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Biofuels Subsidies and The Law of the WTO

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This paper reviews biofuel measures that are commonly used in major producing countries against WTO subsidies disciplines. These measures are found in a range of laws and policies relating to energy, the environment and agriculture. There is little evidence that domestic policymakers have taken into account WTO disciplines when crafting these measures. This paper identifies a number of issues for policymakers to consider, including the following: - WTO subsidy disciplines do not prohibit all subsidies or support to biofuels. Rather, the WTO rules concern themselves with subsidies that have a trade-distorting effect. - Although often cited in discussions about the WTO and biofuel subsidies, the green box provisions of the WTO Agreement on Agriculture (AoA) do not provide a broad category sheltering measures on the basis that they offer some environmental benefits. To qualify as green box support, specific requirements must be met. For example, payments under environmental programmes must be limited to the costs of compliance with the programme.

Promoting Sustainable Bioenergy Production and Trade


Issue Paper No. 20


June 2009 l ICTSD Programme on Agricultural Trade and Sustainable Development


By Toni Harmer
Independent Consultant


Biofuels subsidies and the law
of the WTO


ICTSD Global Platform on Climate Change, Trade Policies and Sustainable Energy


ICTSD
International Centre for Trade
and Sustainable Development






June 2009 l ICTSD Programme on Agricultural Trade and Sustainable Development


By Toni Harmer
Independent Consultant


Biofuels subsidies and the law
of the WTO


Issue Paper No. 20


ICTSD




ii Toni Harmer — Biofuels Subsidies and the law of the WTO


Published by


International Centre for Trade and Sustainable Development (ICTSD)
International Environment House 2
7 chemin de Balexert, 1219 Geneva, Switzerland
Tel: +41 22 917 8492 Fax: +41 22 917 8093
E-mail: ictsd@ictsd.ch Internet: www.ictsd.org


Chief Executive: Ricardo Meléndez-Ortiz
Programmes Director: Christophe Bellmann


Manager of the Global Platform on Climate Change, Trade Policies and Sustainable Energy: Marie Chamay


Acknowledgements:


We are grateful to Tara Laan and Ron Steenblik for their review and comments on the paper.


This paper was produced under ICTSD Global Platform on Climate Change, Trade Policies and Sustainable
Energy - An initiative supported by DANIDA (Denmark); Ministry of Foreign Affairs of Finland; the Department
for International Development (U.K.); the Ministry for Foreign Affairs of Sweden; the Ministry of Foreign
Affairs of Norway; and the Commonwealth Secretariat.


For more information about ICTSD’s programme on agriculture, visit www.ictsd.org.


ICTSD welcomes feedback and comments on this document. These can be forwarded to Marie Chamay,
mchamay@ictsd.ch.


Citation: Harmer, T. (2009). Biofuels Subsidies and the Law of the World Trade Organization. ICTSD
Programme on Agricultural Trade and Sustainable Development, Issue Paper No.20, International Centre for
Trade and Sustainable Development, Geneva, Switzerland.


Copyright © ICTSD, 2009. Readers are encouraged to quote and reproduce this material for educational,
non-profit purposes, provided the source is acknowledged.


The views expressed in this publication are those of the author and do not necessarily reflect the views of
ICTSD or the funding institutions.


ISSN 1817-3551




iiiICTSD Programme on Agricultural Trade and Sustainable Development


Contents
ABBREVIATIONS AND ACRONYMS v


LIST OF TABLES vi


FOREWORD vii


EXECUTIVE SUMMARY ix


1. INTRODUCTION 1


1.1 Scope of Paper 1


1.2 Policy Drivers and Government Support 1


1.3 Growing Concerns 1


1.4 Global Biofuel Production and Trade 2


1.5 International Biofuel Trade and the WTO 2


2. BIOFUEL SUPPORT POLICIES IN SELECTED COUNTRIES 3


2.1 Major Producing Countries 3


2.2 Common Biofuel Measures 3


2.2.1 Evolving policy landscape 3


2.2.2 Current biofuel measures 3


3. WTO SUBSIDY RULES 5


3.1 Industrial or Agricultural Goods? 5


3.2 WTO Agreement on Subsidies and Countervailing Measures 5


3.3 WTO Agreement on Agriculture 7


3.3.1 Amber box 7


3.3.2 Green box 7


3.4 Special and Differential Treatment 8


3.5 Analysis of Biofuels Subsidies 8


3.5.1 Output-related assistance 8


3.5.2 Support for factors of production 9


3.5.3 Downstream subsidies 12


3.5.4 Support for distribution and use 12


3.6 Current Trade Issues 12


3.6.1 US ethanol tariff and producers tax credit 12


3.6.2 WTO–US agricultural cases 13


3.6.3 US biodiesel blenders tax credit 13




iv Toni Harmer — Biofuels Subsidies and the law of the WTO


4. POLICY SPACE 14


5. IMPLICATIONS AND CONCLUSIONS 15


5.1 Some Implications of WTO Subsidy Rules 15


ANNEX I: 17


SELECTED BIOFUEL MEASURES IN MAJOR PRODUCING COUNTRIES 17


A1.1 Output-Related Assistance 17


A1.1.1 Mandates and targets 17


A1.1.2 Volume-related subsidies 17


A1.2 Support for Factors of Production 18


A1.2.1 Loans, loan guarantees and financing incentives 18


A1.2.2 Feedstock assistance 18


A1.2.3 Research and development 19


A1.3 Distribution and Use 19


A1.3.1 Fuel tax reductions 19


A1.3.2 Assistance with the cost of purchasing vehicles 20


A1.3.3 Refuelling and storage assistance 20


ANNEX 2: 21


RELEVANT PROVISIONS FROM THE AGREEMENT ON AGRICULTURE 21


A2.1 Article 6: Domestic Support Commitments 21


A2.2 Article 7: General Disciplines on Domestic Support 22


A2.3 Agreement on Agriculture: Annex 2 22


Domestic support: the basis for exemption from the reduction commitments 22
Government service programmes 22


ANNEX 3: 26


RELEVANT PROVISIONS FROM AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES 26


A3.1 Article 1: Definition of a Subsidy 26


A3.2 Article 2: Specificity 26


A3.3 Part II: Prohibited Subsidies – Article 3: Prohibition 27


ENDNOTES 28


REFERENCES 32




vICTSD Programme on Agricultural Trade and Sustainable Development


ABBReVIAtIons AnD ACRonYMs


AMS aggregate measurement of support


AoA Agreement on Agriculture


CAP Common Agricultural Policy


EC European Community


ECA Energy Crop Aid


ecoABC ecoAgricultural Biofuels Capital Initiative


EU European Union


FAO Food and Agriculture Organization of the United Nations


GSI Global Subsidies Initiative


HS Harmonized Commodity Description and Coding System


OECD Organisation for Economic Co-operation and Development


SCM Agreement on Subsidies and Countervailing Measures


R&D research and development


USA United States of America


VEETC Volumetric Ethanol Excise Tax Credit


WTO World Trade Organization




vi Toni Harmer — Biofuels Subsidies and the law of the WTO


Table 1: Top producing countries by total biofuel production in 2007 3


Table 2: Framework for SCM analysis 6


Table 3: Policy categories for green box support from Annex 2 of the WTO Agreement on
Agriculture 7


Table 4: Biofuel mandates by major producer 17


LIst of tABLes




viiICTSD Programme on Agricultural Trade and Sustainable Development


foRewoRD


To produce, trade on or use agricultural products as fuel—a practice as old as human history—
has become a policy riddle spawning emotional debate and multiple, sometimes competing and
conflicting, measures and actions. Today, many see fuel derivatives from agricultural produce and
forests as a new frontier in energy supply. In a context of action against climate change, the carbon
emissions efficiency of some energy crops has emerged as a promising, powerful alternative to
the use of fossil fuels. Against a backdrop of energy scarcity, particularly in cash-dry economies,
excitement on the prospect of producing cheap fuels from un-edible crops at large scale seems
unarguable. Especially if crops are grown on marginal lands, if new policies both at home and
abroad are generating fresh capital and investment flows, and if, on top, energy resulting may
match otherwise unattended demand and neglected populations.


A promissory outlook, except that at this very time, successfully steering action on agrofuels as
a tactic in combating climate change, or as energy or developmental strategy, is complicated by
critical factors; primarily, a lack of consensus on how to deal with the emerging flows of trade
and investment and the ensuing trade-offs in the allocation of implicated resources, from land, to
work force, to capital. Compounding the issue are ill-equipped existing regulatory frameworks at
both domestic and international levels. And, equally crippling is perceived deficiency in science
and metrics to demonstrate effects. Not insignificant is the realization that current technologies
limitations of scale render the whole idea less attractive or, at best, relegate its relevance to a
niche use.


Yet, OECD countries and most major demandeurs of energy for transport or otherwise, have in the
past few years adopted policies and measures that have spurred enormous demand and stimulated
investment in production and growth. Evidence shows that these policies have created or significantly
and rapidly expanded trade flows and production at home and abroad; in particular measures
introducing mandates of agrofuel use in the mix of liquid fuel for transportation or the energy grid.
Activity on technological development has also surged in recent years in response to prospects and
stimuli; indeed, high expectation of an eventual technological fix to the shortcomings of existing
possibilities for ethanol and bio-diesel, specifically in the use of biotechnology in the conversion
of cellulose fibres into energy, has served in contradictory ways as both incentive or deterrent for
further development of existing feedstock. The fact is that given that energy crops are based on the
basic conversion of sunlight into energy by means of plants, natural comparative advantages rest
for the moment in tropical crops; a key factor determining the current geography of production and
trade. However, technological applications at advanced stages of development may soon alter all
this and with it, the accompanying political economy orbiting policy-making.


Net gains and losses from use of biomass as energy are hard to estimate, particularly in a long-term
assessment. Odds for a future of improved energy efficiency, lower carbon emissions, reasonable and
sustainable use of lands for the production of food, fibre, forests or fuel, and larger developmental
and social gains, may be enhanced or doomed by options on policy made now; especially those
aiming at long term targets and changes and regulatory frameworks in the form of international
rules that limit and lock-in our possibilities.


It is in this context that ICTSD has decided in the past two years to engage in policy dialogue,
research and analysis and problem-solving activity that contribute to societies’ very pressing and
real need to come to grips with the reality of energy crops. We do so, conscious of the dynamism
of the policy environment, together with the intended and unintended consequences of policy
development; the actual impact of decisions on use of resources in the daily lives of communities




viii Toni Harmer — Biofuels Subsidies and the law of the WTO


and individuals, even if on trial or temporarily terms, and the need to find solutions from the policy
perspective that are durable and supportive of the sustainable aspirations of societies and global
welfare.


