Valentina Rollo, Tariff preferences as a determinant for
exports from Sub-Saharan Africa, 2013, 30 p.






Farm Support and Trade Rules: Towards a New Paradigm Under the 2030 Agenda 23


No. 61 Marco Fugazza, Jan Hoffmann and Rado Razafinombana, Building a dataset for
bilateral maritime connectivity, 2013, 31 p.




No. 62 Alessandro Nicita, Marcelo Olarreaga and Peri Silva, Cooperation in the tariff waters
of the World Trade Organization, 2014, 39 p.




No. 63 Marco Fugazza and Claudia Trentini, Empirical insights on market and foreign direct
investment, 2014, 33 p.




No. 64 Marco Fugazza, Céline Carrère, Marcelo Olarreaga and Fréderic Robert-Nicoud, Trade
in unemployment, 2014, 36 p.




No. 65 Céline Carrère and Christopher Grigoriou, Can mirror data help to capture informal
international trade?, 2014, 42 p.




No. 66 Denise Penello Rial, Study of average effects of non-tariff measures on trade imports,
2014, 26 p.




No. 67 Cristian Ugarte, Weak Links and diversification, 2014, 28 p.


No. 68 Marina Murina and Alessandro Nicita, Trading with conditions: The effect of sanitary
and phytosanitary measures on lower income countries' agricultural exports, 2014,
20 p.




No. 69 Olivier Cadot, Alan Asprilla, Julien Gourdon, Christian Knebel and Ralf Peters, Deep
regional integration and non-tariff measures: A methodology for data analysis,
2015, 36 p.




No. 70 Marco Fugazza, Maritime connectivity and trade, 2015, 30 p.


No. 71 David Vanzetti, Ralf Peters and Christian Knebel, Sand in the wheels: Non-tariff
measures and regional integration in SADC, 2016, 31 p.




No. 72 Marco Fugazza and Jan Hoffmann, Bilateral liner shipping connectivity since 2006,
2016, 30 p.




No. 73 Alain McLaren, Policy space in agricultural markets, 2016, 24 p.


No. 74 Irene Musselli, Farm support and trade rules: Towards a new paradigm under 2030
agenda, 2016, 29 p.










Copies of the UNCTAD study series Policy Issues in International Trade and Commodities may be
obtained from the Publications Assistant, Trade Analysis Branch, Division on International Trade
in Goods and Services, and Commodities, United Nations Conference on Trade and
Development, Palais des Nations, CH-1211 Geneva 10, Switzerland (Tel: +41 22 917 4644).
These studies are available at http://unctad.org/tab.





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