The issue paper you are holding, authored by Toni Harmer, seeks to contribute to the policy dialogue
on biofuels and, in particular, to discussion of the implications of World Trade Organization (WTO)
subsidy disciplines for national biofuel policies. It also raises a number of issues that warrant
further examination in order to clarify the interaction between biofuels and these trade rules. The
first section discusses the policy context driving government support for biofuels and considers
current production and trade trends. The second section considers the evolving policy landscape
for biofuels and identifies key policy measures used by major producing countries to support their
industries. The third section considers the application of WTO subsidy disciplines to common biofuel
measures and raises a number of questions of how those disciplines might affect national policies.
The fourth section briefly outlines the emerging discussion about the adequacy of WTO rules to deal
with biofuels, and climate-change measures more generally. The paper concludes with some policy
implications for national approaches.


This issue paper is part of ICTSD’s project on Promoting Sustainable Bioenergy Production and Trade,
published under its Programme on Agricultural Trade and Sustainable Development, which seeks to
promote food security, equity and environmental sustainability in agricultural trade.


The ICTSD teams involved in these fascinating issues and myself, very much hope that this paper is
of interest and, indeed, a contribution to the current debate and the definition of policy options.


Thank you,


Ricardo Meléndez-Ortiz
Chief Executive, ICTSD




ixICTSD Programme on Agricultural Trade and Sustainable Development


eXeCUtIVe sUMMARY


In recent years, biofuels have been eagerly embraced by governments as a home-grown solution to
a range of complex policy challenges, including climate change, dependence on foreign energy, and
rural development. Biofuels have also been promoted to developing countries as opening new markets
for their agricultural goods.


Government subsidies and other incentives have played a fundamental role in shaping domestic biofuel
industries. This support has promoted and supported investment in biofuels where such businesses
would not otherwise have been commercially viable.


The growth of biofuel production has also attracted attention for its negative impact on global food
prices. Less attention has been paid, however, to the broader trade and economic impacts of the subsidies
and incentives underlying this growth in production and, in particular, their World Trade Organization
(WTO) implications. Considering these subsidies through a WTO prism is not an end in itself. Rather, the
WTO disciplines on subsidies provide an important framework to constrain the proliferation of trade-
distorting subsidies that can lead to global inequities, particularly for developing and least-developed
countries. Moreover, the history of trade negotiations, especially in the agricultural sector, indicates
that, once in place, trade-distorting subsidies prove very difficult to reform.


This paper reviews biofuel measures that are commonly used in major producing countries against
WTO subsidies disciplines. These measures are found in a range of laws and policies relating to energy,
the environment and agriculture. There is little evidence that domestic policymakers have taken into
account WTO disciplines when crafting these measures. This paper identifies a number of issues for
policymakers to consider, including the following:


WTO subsidy disciplines do not prohibit all subsidies or support to biofuels. Rather, the WTO •
rules concern themselves with subsidies that have a trade-distorting effect.


Although often cited in discussions about the WTO and biofuel subsidies, the green •
box provisions of the WTO Agreement on Agriculture (AoA) do not provide a broad
category sheltering measures on the basis that they offer some environmental benefits.
To qualify as green box support, specific requirements must be met. For example,
payments under environmental programmes must be limited to the costs of compliance
with the programme.


The issue of whether subsidies have been passed on to the benefit of other participants in the •
biofuel production chain may be particularly relevant in a biofuels context, where subsidies are
provided at various stages of the production and use chain.


Attempts to provide assistance by way of decoupled payments are likely to be scrutinized •
closely and the requirement that a payment not be “related to” production will be
applied strictly. Importantly, if there is some condition attached to the payment that
would have an impact on production – positive or negative, direct or indirect – then it
is not likely to qualify as a decoupled payment.


Many countries have sought to foster domestic production and use of biofuels, raising the •
prospect of policies that favour domestically sourced biofuels. For this reason, biofuel
polices that express a preference for domestic over foreign-sourced biofuels raise may
present problems as prohibited on local content subsidies.




x Toni Harmer — Biofuels Subsidies and the law of the WTO


In addition, this paper identifies some complex issues that arise from the interaction between trade rules and
biofuel subsidies that warrant further examination. These include the following:


How ethanol subsidies should be notified under the WTO, in particular the scope of ethanol •
subsidies that should be properly included in a WTO Member’s aggregate measurement of
support (AMS) calculation. Given that ethanol is an agricultural product, it is conceivable
that some subsidies to ethanol producers are provided “in favour of the producer of the
basic agricultural feedstock” and thus should be included in the AMS.


The multiplicity of biofuel subsidies and other incentives can lead to situations where the •
interaction between two measures has a trade-distorting impact. In such a case, a question
arises as to whether the combination of the measures could be an actionable subsidy,
where taken individually neither measure would meet the threshold requirements.


Given the shifting focus of support in many countries to second- and third-generation •
biofuels, how would these biofuels and their feedstocks, such as switchgrass, be
classified for WTO purposes?




1ICTSD Programme on Agricultural Trade and Sustainable Development


IntRoDUCtIon


This paper seeks to contribute to the policy dialogue
on biofuels and, in particular, to discussion of the
implications of World Trade Organization (WTO)
subsidy disciplines for national biofuel policies. It
also raises a number of issues that warrant further
examination in order to clarify the interaction
between biofuels and these trade rules. Section
1 discusses the policy context driving government
support for biofuels and considers current production
and trade trends. Section 2 considers the evolving
policy landscape for biofuels and identifies key
policy measures used by major producing countries
to support their industries. Section 3 considers the
application of WTO subsidy disciplines to common
biofuel measures and raises a number of questions
of how those disciplines might affect national
policies. Section 4 briefly outlines the emerging
discussion about the adequacy of WTO rules to
deal with biofuels, and climate-change measures
more generally. The paper concludes with some
policy implications for national approaches.


A review of the policy approaches of major
producing countries reveals significant support
provided by governments at all stages of the
biofuel production and use cycle. This paper
discusses these measures under three broad
categories: production-related assistance;
support for factors of production; and support
for distribution and use. This categorization
is based upon the framework utilized in a
series of excellent studies conducted by the
Global Subsidies Initiative (GSI) on government
support for ethanol and biodiesel.1


The main focus of this paper is on subsidies for
so-called “first-generation” liquid biofuels,2
specifically ethanol and biodiesel, which are
produced mainly from food crops such as corn
and sugar. These liquid biofuels can be used
in the transportation sector to replace petrol,
diesel and jet fuel.3


Government subsidization for biofuels is
significant, and these policies have played a major
role in shaping domestic industries. Steenblik
(2007) estimates that in 2006 the combined
support provided by governments in the European
Union (EU), the United States of America (USA)
and Canada totalled $US11 billion.


Governments justify their subsidization of
biofuels with reference to a number of policy
goals. Although priorities may differ between
countries, frequently cited policy drivers are
the desire to reduce greenhouse gas emissions,
ensuring a secure and affordable energy supply
by creating a domestic source of energy, and
stimulating rural development.4


1.1 scope of Paper


1.2 Policy Drivers and Government support


Despite enthusiasm for biofuels, the news has
not all been positive. The growth in biofuel
production fuelled by government policies has
driven up food prices. This impacts particularly
on developing countries, which spend propor-
tionately more of their household incomes on
food (Mitchell 2008).


It also appears that initial claims about the
environmental advantages of some biofuels
may have been overblown. Depending on the
underlying feedstock, biofuel production and
use generate very different greenhouse gas


savings, ranging from savings of 30 percent to
80 percent, depending on the feedstock used.5


The Food and Agriculture Organization of the
United Nations (FAO) has called for an urgent
review of biofuel policies and subsidies to ensure
that they are not having a negative impact on
world food security, or the environment, and
are contributing to rural development rather
than disadvantaging poor farmers.6 The World
Bank has raised similar concerns (International
Bank for Reconstruction and Development and
World Bank 2008).


1.3 Growing Concerns




2 Toni Harmer — Biofuels Subsidies and the law of the WTO


These concerns are important for policymakers
implementing domestic biofuel policies, as
they contribute to decision-making about


the opportunity cost of devoting limited
government funds and resources to the
subsidization of biofuels.


Despite the enthusiasm with which biofuels have
been embraced, global production and trade is
relatively small. The Organisation for Economic
Co-operation and Development (OECD) estimates
that global biofuel production in 2007 was 62 billion
litres, the equivalent of 1.8 percent of total global
fuel consumption. Global trade is also limited, with
only about one-tenth of global production traded
annually.7 The low levels of international trade are
generally attributed to the fact that most countries
subsidize domestic production and use of biofuels or
impose import tariffs (or both).


That said, both ethanol and biodiesel production
have grown rapidly in recent years, and biofuel
production is projected to double over the
decade to 2017.8 A major unknown, however,
is how the current global financial crisis will
impact on the biofuels industry. In the USA, for
example, falling oil prices, over-capacity and
the credit crunch have resulted in the closure
of many ethanol plants. One estimate puts the
number of US ethanol plant closures at 25 out of
some 170, reducing annual ethanol production
by 2 billion gallons.9


1.4 Global Biofuel Production and trade


At the time of the Uruguay Round of WTO nego-
tiations, biofuels had little profile, with few
countries having significant biofuel interests.
Biofuels have gained greater profile in the WTO
Doha Round, however, due largely to the efforts
of Brazil to pursue accelerated liberalization for
ethanol in the negotiations over environmental
goods (WTO 2005) and to have ethanol included
in any final WTO Doha Round agreement (Inter-
national Herald Tribune 2008).


Also, despite the relatively low levels of
international biofuel trade, there is tension
between some major producers over subsidies.
The European Commission (EC) has imposed
countervailing and anti-dumping duties on US


biodiesel imports to counter what it considers
to be unfair US tax incentives. Canada and
Brazil have taken a WTO dispute against the
USA over agricultural subsidies, including corn,
the major US feedstock for ethanol production.
Also, Brazil continues to protest against a US
ethanol tariff that, Brazil claims, operates to
deny foreign producers the benefit of the US
ethanol tax credit.


Although this paper focuses on WTO subsidy rules,
the biofuels trade has the potential to raise a
range of other WTO issues, including differences
in tariff treatment, non-tariff barriers, and the
place of biofuels in the current WTO Doha Round,
that also warrant deeper consideration.


1.5 International Biofuel trade and the wto




3ICTSD Programme on Agricultural Trade and Sustainable Development


The top six major biofuel-producing countries are
set out in Table 1. The USA and Brazil dominate eth-
anol production, accounting for some 79 percent
of global production in 2007. The EU, on the other
hand, tops world biodiesel production, accounting
for some 60 percent of global production.


Canada, India and China have lower biofuel
outputs, but governments in each of these
countries are actively promoting greater bio-
fuel production.


2. BIofUeL sUPPoRt PoLICIes In seLeCteD CoUntRIes
2.1 Major Producing Countries


2.2.1 Evolving policy landscape


A review of the biofuel policies of each of the
major producers shows that these policies con-
tinue to evolve. With the exception of Brazil,
each of the top six producers undertook policy
reviews or introduced significant new measures
over the past 12–18 months.


Both India and China made policy changes in 2008
in response to concerns about the impact of bio-
fuel production on food prices and availability.
Both made a policy shift away from the growth of
food-based feedstocks in favour of growing non-
food feedstocks on marginal land. China’s policy is
also evolving away from direct subsidies in favour
of tax incentives and loans (GSI 2008).


The EU and the USA both expanded their bio-
fuel mandates in 2008,10 and Canada imple-
mented a federal mandate for the first time,
making mandates an important way for gov-
ernments to guarantee a domestic market for
biofuels (Laan et al. 2009).


It is unclear how the current global financial
crisis will impact on the short- to medium-
term prospects of the biofuels industry or
domestic biofuel policies. The US government,
for example, has provided struggling ethanol
producers with further loan assistance, and
US Agriculture Secretary Vilsack has indicated
that the administration may be willing to assist
producers, including through an increase in the
maximum blended rate for ethanol in petrol, if
necessary.11


2.2.2 Current biofuel measures


A review of the biofuel regimes of the major
producing countries shows government assistance
at all stages of the biofuel production and use
chain, from growing agricultural feedstocks
through to consumption of the end product.
Further details about these measures are set out
in Annex 1 of this paper.12


The policies of the major producers show
a number of commonly used measures.
In particular, all major producers have


Country Ethanol (million
litres)


Biodiesel (million
litres)


Total (million
litres)


USA 26 500 1688 28 188
Brazil 19 000 227 19 227
EU 2253 6109 8361
China 1840 114 1954
Canada 1000 97 1097
India 400 45 445
World 52 009 10 204 62 213


table 1. top producing countries by total biofuel production in 2007


Source: OECD (2008)


2.2 Common Biofuel Measures




4 Toni Harmer — Biofuels Subsidies and the law of the WTO


implemented targets or mandates for
the blending of biofuels with petrol or
diesel. In addition, fuel-tax reductions and
financial assistance for infrastructure costs
and research and development (R&D) are
common.


Subsidies to the agricultural producers of
biofuel feedstocks are also a significant source
of support through general agricultural policies.
In addition, some countries have programmes
designed to increase the production of crops
specifically for use in biofuel production.


The developed countries of the USA, the EU and
Canada have a complex overlay of federal, sub-
national and local level incentives, often imple-
mented with little reference to one another
(Steenblik 2007). Tax incentives also play a more
substantial role in the regimes of developed
countries.


Brazil in many respects stands apart from the
other major producers. The Brazilian govern-
ment’s support for a domestic ethanol industry
dates from a national programme in the 1970s.
Although Brazil’s early industry enjoyed a range
of government subsidies and controls, these
were deregulated in the 1990s. Today, Brazil
does not provide direct assistance to ethanol,
but it has a blending mandate and provides
some credit assistance to producers. Brazil is
generally considered to be the world’s most
viable and efficient ethanol producer.


In summary, the types of measures used include
the following:


Output-related assistance:•
Mandates or targets that require a particular •
percentage of ethanol or biodiesel be
included in the total fuel supply
Tax credits for ethanol or biofuel production•
Producer incentives and operating grants•


Support for factors of production:•
Loans, loan guarantees and tax incen-•
tives to assist with infrastructure costs
(e.g. accelerated depreciation)
Infrastructure capital grants, business-•
planning and market development (grants
and interest-free loans)
General agricultural subsidy programmes •
for feedstocks, such as sugar and corn,
and subsidies for indirect inputs such as
fertilizer, water and seeds
Specific biofuel feedstock policies tar-•
geted at the production of crops for
energy use, including programmes that
provide payments for land used to grow
energy crops
Research and development support•


Distribution and use:•
Fuel-tax reductions that compensate •
consumers for the higher costs of biofuel
production compared with fossil fuels
ncentives for the purchase of vehicles •
that can run on biofuels, generally
through rebates or tax incentives
Assistance with the costs of refuelling •
and storage infrastructure.




5ICTSD Programme on Agricultural Trade and Sustainable Development


Any analysis of the application of WTO rules to
individual biofuel subsidies is a complex task.
There is no WTO jurisprudence dealing spe-
cifically with biofuels. Moreover, any analysis
requires a detailed examination of the measure,
its implementation and the market impacts. It is
not the purpose of this paper to draw conclusions


about WTO consistency of specific national mea-
sures. Rather, the following section provides a
general consideration of the operation of WTO
subsidy disciplines in the context of some key
biofuel support measures and raises a number of
questions about the possible application of those
rules for further discussion.


3. wto sUBsIDY RULes


A critical first step in examining the WTO
consistency of a government biofuel measure
is to establish the appropriate classification
of each product. In addition, any analysis of
biofuels subsidies requires consideration of
subsidies provided for biofuel feedstocks,
particularly as these may be passed on for the
benefit of biofuel producers.


As Steenblik (2006) makes clear, biodiesel falls
under Chapter 38 of the Harmonized Commodity
Description and Coding System (HS), which
covers chemicals not listed elsewhere:


A ... decision by the WCO’s Harmonized
System Committee (35th session, March
2005) confirmed that biodiesel should be
classified under HS 3824.90, which refers
to chemical products and preparations
of the chemical or allied industries
(including those consisting of mixtures
of natural products), not elsewhere
specified or included.13


Accordingly, biodiesel is an industrial good gov-
erned by the WTO Agreement on Subsidies and
Countervailing Measures (SCM).


Ethanol is classified as an agricultural good.
The Agreement on Agriculture (AoA) applies to
products covered by Chapters 1–24 of the HS14
(less fish and fish products) and a range of other
goods specified in Annex 1 of the AoA. Ethanol
is not referred to explicitly in the HS, but it
is classified according to its chemical makeup
as “ethyl alcohol” in Chapter 22 of the HS.15
Agricultural goods are subject to both the SCM
and to the specific provisions of WTO AoA.16 As
a result, it is possible that there could be subsi-
dies for ethanol that are permissible under the
AoA but that would contravene the SCM if they
were provided for biodiesel.


It is also pertinent to consider the classification
of biofuel feedstocks given their significance in
biofuel production. First-generation biofuels
are overwhelmingly produced from agricul-
tural crops such as corn and sugar, making their
classifications as agricultural goods straight-
forward. Less clear, however, is how some of
the feedstocks for second- and third-generation
biofuels would be treated. It is not readily
apparent, at least to this author, that switch-
grass or miscanthus, for example, would fall
within the categories covered by the AoA.


3.1 Industrial or Agricultural Goods?


3.2 wto Agreement on subsidies and Countervailing Measures
The SCM does not outlaw all subsidies; rather, it
disciplines subsidies that distort trade. Table 2
sets out a framework for analysis of a measure
under the SCM.


The SCM establishes two categories of subsidy:
(1) prohibited subsidies that are outright WTO


illegal; and (2) actionable subsidies that may be
outlawed, depending on their impact.


Both prohibited and actionable subsidies must
meet the three basic elements of a subsidy: (1)
a financial contribution, (2) provided by gov-
ernment and (3) that confers a benefit.




6 Toni Harmer — Biofuels Subsidies and the law of the WTO


Further, a subsidy will not be subject to the disci-
plines of the SCM unless it is specific. A prohibited
subsidy is deemed to be specific under the SCM.17
To be actionable, a subsidy must be targeted or
available only to particular recipients.18


Prohibited subsidies are (1) subsidies contin-
gent on export performance (export subsi-
dies); and (2) subsidies contingent on the use
of domestic over imported goods (local con-
tent subsidies).


Export subsidies are not a common source of
support to biofuels, but the prohibition on local


content subsidies may pose a bigger hurdle for
policymakers as many national policies seek to
foster the domestic production of biofuels and
their feedstocks.


Many biofuel subsidies fall within the category
of actionable subsidies. These subsidies will fall
foul of the SCM only if they can be proven to
have certain adverse effects, specifically (1)
injury to the domestic industry of another WTO
Member; (2) serious prejudice to the interests
of another WTO Member; or (3) the measure
nullifies or impairs a benefit that a WTO Member
expected from its WTO membership.


table 2: framework for sCM analysis


Question 1: Is there a subsidy?
(1) Is there a financial contribution? – A transfer or potential transfer
of funds or liabilities/government revenue forgone/government-pro-
vided goods or services (other than general infrastructure)


(2) Is the financial contribution provided by government (or by a
private body under direction from a government)?


(3) Is there a benefit? – Has a recipient gained some advantage on
terms more favourable than those available in the marketplace?


If no to any of
these questions:


No subsidy – SCM does
not apply.


If yes to all of
these questions:


Yes


Yes


No


Question 2: Is the subsidy prohibited?
Is it an export subsidy (i.e. contingent
on export performance) or a local con-
tent subsidy (contingent on the use of
domestic over imported goods)?


Question 3: If not prohibited, is the subsidy actionable?
Is it specific? – Does it target a particular company/com-
panies, industry or region?


Question 4: If actionable, does the subsidy have adverse effects?


Does it injure the domestic industry of the complaining WTO Mem-
ber; or cause “serious prejudice” to the interests of another Mem-
ber; or impair or nullify the benefits that a Member derives from
WTO membership?


If yes, is a prohibited subsidy
no further analysis required.


If yes, it can
be challenged.


If yes, it is
actionable.




7ICTSD Programme on Agricultural Trade and Sustainable Development


3.3 wto Agreement on Agriculture
The AoA divides agricultural support into three
categories, or “pillars”: export competition,
market access and domestic support. Each of
these pillars is subject to different disciplines. In
the case of biofuels, the most relevant category
is that of domestic support.


Domestic support is divided into three
categories, or “boxes” – amber, blue and
green19 – according to the trade-distorting
effects of a payment. The box into which a
particular biofuel measure is categorized is
the key to determining whether that subsidy
must be eliminated or reduced.


3.3.1 Amber box


The amber box covers subsidies that are the
most trade-distorting, such as price supports
and production subsidies. WTO Members have
not agreed to stop providing all amber box
support. Rather, they have agreed to cap their
annual total expenditure on domestic support
(expressed in a single figure, known as the
aggregate measurement of support, AMS20) and
to reduce this domestic support over time. If a
WTO Member exceeds its AMS ceiling in any year,
the Member will have breached its obligations
under the AoA and may become the subject of
a WTO dispute.


WTO Members determine which of their mea-
sures are amber box supports and notify the WTO
accordingly. This method of categorization adds


to the complexity and a lack of clarity about
whether a particular biofuel subsidy would be
subject to reduction or elimination. It can also
lead to controversy between Members as to the
appropriate categorization, potentially leading
to WTO disputes.


3.3.2 Green box


The green box is meant to capture subsidies
that have no (or minimal) trade- or produc-
tion-distorting effects. These subsidies are
not counted in a Member’s AMS and there is no
requirement for a Member to limit or reduce
such payments.


Categorization of a subsidy or payment as green
box is subject to strict requirements that are
set out in Annex 2 of the AoA. There are both
general requirements, which all green box pay-
ments must meet, and policy-specific require-
ments, which differ depending on the nature of
the payment in question. The general require-
ments are that a measure must:


• have no (or minimal) trade-distorting effects
or effects on production;


• be part of a publicly funded government
programme;


• not involve transfers from consumers;


• not have the effect of providing price support.


Table 3 sets out the 12 policy-specific categories
contained in the green box.


table 3: Policy categories for green box support from Annex 2 of the
wto Agreement on Agriculture


1 General services (Paragraph 2)


2 Food security (Paragraph 3)


3 Domestic food aid (Paragraph 4)


4 Direct payments to producers (Paragraph 5)


5 Decoupled income support (Paragraph 6)


6 Income insurance and income safety net programmes (Paragraph 7)


7 Natural disaster relief (Paragraph 8)


8 Producer retirement programmes (Paragraph 9)


9 Resource retirement programmes (Paragraph 10)


10 Investment aids (Paragraph 11)


11 Environmental programmes (Paragraph 12)


12 Regional assistance programmes (Paragraph 13)




8 Toni Harmer — Biofuels Subsidies and the law of the WTO


The AoA and the SCM contain a number of pro-
visions to assist developing countries in imple-
menting their obligations and to take account
of their development needs. Least-developed
countries, however, have no commitments to
reduce tariffs, domestic support or export
subsidies under the AoA.21 The agreement also
contains a number of provisions that provide
flexibility and assistance to developing coun-
tries to implement their obligations. These
include the following:22


• Certain subsidies do not have to be counted
towards a developing country’s AMS, such as
investment subsidies, which are generally
available to agriculture, and agricultural
input subsidies, which are generally
available to low-income or resource-poor
producers (Article 6.2, AoA).


• The de minimis level of trade-distorting
domestic support for developing in coun-
tries is 10 percent for developing countries,
compared with 5 percent for developed
countries (Article 6.4b, AoA).


• Developing countries have lower reduction
commitments in relation to tariffs, export
subsidies and domestic support.


• Developing countries have an extended time
period for implementation of their reduc-
tion commitments (Article 15.2, AoA).


Article 27 of the SCM recognises that subsidies
can be important to economic development
for developing countries. This Article
includes a number of special and differential
provisions, some of which have now lapsed.
Least developed countries and countries
do not meet a certain threshold level of
Gross National Product are exempt from the
prohibition on export subsidies (Article 27.2
and 27.3 SCM). Developing countries also
enjoy more favourable treatment with respect
to actionable subsidies. For example, the
multilateral WTO dispute resolution process
is not available for a developing country’s
actionable subsidies unless there is: injury
to the domestic industry of the complaining
party; or a WTO member has suffered a
nullification or impairment of the benefits its
expected from WTO membership, such that
the imports of the complaining WTO member’s
industry are impacted in the market of the
subsidising member (Article 27.9 SCM).


3.5.1 Output-related assistance


Tax credits and reductions


Tax credits and reductions linked to biofuel
production are a common form of government
support. For example, in the USA, the volumetric
tax credit provided to ethanol producers has
been a major factor in the strong growth of US
ethanol industry (Koplow 2006).


A financial contribution under SCM includes not
only a transfer of funds or the provision of goods
and services but also revenue that would other-
wise be due to the government but that has been
forgone or not collected.23 A tax measure that
operates to reduce the amount of tax owed by a
taxpayer would, on its face, appear as a clear case
of the government forgoing revenue that was oth-
erwise due. A WTO panel has said, however, that


a forgoing of revenue (and thus the existence of a
financial contribution) cannot be presumed.24


In order to determine whether such a tax measure
is a financial contribution, a benchmark must
be established against which the measure can
be assessed. The Appellate Body has said that
an appropriate benchmark should be based on
the tax rules of the WTO Member in question. As
the WTO agreements do not impose a particular
tax regime on WTO Members, the appropriate
benchmark will depend entirely on the specific
tax rules of the individual WTO Member.25


In considering the national regime, the search
is not for a general rule of taxation; rather,
the appropriate comparison, according to the
Appellate Body, is between “the fiscal treat-
ment of legitimately comparable income”.26 It


3.5 Analysis of Biofuels subsidies


3.4 Special and Differential Treatment




9ICTSD Programme on Agricultural Trade and Sustainable Development


is impossible to draw any general conclusion
about what a suitable benchmark would be for
a tax credit relating to biofuels in a vacuum. For
example, in some cases it might be legitimate to
use income from other fuels or from other renew-
able energies, or the relevant comparison might
be the type of income taxed rather than the tax
treatment of a particular category of product.


Operating grants and other output-linked
payments


Payments calculated on the basis of biofuel
output can take a number of forms. Laan
and colleagues (2009) identify a number of
operating grants and producer payments
available to biofuel producers in Canada at
the federal level and in some provinces. For
example, under the federal ecoENERGY for
Biofuels Initiative, volumetric payments are
available for ethanol and biodiesel production
(subject to certain limitations).


Payments that involve a direct transfer
of funds from the government to biofuel
producers are likely to meet the requirements
for an actionable subsidy. Clearly there would
be a financial contribution and establishing
a benefit would also seem straightforward.
Also, such payments are generally targeted to
particular industries or industry sectors and
thus are likely to be specific.


In order to determine whether an actionable
subsidy is prohibited under the SCM, the
subsidy must be shown to have adverse effects
on the interests of another WTO Member. This
might arise, for example, if the subsidy enabled
producers to export ethanol or biodiesel at low
cost, causing injury to the domestic industry of
the importing WTO Member, or the measure had
the impact of impeding the exports of another
WTO Member.


Mandates


As noted above, mandates and targets are per-
vasive in national regimes. A mandate, in and
of itself, does not raise subsidies concerns, as
mandates do not generally involve a financial
contribution within the meaning of the SCM.
It is, however, important to examine whether
the rules established to implement or enforce
a mandate constitute some form of subsidy.


Given the focus of many national regimes on
the production and use of biofuels domestically,
this may be an area in which there is a tempta-
tion for policymakers to include preferences for
locally sourced biofuels.


For example, Louisiana’s Advanced Biofuel
Industry Initiative requires that 2 percent of
the ethanol contained in fuel that is sold in
Louisiana must originate from non-corn crops
produced in that state (once biofuel production
reaches a certain level) (Kojima et al 2007).
Requirements such as these run the risk of being
prohibited local-content subsidies.27


3.5.2 Support for factors of production


Loans, loan guarantees and other forms of
financial assistance


Loans and loan guarantees to assist with infra-
structure costs are another common form of
assistance. Unlike a tax credit, the central issue
with these measures is generally not whether
there is a financial contribution but whether a
benefit exists.


The Appellate Body has made clear that
financial contribution and benefit are separate
legal elements, each of which must exist for a
particular loan or other such financial assistance
to be a subsidy. According to the Appellate Body,
the relevant question is whether the recipient
has received a contribution “on terms more
favourable than those available to the recipient
in the market”.28


The term “benefit” is not defined, but guidance
is provided in Article 14 of the SCM.29 For
example, a loan will have conferred a benefit
where the amount that the recipient pays on
the government loan is less than the amount
that would have been paid on a comparable
commercial loan that the recipient could have
obtained.30 In the case of loan guarantee, the
guarantee does not need to be invoked before
there can be a benefit. Rather, there will be
a benefit where there is a difference in the
amount the recipient pays on the loan guarantee
and the amount that a comparable commercial
loan would have cost without the guarantee.31




10 Toni Harmer — Biofuels Subsidies and the law of the WTO


If there is a benefit and the particular measure is
specific, then the subsidy will be an actionable
subsidy and the complaining party would need
to demonstrate that the measure had adverse
effects within the meaning of the SCM.


Feedstock subsidies


The cost of biofuel feedstocks is a major com-
ponent of biofuel production costs. Accordingly,
feedstock subsidies have the potential to have
a significant impact on production costs and
output. An examination of subsidies at the agri-
cultural producer level is therefore essential to
any biofuel subsidy analysis.


Ethanol subsidies and the AMS


It is relevant to consider the scope of the
ethanol subsidies that should properly be
included in a WTO Member’s AMS calculation.
Subject to certain exemptions, the AMS is:


... the annual level of support, expressed
in monetary terms, provided for an
agricultural product in favour of the
producers of the basic agricultural
product or non-product-specific support
provided in favour of agricultural
producers (authors’ italics).32


Further, Annex III of the AoA, which provides guid-
ance on the calculation of the AMS, states that
“measures directed at agricultural processors shall
be included to the extent [they] benefit producers
of the basic agricultural product”.33


Payments to agricultural producers that grow bio-
fuel feedstocks, such as corn or sugar, which are
basic agricultural products, clearly fall within the
AMS definition. The definition is, however, not
limited to payments made to producers of the
basic agricultural product but extends to pay-
ments “in favour of producers of the basic agri-
cultural crops” and also to “measures directed at
agricultural processors”. Ethanol is an agricultural
product. If, for example, a subsidy to an ethanol
producer had the effect of increasing the price of
the feedstock, then it is arguable that the subsidy
should be included in the AMS calculation.


Certainly, the inclusion of a broader range of
ethanol subsidies in the AMS calculation is likely


to significantly affect the total AMS of some WTO
Members and, depending on how much a country
spends on such subsidies, could put a WTO Member
at risk of exceeding its AMS ceilings and thereby
exposed to possible WTO dispute action.


Green box payments


With green box payments sheltered from
reduction or elimination, there is considerable
incentive for policymakers to argue that their
biofuel policies are green box supports. That
said, however, an examination of the green
box provisions of the AoA shows that this is not
a broad and expansive category for subsidies
that have some environmental, energy or rural
development objective or outcome. Rather,
the green box provisions present a number of
hurdles and, at least with respect to decoupling,
are likely to be applied strictly.


Of the 12 policy-specific categories set out in
the AoA for green box payments, the following
may be particularly relevant to the types of
policy used by major producers: (1) general
services (R&D), (2) environmental programmes,
(3) removal of land from marketable agricultural
production and (4) decoupled income support.


General services – research and development


As identified in Section 2, all of the major
producers provide some form of R&D assistance.
Often this assistance is provided for R&D
related to agricultural feedstock production
and conversion into ethanol.


The general services category of green box support
covers services that benefit agriculture or the
rural community, including “general research,
research in connection with environmental
programmes and research relating to particular
products” (Annex 2, Paragraph 2, AoA). Although
the categories of research covered by this
provision appear broad, they are subject to
an important limitation: direct payments to
producers or processors are excluded from this
category. Accordingly, if an R&D programme were
too specific in directing payments to particular
producers or processors, then the programme
would not be green-box-compliant.




11ICTSD Programme on Agricultural Trade and Sustainable Development


Decoupled income support


A further area of green box payments that
may be relevant to biofuels subsidies is that
of decoupled income support. The decoupling
of payments from production is an important
aspect of the green box, as it ensures that pay-
ments do not impact on or influence what or
how much of a crop is produced.


Paragraph 6(b) provides that “payments ...
shall not be related to ... the type or volume
of production”. Accordingly, if a biofuel subsidy
is completely unrelated, both directly and indi-
rectly, to production, then it may be permissible
green box support. The only WTO case to have
considered green box subsidies was the WTO US
Upland Cotton dispute.34 This WTO dispute pro-
vided important guidance on the interpretation
of decoupled support.


The contested measure in Upland Cotton that is
relevant to this analysis was a US provision that
provided payments to farmers with a history
of planting certain crops on their land. The
payment was contingent on farmers not growing
fruits, vegetables or wild rice on that land.
Farmers could grow other crops on the land, or
no crops. The USA argued that the payment was
not “related to” production, as the payment did
not require or encourage production of fruit,
vegetables or wild rice; rather, the payment was
contingent on these crops not being produced.
Brazil prevailed, however, with the Appellate
Body finding that a requirement not to produce
certain crops also created a connection between
payment and production. The payments were
not decoupled from production as they had the
potential to channel production into other crops
to ensure that a farmer received the payment,
thereby affecting production.


Structural adjustment – removing land from
marketable agricultural production


Another biofuel policy used to encourage the
production of biofuel feedstocks is payments
made to farmers in return for them using a
portion of their land to grow biofuel feedstocks.
For example, under the EU’s set aside and
energy crop schemes, which expire in 2009,
farmers received up to €45 per hectare for land
that is set aside to grow energy crops (including
for biofuels).35


Such policies may implicate the green box
provision for structural adjustment payments for
“programmes designed to remove land ... from
marketable agricultural production” (authors’
italics). Such payments must not require or
specify that the land in question be used “for
the production of marketable agricultural
products” (Annex 2, Paragraph 10, AoA).


Whether a particular programme falls within
Paragraph 10 would depend, therefore, on
whether a payment is conditioned in any way
on growing marketable agricultural products
on the land in question. On a straightforward
reading “marketable agricultural product”
means a product covered by the AoA that can
be marketed.


If this interpretation is correct, then it would
be difficult to make a case that growing
agricultural crops, such as sugar and corn, for
energy uses (as opposed to food) would amount
to taking land out of “marketable agricultural
production”. As Blandford and Josling (2007)
note, many agricultural crops have industrial
uses but Members have never sought to adjust
their WTO notifications on the basis of the end
use of these products.


If the crop being grown for energy purposes was,
however, not covered by the AoA, as may be
the case for some second- and third-generation
biofuel feedstocks, then there would be a
stronger argument that land had been removed
from marketable agricultural production.36


Environmental programmes


The green box provides for payments associated
with certain environmental programmes to
be sheltered. Given the weight that many
governments place on climate change or other
environmental objectives, the possibility
of categorizing such payments as green box
environmental programmes is superficially
attractive. Such payments, however, “must be
limited to the extra costs or loss of income
involved in complying with the programme”
(Annex 2, Paragraph 12).




12 Toni Harmer — Biofuels Subsidies and the law of the WTO


It would be difficult to argue that many of the
government policies supporting for biofuels
are limited to covering compliance costs.
Certainly it would be necessary to show a direct
relationship between those additional costs of
complying with requirements of the programme
and the payments provided to producers.


3.5.3 Downstream subsidies


Given the prevalence of support throughout
the biofuel production and use chain in many
countries, it is conceivable that subsidies pro-
vided at one point in the production chain
could benefit an industry participant else-
where in the chain.


The Appellate Body has made clear that a financial
contribution need not be bestowed directly on a
recipient in order for that recipient to benefit
from the subsidy. In effect, one company can be
found to benefit from a financial contribution
conferred on another company.37


An example in a biofuel context might be a
feedstock subsidy provided to an agricultural
producer (the upstream subsidy), which is passed
on, by way of lower feedstock prices, to the
benefit of a biofuel producer (the downstream
producer). The passing on of such a benefit is
known as a downstream subsidy.


In analysing the possibility of a downstream
subsidy, the Appellate Body has said that if the
downstream producer and the upstream producer
are identical (i.e. the same legal entity), then


there is no need to examine whether the benefit
has been passed on: it will be assumed. If the
two producers are unrelated – for example,
the farmer growing the corn feedstock and the
ethanol producer were unrelated legal entities
transacting at arm’s length – then it will be
necessary to conduct an analysis to determine
whether, and to what extent, the benefit of
the subsidy to the corn has been passed on to
benefit the ethanol producer.38


3.5.4 Support for distribution and use


The costs of biofuel production and distribution
are generally higher than their fossil-fuels
counterparts. This has led policymakers to
provide assistance with the additional costs of
distribution or consumption. For example, a
retailer may need to install specific and costly
refuelling equipment. Further, the higher costs
of biofuel production may result in higher costs
to consumers, prompting governments to offer
fuel tax reductions to compensate for the
additional costs to encourage consumption.


If these tax reductions compensate for higher
costs relative to fossil fuels, then it may be
difficult to make a case that the tax reduc-
tion confers a benefit. From the perspective
of a consumer, they may not have gained any
particular advantage in the marketplace if the
exemption merely equalizes the price of the
biofuel with fossil fuels. In addition, such tax
reductions are generally available to all con-
sumers and thus are unlikely to meet the speci-
ficity requirement for an actionable subsidy.


A number of trade issues have arisen between
the major biofuel producers over subsidies.


3.6.1 US ethanol tariff and producers tax
credit


Brazilian producers are vocal in their opposition
to a US tariff on ethanol, which operates as an
additional duty or secondary tariff of 54 cents a
gallon on imported ethanol.39 This tariff issue
arises in a discussion about biofuel subsidies
because of the context in which the tariff was
implemented. The US Congress introduced
the tariff for the specific purpose of ensuring


that foreign producers did not benefit from a
US ethanol tax credit that, under US law, was
available to both domestic and foreign sourced
ethanol (Renewable Fuel Association). Brazil
claims that the US tariff is above the bound
rate that the USA agreed to in the WTO.40


From an SCM perspective, a tariff, of itself,
would not amount to a financial contribution.
But this example does raise an interesting
question about whether an actionable subsidy
could arise where the operation of two related
(or unrelated) measures effectively subsidizes


3.6 Current trade Issues




13ICTSD Programme on Agricultural Trade and Sustainable Development


domestic producers only.41 A key question would
be whether the two measures, taken together,
would be a financial contribution.


3.6.2 WTO–US agricultural cases


Two pending WTO disputes may have direct impli-
cations for the US ethanol industry, as they will
place scrutiny on US subsidies for agricultural
products (WTO 2007a,b). Canada has asked the
WTO to consider the WTO consistency of a range
of US subsidies and other domestic support for
agricultural products, with specific reference
to corn. Brazil subsequently commenced a WTO
dispute on similar grounds, and the two cases
will be considered by a single WTO panel.


The disputes are of particular interest in the
biofuel context, as both Canada and Brazil
allege that the USA has failed to include a range
of subsidies in its AMS calculations and that
properly doing so would put the USA in violation
of its commitment not to exceed its AMS
ceiling. Brazil’s claims cover a broader range of
measures, including certain tax reductions for
on-farm use of gasoline and diesel. There have
been reports that Brazil may include ethanol
production subsidies that indirectly increase
demand for corn in its claim, but this has not
occurred to date.42


3.6.3 US biodiesel blenders tax credit


In March 2009, the European Commission began
levying additional duties on US biodiesel imports
after finding that federal and state tax credits
amounted to unfair subsidies under EC law.43


EU biodiesel producers had complained about a
practice known as “splash and dash”. This practice
enabled US refiners to import foreign diesel and
blend it with a small amount of biodiesel (“a
splash”) in order to qualify for the tax credit. The
blended biodiesel was then re-exported to the
EU (“the dash”). EU producers claimed that US
imports were being unfairly subsidized.


Before the imposition of these additional duties,
the US Congress amended the tax credit, and
it is now no longer available for fuel “pro-
duced outside the US for use as a fuel outside
the US”.44 The European biodiesel producers
are, however, not appeased. They claim that
because the tax credit is still available for US
biodiesel, the measure is “even one step more
discriminatory ... clearly breaching WTO rules
and threatening the concept of international
trade in biodiesel”.45




14 Toni Harmer — Biofuels Subsidies and the law of the WTO


As the review of subsidy rules in Section 3
shows, the AoA and SCM do not outlaw all forms
of government assistance to biofuels. They
do, however, place restrictions on the ability
of policymakers to implement trade-distorting
measures. The WTO agreements seek to strike a
balance between giving policymakers flexibility
to achieve domestic policy goals and not pro-
viding scope for WTO Members to erect a slew
of new trade barriers.


Neither the AoA nor the SCM operates to
prevent policymakers from taking any account
of policy objectives when they design their
biofuel regimes, but they do this in different
ways. The AoA green box provisions contain a
range of policy-specific criteria for domestic
support that enable policymakers to shelter
certain payments from reduction commitments
providing they are not (or are only minimally)
production-distorting.


By contrast, the SCM does not explicitly provide
for domestic policy interests to be considered;
nor does it contain general exceptions. In fact,
when the SCM entered into force, it contained
a specific category of non-actionable subsidies


for research and development, regional
inequality and environmental protection, which
were exempt from actionability (Article 8).
This carve-out expired five years after the SCM
entered into force and has not been renewed.46


Nonetheless, the SCM does not outlaw all
support; instead, its provisions are designed to
target assistance that distorts trade, allowing
policymakers to provide support that meets
their policy objectives, provided that support
does not distort trade.


The convergence of policy interests around
biofuels, particularly the interest of some poli-
cymakers in using biofuels as a tool to tackle
climate change, has led some commentators
to speculate about whether existing WTO rules
provide sufficient flexibility or “policy space”
to achieve domestic objectives.


This speculation underlines the importance of
greater transparency with respect to existing
biofuel measures, as well as a robust policy
dialogue on the application of existing WTO
rules, both of which would be essential first
steps before any conclusions can be drawn
about the adequacy of existing rules.


4. PoLICY sPACe




15ICTSD Programme on Agricultural Trade and Sustainable Development


Government policies have played a fundamental
role in developing and shaping the domestic
biofuel industries of major producers. It seems
that, at least for the foreseeable future, most
countries will need to continue to support domestic
industries if they are to be viable, particularly in
light of the current global financial turmoil.


The ongoing negotiations for a post-2012
international climate-change agreement will


further increase focus on the need for govern-
ments to find new means of reducing green-
house gas emissions.


Likewise, concerns about energy independence
and a desire to assist agricultural producers
to exploit new markets are likely to intensify
only as domestic economies become more
vulnerable to external influences.


5. IMPLICAtIons AnD ConCLUsIons


Biofuels offer both opportunities and risks for
developing countries. International trade rules
can play an important role in ensuring that trade
barriers are not erected that deprive them of
opportunities to participate in new markets.


As governments put in place new measures,
or fine-tune existing ones, care is needed in
crafting these measures. This is important both
to ensure that biofuel policy objectives are
achieved in an efficient and effective way and to
avoid distorting trade. Some specific issues for
policymakers to consider include the following:


• WTO subsidy disciplines do not prohibit all
subsidies or support to biofuels. Rather, the
WTO rules concern themselves with subsidies
that have a trade-distorting effect.


• Although often cited in discussions about the
WTO and biofuel subsidies, the green box
provisions of the WTO AoA do not provide a
broad category sheltering measures on the
basis that they offer some environmental
benefits. To qualify as green box support,
specific requirements must be met. For
example, payments under environmental
programmes must be limited to the costs of
compliance with the programme.


• The issue of whether subsidies have been
passed on to the benefit of other partici-
pants in the biofuel production chain may be
particularly relevant in a biofuels context,
where subsidies are provided at various
stages of the production and use chain.


• Attempts to provide assistance by way of
decoupled payments are likely to be scru-
tinized closely, and the requirement that
a payment not be “related to” production
will be applied strictly. Importantly, if there
is some condition attached to the payment
that would have an impact on production –
positive or negative – then it is not likely to
qualify as a decoupled payment.


• Many countries have sought to foster
domestic production and use of biofuels,
raising the prospect of policies that
favour domestically sourced biofuels. For
this reason, biofuel polices that express
a preference for domestic over foreign-
sourced biofuels raise may present problems
as prohibited on local content subsidies.


In addition, this review has identified some
complex issues that arise from the interaction
between trade rules and biofuel subsidies that
warrant further examination. These include:


• how ethanol subsidies should be notified
under the WTO, in particular the scope of
ethanol subsidies that should be properly
included in a WTO Member’s AMS calcula-
tion. Given that ethanol is an agricultural
product, it is conceivable that some subsi-
dies to ethanol producers are provided “in
favour of the producer of the basic agricul-
tural feedstock” and thus should be includ-
ed in the AMS;


5.1 some Implications of wto subsidy Rules




16 Toni Harmer — Biofuels Subsidies and the law of the WTO


• the multiplicity of biofuel subsidies and oth-
er incentives, which can lead to situations
where the interaction between two mea-
sures has a trade-distorting impact. In such
a case, the question arises as to whether
the combination of the measures could be
an actionable subsidy, where taken indi-
vidually neither measure would meet the
threshold requirements;


• how these biofuels and their feedstocks,


such as switchgrass, would be classified for


WTO purposes, given the shifting focus of


support in many countries to second- and


third-generation biofuels.




17ICTSD Programme on Agricultural Trade and Sustainable Development


A1.1.1 Mandates and targets


As Table 4 shows all major producing coun-
tries use mandates or targets as part of their
biofuel policy. Generally, mandates require


that ethanol or biodiesel form a minimum
percentage of the total fuel supply. These
measures operate to guarantee a market for
biofuel producers.


table 4. Biofuel mandates by major producer


Country Mandate
USA Mandatory target of 9 billion gallons of biofuels by 2008, rising to 36 billion by 2022 (of


the 36 billion gallons, 21 billion to be from advanced biofuels)


Brazil Mandatory blend of 20–25 percent anhydrous ethanol with petrol; mandatory minimum
blend of 3 percent biodiesel with diesel by July 2008 and 5 percent by end 2010


EU Mandatory target of 10 percent share of renewables (including biofuels) in transport
fuels by 2020


China 15 percent of transport energy needs from biofuels by 2020
Canada 5 percent renewable content in petrol by 2010; 2 percent renewables in diesel fuel and


heating oil by 2012


India Proposed blending mandates of 5–10 percent for ethanol and 20 percent for biodiesel


Source: FAO (2008b)



AnneX I: seLeCteD BIofUeL MeAsURes In MAJoR
PRoDUCInG CoUntRIes


A1.1 output-Related Assistance


A1.1.2 Volume-related subsidies


In the USA, excise tax credits have formed the
largest subsidy to biofuels to date (Yacobucci
2008). Until 1 January 2009, the Volumetric
Ethanol Excise Tax Credit (VEETC) provides
ethanol blenders with a tax credit of $0.51 per
gallon (applicable to both domestic and imported
ethanol). It is now US$0.45 per gallon. Biodiesel
blenders also enjoy a volumetric tax credit of
$US1.00 per gallon of biodiesel blended with
diesel. In addition, further tax credits are available
to small ethanol and biodiesel producers, and
the 2008 Farm Bill added a new tax credit for
cellulosic biofuel (second-generation) production
at a rate of $US1.01 per gallon.


For some years, China favoured fixed production
subsidies for ethanol production. In 2007 a


subsidy of $196 (RMB1373) per tonne was
provided for ethanol production, but from 2008
the government introduced a flexible subsidy
scheme under which the final payments will be
calculated on the basis of an annual evaluation
of each plant’s profitability (USDA 2008c).


At the federal level and in a number of provinces,
Canadian ethanol producers enjoy producer
payments or operating grants calculated according
the output. At the federal level, Canada’s
ecoENERGY for Biofuels Initiative provides
volumetric producer payments for ethanol
and biodiesel (subject to certain limitations).
In addition, Alberta, Manitoba, Ontario and
Saskatchewan provide direct payments calculated
on output (Laan et al. 2009).




18 Toni Harmer — Biofuels Subsidies and the law of the WTO


A1.2.1 Loans, loan guarantees and financing
incentives


The investment costs of producing biofuels are
generally higher than the production costs of
traditional fossil fuels. It is common for gov-
ernments to provide financial assistance or
incentives such as reduced interest-rate loans,
government-backed loan guarantees and tax
incentives (e.g. accelerated depreciation) to
encourage investment.


The US government provides a mixture of loans,
loan guarantees and other assistance with the
cost of infrastructure for biofuel production.
State governments also provide an array of
economic development grants and loans (Koplow
2007). For example, under the Rural Energy for
America Program, grants and loan guarantees
are available for renewable energy facilities,
including those using biomass fuels and facilities
producing ethanol or biodiesel (US 2008 Farm
Bill, Section 9006). A biorefinery assistance
programme provides loan guarantees and grants
for the construction or conversion of biorefineries
for advanced biofuel production. The Business
and Industry Program provides guarantees of up
to 90 percent of a loan made by a commercial
lender for loans for working capital, machinery,
buildings and real estate. Biofuel producers are
also able to accelerate depreciation of capital.


Brazil provides financing incentives for the
construction of new mills or modernisation of
existing ones through the National Bank for Social
and Economic Development (Abreu et al. 2006).


India also provides subsidized loan funds. For
example, through the Sugar Development Fund,
loans for up to 40 percent of the project cost of
establishing ethanol production plants can be
obtained at 2 percent below the market rate.
Subsidies to assist with credit financing are also
available to biodiesel producers. The scheme
provides a 30 percent credit-linked subsidy
with a 50 percent term loan taken from a bank
and 20 percent beneficiary share in the form of
land, labour, etc. (USDA 2007).


Canada has tended to take a slightly different
approach to the other major producers
in relation to loans by making repayment
contingent on prevailing market conditions
(Laan et al. 2009). Canada’s ecoAgricultural
Biofuels Capital Initiative (ecoABC), for
example, provides repayable contributions
for the construction or expansion of biofuel
production facilities. The initiative is designed
to aid agricultural producers to diversify
their economic base and participate in the
biofuels industry through equity investment or
ownership in biofuels production facilities.


A1.2.2 Feedstock assistance


The feedstocks used in biofuel production are
overwhelmingly agricultural crops, such as
corn, sugarcane and oilseeds. With feedstock
accounting for more than half of the produc-
tion cost of biofuels, government support for
these agricultural crops can be an important
subsidy to the final biofuel product (Kojima et
al. 2007).


A number of the key feedstocks for biofuels
benefit from general agricultural support
policies. For example, in the USA corn and
soybeans, and the EU, sugar beets and rapeseed
oil, receive significant levels of government
support (Kojima et al. 2007). It is also common
for countries to provide support for agriculture
production by subsidizing indirect inputs such
as fertilizer, water and seeds.


In addition to general agriculture support, many
governments have specific polices targeted at
the production of crops for energy use.


The US government recently added two
programmes that are aimed specifically at the
biofuel feedstock production: the Feedstock
Flexibility Program for Bioenergy Producers,
and the Biomass Crop Assistance Program.
The Biomass Crop Assistance Program provides
financial assistance for crop establishment costs
and annual payments for biomass production.
Under the Feedstock Flexibility Program for
Bioenergy Producers, the Credit Commodity


A1.2 support for factors of Production




19ICTSD Programme on Agricultural Trade and Sustainable Development


Corporation is authorized to fund the purchase
of surplus sugar to be resold as feedstock to
produce bioenergy (2008 US Farm Bill).


The EU’s Common Agricultural Policy (CAP)
provides support to farmers to grow biofuel
feedstocks. The CAP provided important indirect
support to the EU biofuels industry early in its
development. In addition to providing support
through minimum guaranteed prices and per-
hectare payments, two programmes specific to
energy crops have been established. Reforms
to the EU’s CAP required cereal and oilseed
producers to “set aside” a portion of their land
(i.e. not grow arable crops on the land) in order
to receive payments. The objective of the policy
was to reduce agricultural surpluses. In addition
to a compulsory requirement to set aside land,
farmers could gain a further payment if they
voluntarily set aside additional land for the
growth of industrial or energy crops. A second
programme, the EU’s Energy Crop Aid scheme,
provides an area payment of €45 per hectare
for the production of energy crops on up to 2
million hectares, which includes crops used for
biofuel production. This scheme is designed
specifically to encourage the growth of energy
crops (Kutas et al. 2007).


China provides farmers with a subsidy of RMB3000
($US435) per hectare of forestry plantations
used to grow biofuel feedstocks and a subsidy
of RMB2700 ($US394) per hectare for non-grain
feedstocks such as cassava (GSI 2008).


A1.2.3 Research and development


All major producers provide some form of
R&D support. It is common for governments to
fund R&D efforts to improve aspects of biofuel
production or use, including through the
establishment of demonstration facilities. The
focus of these programmes is increasingly on
accelerating the commercialization of second-
generation biofuels.


Canada’s Agricultural Bio-products Innovation
Program provides capped payments to research
networks for work on research on effective
and efficient technologies for biomass
conversion and product diversification. The
NextGen Biofuels Fund provides funding
for large-scale demonstration facilities for
second-generation biofuels.


The USA provides significant funds for biofuels
R&D. For example, the Biomass Research and
Development Initiative provide grants and other
assistance for R&D and the demonstration of
biofuel technologies (2008 US Farm Bill, Section
9008). Six cellulosic plant projects have been
sponsored by the Department of Energy.


China also subsidizes demonstration projects for
non-grain biofuel and second-generation biofuel
production. For example, 20–40 percent of the
investment in demonstration projects for the
production of ethanol from cellulose, sorghum
or cassava, and biodiesel from forest products,
is subsidized by the government (GSI 2008).


A1.3.1 Fuel-tax reductions


Fuel-tax reductions (or exemptions) are the
most widely used form of government support
for biofuels (Kojima et al. 2007). Such reductions
can be used to compensate for the higher cost
of biofuels production relative to fossil fuels,
or to make biofuels more attractive than fossil
fuels.


The EU’s policy framework includes a directive
on energy taxation (Directive EC 2003/96 on
Energy Taxation), which allows Member States
to provide reductions or exemptions from fuel


excise taxes for biofuels in order to compensate
for higher costs of biofuel production (Kutas
et al. 2007). EU Member States have taken
different policy approaches in providing these
tax exemptions:


• Full or partial exemptions to all biofuels,
irrespective of blending


• Full or partial exemptions proportionate to
the level of biofuel blend


• Production quota system limiting the quantity
of biofuels entitled to the exemptions.


A1.3 Distribution and Use




20 Toni Harmer — Biofuels Subsidies and the law of the WTO


Fuel excise tax reductions or exemptions from
sales tax are used widely in US states for etha-
nol and biodiesel.47


In India, biodiesel is exempt from the central
excise tax of 4 percent. China also exempts
biodiesel from its consumption tax (OECD 2008).


Brazil provides tax exemptions or reductions at
both the federal and state levels (OECD 2008)
for ethanol and biodiesel.


A1.3.2 Assistance with the cost of purchasing
vehicles


Many countries provide some form of rebates
to tax incentives to encourage the purchase of
vehicles that run on biofuels.


Brazil provides tax reductions to encourage
the purchase of vehicles that can run on


pure ethanol or ethanol–gasoline blends, the
availability of which has been a major boost to
biofuel consumption (USDA 2008a).


EU Member States have taken various approaches
to support the distribution and use of biofuels,
including reduced fuel taxes, reduced vehicle
registration fees and tax credits for the purchase
of flex-fuel vehicles (Kutas et al. 2007).


A1.3.3 Refuelling and storage assistance


Biofuels have special storage requirements and
need particular refuelling equipment, which
can be costly. Assistance for refuelling and
storage can enhance the distribution and hence
consumption of biofuels. For example, the USA
has a Renewable Fuel Infrastructure Tax Credit
that provides an income tax credit for the
installation of alternative fuelling equipment.




21ICTSD Programme on Agricultural Trade and Sustainable Development


1. The domestic support reduction commit-
ments of each Member contained in Part
IV of its Schedule shall apply to all of its
domestic support measures in favour of ag-
ricultural producers with the exception of
domestic measures which are not subject
to reduction in terms of the criteria set out
in this Article and in Annex 2 to this Agree-
ment. The commitments are expressed in
terms of Total Aggregate Measurement of
Support and “Annual and Final Bound Com-
mitment Levels”.


2. In accordance with the Mid-Term Review
Agreement that government measures of
assistance, whether direct or indirect, to
encourage agricultural and rural development
are an integral part of the development
programmes of developing countries,
investment subsidies which are generally
available to agriculture in developing
country Members and agricultural input
subsidies generally available to low-income
or resource-poor producers in developing
country Members shall be exempt from
domestic support reduction commitments
that would otherwise be applicable to such
measures, as shall domestic support to
producers in developing country Members
to encourage diversification from growing
illicit narcotic crops. Domestic support
meeting the criteria of this paragraph shall
not be required to be included in a Member’s
calculation of its Current Total AMS.


3. A Member shall be considered to be in
compliance with its domestic support
reduction commitments in any year in which
its domestic support in favour of agricultural
producers expressed in terms of Current Total
AMS does not exceed the corresponding annual
or final bound commitment level specified in
Part IV of the Member’s Schedule.


4. (a) A Member shall not be required to include
in the calculation of its Current Total AMS
and shall not be required to reduce:


(i) product-specific domestic support
which would otherwise be required to
be included in a Member’s calculation
of its Current AMS where such support
does not exceed 5 per cent of that
Member’s total value of production of
a basic agricultural product during the
relevant year;


and


(ii) non-product-specific domestic sup-
port which would otherwise be
required to be included in a Member’s
calculation of its Current AMS where
such support does not exceed 5 per
cent of the value of that Member’s
total agricultural production.


(b) For developing country Members, the de
minimis percentage under this paragraph
shall be 10 per cent.


5. (a) Direct payments under production-limit-
ing programmes shall not be subject to the
commitment to reduce domestic support if:


(i) such payments are based on fixed
area and yields; or


(ii) such payments are made on 85 per cent
or less of the base level of production;


or


(iii) livestock payments are made on a
fixed number of head.


(b) The exemption from the reduction
commitment for direct payments meeting
the above criteria shall be reflected by
the exclusion of the value of those direct
payments in a Member’s calculation of its
Current Total AMS.


AnneX 2: ReLeVAnt PRoVIsIons fRoM tHe
AGReeMent on AGRICULtURe
A2.1 Article 6: Domestic support Commitments




22 Toni Harmer — Biofuels Subsidies and the law of the WTO


1. Each Member shall ensure that any
domestic support measures in favour
of agricultural producers which are not
subject to reduction commitments because
they qualify under the criteria set out in
Annex 2 to this Agreement are maintained
in conformity therewith.


2. (a) Any domestic support measure in favour
of agricultural producers, including any
modification to such measure, and any
measure that is subsequently introduced


that cannot be shown to satisfy the criteria
in Annex 2 to this Agreement or to be
exempt from reduction by reason of any
other provision of this Agreement shall be
included in the Member’s calculation of its
Current Total AMS.


(b) Where no Total AMS commitment exists
in Part IV of a Member’s Schedule, the Mem-
ber shall not provide support to agricultural
producers in excess of the relevant de mini-
mis level set out in paragraph 4 of Article 6.


A2.2 Article 7: General Disciplines on Domestic support


Domestic support: the basis for exemption
from the reduction commitments


1. Domestic support measures for which
exemption from the reduction commitments
is claimed shall meet the fundamental
requirement that they have no, or at most
minimal, trade-distorting effects or effects
on production. Accordingly, all measures for
which exemption is claimed shall conform to
the following basic criteria:


(a) the support in question shall be provided
through a publicly-funded government
programme (including government
revenue foregone) not involving
transfers from consumers; and


(b) the support in question shall not have
the effect of providing price support
to producers;


plus policy-specific criteria and conditions as
set out below.


Government service programmes


2. General services


Policies in this category involve expenditures
(or revenue foregone) in relation to pro-
grammes which provide services or benefits to
agriculture or the rural community. They shall
not involve direct payments to producers or
processors. Such programmes, which include
but are not restricted to the following list,


shall meet the general criteria in paragraph 1
above and policy-specific conditions where set
out below:


(a) research, including general research,
research in connection with environmen-
tal programmes, and research programmes
relating to particular products;


(b) pest and disease control, including general
and product-specific pest and disease
control measures, such as early-warning
systems, quarantine and eradication;


(c) training services, including both general
and specialist training facilities;


(d) extension and advisory services, including
the provision of means to facilitate the
transfer of information and the results of
research to producers and consumers;


(e) inspection services, including general
inspection services and the inspection of
particular products for health, safety, grad-
ing or standardization purposes;


(f) marketing and promotion services,
including market information, advice and
promotion relating to particular products
but excluding expenditure for unspecified
purposes that could be used by sellers to
reduce their selling price or confer a direct
economic benefit to purchasers; and


A2.3 Agreement on Agriculture: Annex 2




23ICTSD Programme on Agricultural Trade and Sustainable Development


(g) infrastructural services, including: electricity
reticulation, roads and other means of
transport, market and port facilities, water
supply facilities, dams and drainage schemes,
and infrastructural works associated with
environmental programmes. In all cases the
expenditure shall be directed to the provision
or construction of capital works only, and shall
exclude the subsidized provision of on-farm
facilities other than for the reticulation of
generally available public utilities. It shall
not include subsidies to inputs or operating
costs, or preferential user charges.


3. Public stockholding for food security
purposes48


Expenditures (or revenue foregone) in relation to
the accumulation and holding of stocks of products
which form an integral part of a food security
programme identified in national legislation. This
may include government aid to private storage of
products as part of such a programme.


The volume and accumulation of such stocks shall
correspond to predetermined targets related
solely to food security. The process of stock
accumulation and disposal shall be financially
transparent. Food purchases by the government
shall be made at current market prices and sales
from food security stocks shall be made at no
less than the current domestic market price for
the product and quality in question.


4. Domestic food aid49


Expenditures (or revenue foregone) in relation
to the provision of domestic food aid to sections
of the population in need.


Eligibility to receive the food aid shall be subject
to clearly-defined criteria related to nutritional
objectives. Such aid shall be in the form of direct
provision of food to those concerned or the
provision of means to allow eligible recipients to
buy food either at market or at subsidized prices.


Food purchases by the government shall be made
at current market prices and the financing and
administration of the aid shall be transparent.


5. Direct payments to producers


Support provided through direct payments
(or revenue foregone, including payments in
kind) to producers for which exemption from
reduction commitments is claimed shall meet
the basic criteria set out in paragraph 1 above,
plus specific criteria applying to individual types
of direct payment as set out in paragraphs
6 through 13 below. Where exemption from
reduction is claimed for any existing or new type
of direct payment other than those specified
in paragraphs 6 through 13, it shall conform to
criteria (b) through (e) in paragraph 6, in addition
to the general criteria set out in paragraph 1.


6. Decoupled income support


(a) Eligibility for such payments shall be
determined by clearly-defined criteria
such as income, status as a producer or
landowner, factor use or production level in
a defined and fixed base period.


(b) The amount of such payments in any given
year shall not be related to, or based on,
the type or volume of production (including
livestock units) undertaken by the producer
in any year after the base period.


(c) The amount of such payments in any given
year shall not be related to, or based on, the
prices, domestic or international, applying
to any production undertaken in any year
after the base period.


(d) The amount of such payments in any given
year shall not be related to, or based on,
the factors of production employed in any
year after the base period.


(e) No production shall be required in order to
receive such payments.




24 Toni Harmer — Biofuels Subsidies and the law of the WTO


7. Government financial participation in
income insurance and income safety-net
programmes


(a) Eligibility for such payments shall be
determined by an income loss, taking into
account only income derived from agricul-
ture, which exceeds 30 per cent of average
gross income or the equivalent in net income
terms (excluding any payments from the
same or similar schemes) in the preceding
three-year period or a three-year average
based on the preceding five-year period,
excluding the highest and the lowest entry.
Any producer meeting this condition shall
be eligible to receive the payments.


(b) The amount of such payments shall compen-
sate for less than 70 per cent of the producer’s
income loss in the year the producer becomes
eligible to receive this assistance.


(c) The amount of any such payments shall
relate solely to income; it shall not relate
to the type or volume of production (includ-
ing livestock units) undertaken by the pro-
ducer; or to the prices, domestic or inter-
national, applying to such production; or to
the factors of production employed.


(d) Where a producer receives in the same year
payments under this paragraph and under
paragraph 8 (relief from natural disasters),
the total of such payments shall be less than
100 per cent of the producer’s total loss.


8. Payments (made either directly
or by way of government financial
participation in crop insurance schemes)
for relief from natural disasters


(a) Eligibility for such payments shall arise only
following a formal recognition by government
authorities that a natural or like disaster
(including disease outbreaks, pest infestations,
nuclear accidents, and war on the territory
of the Member concerned) has occurred or
is occurring; and shall be determined by a
production loss which exceeds 30 per cent of
the average of production in the preceding
three-year period or a three-year average
based on the preceding five-year period,
excluding the highest and the lowest entry.


(b) Payments made following a disaster shall be
applied only in respect of losses of income,
livestock (including payments in connection
with the veterinary treatment of animals),
land or other production factors due to the
natural disaster in question.


(c) Payments shall compensate for not more
than the total cost of replacing such losses
and shall not require or specify the type or
quantity of future production.


(d) Payments made during a disaster shall not
exceed the level required to prevent or
alleviate further loss as defined in criterion
(b) above.


(e) Where a producer receives in the same year
payments under this paragraph and under
paragraph 7 (income insurance and income
safety-net programmes), the total of such
payments shall be less than 100 per cent of
the producer’s total loss.


9. Structural adjustment assistance
provided through producer retirement
programmes


(a) Eligibility for such payments shall be
determined by reference to clearly defined
criteria in programmes designed to facilitate
the retirement of persons engaged in
marketable agricultural production, or their
movement to non-agricultural activities.


(b) Payments shall be conditional upon the total
and permanent retirement of the recipients
from marketable agricultural production.


10. Structural adjustment assistance provided
through resource retirement programmes


(a) Eligibility for such payments shall be
determined by reference to clearly defined
criteria in programmes designed to remove
land or other resources, including livestock,
from marketable agricultural production.


(b) Payments shall be conditional upon the
retirement of land from marketable agri-
cultural production for a minimum of three
years, and in the case of livestock on its
slaughter or definitive permanent disposal.




25ICTSD Programme on Agricultural Trade and Sustainable Development


(c) Payments shall not require or specify any
alternative use for such land or other
resources which involves the production of
marketable agricultural products.


(d) Payments shall not be related to either the
type or quantity of production or to the
prices, domestic or international, applying
to production undertaken using the land or
other resources remaining in production.


11. Structural adjustment assistance provided
through investment aids


(a) Eligibility for such payments shall be
determined by reference to clearly-
defined criteria in government programmes
designed to assist the financial or physical
restructuring of a producer’s operations
in response to objectively demonstrated
structural disadvantages. Eligibility for such
programmes may also be based on a clearly-
defined government programme for the
reprivatization of agricultural land.


(b) The amount of such payments in any given
year shall not be related to, or based
on, the type or volume of production
(including livestock units) undertaken by
the producer in any year after the base
period other than as provided for under
criterion (e) below.


(c) The amount of such payments in any given
year shall not be related to, or based on, the
prices, domestic or international, applying
to any production undertaken in any year
after the base period.


(d) The payments shall be given only for the
period of time necessary for the realization
of the investment in respect of which they
are provided.


(e) The payments shall not mandate or in any
way designate the agricultural products to be
produced by the recipients except to require
them not to produce a particular product.


(f) The payments shall be limited to the amount
required to compensate for the structural
disadvantage.


12. Payments under environmental programmes


(a) Eligibility for such payments shall be
determined as part of a clearly-defined
government environmental or conservation
programme and be dependent on the
fulfilment of specific conditions under the
government programme, including conditions
related to production methods or inputs.


(b) The amount of payment shall be limited to
the extra costs or loss of income involved in
complying with the government programme.


13. Payments under regional assistance
programmes


(a) Eligibility for such payments shall be limited
to producers in disadvantaged regions. Each
such region must be a clearly designated
contiguous geographical area with a
definable economic and administrative
identity, considered as disadvantaged on the
basis of neutral and objective criteria clearly
spelt out in law or regulation and indicating
that the region’s difficulties arise out of
more than temporary circumstances.


(b) The amount of such payments in any given
year shall not be related to, or based on,
the type or volume of production (including
livestock units) undertaken by the producer
in any year after the base period other than
to reduce that production.


(c) The amount of such payments in any given
year shall not be related to, or based on, the
prices, domestic or international, applying
to any production undertaken in any year
after the base period.


(d) Payments shall be available only to producers
in eligible regions, but generally available
to all producers within such regions.


(e) Where related to production factors, pay-
ments shall be made at a degressive rate
above a threshold level of the factor
concerned.


(f) The payments shall be limited to the
extra costs or loss of income involved in
undertaking agricultural production in the
prescribed area.




26 Toni Harmer — Biofuels Subsidies and the law of the WTO


1.1 For the purpose of this Agreement, a subsidy
shall be deemed to exist if:


(a) (1) there is a financial contribution by a
government or any public body within the
territory of a Member (referred to in this
Agreement as “government”), i.e. where:


(i) a government practice involves a direct
transfer of funds (e.g. grants, loans,
and equity infusion), potential direct
transfers of funds or liabilities (e.g.
loan guarantees);


(ii) government revenue that is otherwise
due is foregone or not collected (e.g.
fiscal incentives such as tax credits);50


(iii) a government provides goods or ser-
vices other than general infrastructure,
or purchases goods;


(iv) a government makes payments to a
funding mechanism, or entrusts or directs
a private body to carry out one or more of
the type of functions illustrated in (i) to
(iii) above which would normally be vested
in the government and the practice, in no
real sense, differs from practices normally
followed by governments;


or


(a) (2) there is any form of income or price sup-
port in the sense of Article XVI of GATT 1994;


and


(b) a benefit is thereby conferred.


1.2 A subsidy as defined in paragraph 1 shall be
subject to the provisions of Part II or shall be
subject to the provisions of Part III or V only if
such a subsidy is specific in accordance with the
provisions of Article 2.


AnneX 3: ReLeVAnt PRoVIsIons fRoM AGReeMent
on sUBsIDIes AnD CoUnteRVAILInG
MeAsURes


A3.1 Article 1: Definition of a Subsidy


2.1 In order to determine whether a subsidy, as
defined in paragraph 1 of Article 1, is specific to
an enterprise or industry or group of enterprises
or industries (referred to in this Agreement as
“certain enterprises”) within the jurisdiction of
the granting authority, the following principles
shall apply:


(a) Where the granting authority, or the
legislation pursuant to which the granting
authority operates, explicitly limits access
to a subsidy to certain enterprises, such
subsidy shall be specific.


(b) Where the granting authority, or the legislation
pursuant to which the granting authority
operates, establishes objective criteria or
conditions51 governing the eligibility for, and
the amount of, a subsidy, specificity shall not
exist, provided that the eligibility is automatic
and that such criteria and conditions are


strictly adhered to. The criteria or conditions
must be clearly spelled out in law, regulation,
or other official document, so as to be capable
of verification.


(c) If, notwithstanding any appearance of non
specificity resulting from the application of
the principles laid down in subparagraphs (a)
and (b), there are reasons to believe that
the subsidy may in fact be specific, other
factors may be considered. Such factors are:
use of a subsidy programme by a limited
number of certain enterprises, predominant
use by certain enterprises, the granting of
disproportionately large amounts of subsidy to
certain enterprises, and the manner in which
discretion has been exercised by the granting
authority in the decision to grant a subsidy.52
In applying this subparagraph, account shall
be taken of the extent of diversification of


A3.2 Article 2: Specificity




27ICTSD Programme on Agricultural Trade and Sustainable Development


economic activities within the jurisdiction of
the granting authority, as well as of the length
of time during which the subsidy programme
has been in operation.


2.2 A subsidy which is limited to certain enter-
prises located within a designated geographical
region within the jurisdiction of the granting
authority shall be specific. It is understood that
the setting or change of generally applicable


tax rates by all levels of government entitled
to do so shall not be deemed to be a specific
subsidy for the purposes of this Agreement.


2.3 Any subsidy falling under the provisions of
Article 3 shall be deemed to be specific.


2.4 Any determination of specificity under
the provisions of this Article shall be clearly
substantiated on the basis of positive evidence.


3.1 Except as provided in the Agreement on Agri-
culture, the following subsidies, within the mean-
ing of Article 1, shall be prohibited:


(a) subsidies contingent, in law or in fact,53


whether solely or as one of several other con-
ditions, upon export performance, including
those illustrated in Annex I;54


(b) subsidies contingent, whether solely or as one
of several other conditions, upon the use of
domestic over imported goods.


3.2 A Member shall neither grant nor maintain
subsidies referred to in paragraph 1.


A3.3 Part II: Prohibited subsidies – Article 3: Prohibition




28 Toni Harmer — Biofuels Subsidies and the law of the WTO


1 The GSI of the International Institute for Sustainable Development has published a series of
comprehensive studies on government support for the ethanol and biodiesel. This paper draws
heavily on the examples and framework used by GSI in those authoritative studies, which are
available at www.globalsubsidies.org/en/research/biofuel-subsidies (accessed 2 June 2009).


2 There are two emerging categories of biofuels: “second-generation biofuels” refers to
biofuels produced from cellulosic feedstocks, and “third-generation biofuels” refers to fuels
produced from algae. These biofuels are not considered in detail in this paper as they are
yet commercially viable. These emerging technologies do, however, offer the prospect of less
negative environmental and food impacts than their first-generation counterparts, and for this
reason they are attracting increased attention and government R&D support.


3 Ethanol is ethyl alcohol, an alcohol fermented from plant materials, such as sugarcane and
corn. Biodiesel is an esterified fuel produced from fatty-acid feedstocks such as vegetable oils,
animal fats and cooking wastes.


4 Statistics in Section 1 are drawn from OECD (2008) unless otherwise stated.


5 Ethanol from sugarcane, the key feedstock used in Brazil, is estimated to reduce greenhouse
gas emissions by 80 percent over the production and use lifecycle. Other feedstocks, however,
such as sugar beets, wheat and vegetable oils, offer lower savings, estimated to be in the
30–60 percent range. Corn, the key feedstock for ethanol in the USA, has the lowest estimated
savings, at less than 30 percent (OECD 2008).


6 FAO Director-General Jacques Diouf has expressed concern that “current policies tend to favour
producers in some developed countries”: FAO press release, “Reviewing biofuel policies and
subsidies”, 7 October 2008, following the release of FAO (2008b).


7 Only 1.9 percent of global ethanol production was traded in 2006, and 12 percent of global
biodiesel production was traded in 2007 (OECD 2008). It is difficult to obtain firm figures for
global ethanol trade, as trade data do not distinguish between ethanol used for fuel and ethanol
used for other purposes such as beverages and chemicals (Kojima et al. 2007).


8 Ethanol production has tripled since 2000, to reach 52 billion litres in 2007. Biodiesel production
grew by 43 percent over 2006–2007, to reach 10.2 billion litres.


9 Testimony of Nathan Kimpel, President and Chief Operating Office, New Energy Corp, before the
US House of Representatives Small Business Committee Hearing, “The State of the Renewable
Fuels Industry in the Current Economy”, 4 March 2009.


10 The EU agreed to expanded binding targets in late 2008 after it became clear that indicative
targets established in 2003 would not be met. The USA also announced a significant expansion to
its renewable fuels standard and Canada implemented a federal biofuels mandate for the first
time.


11 The US ethanol industry is also pushing for the federal government to increase the maximum blended
rate for ethanol in petrol from its current 10 percent cap. The administration has indicated support
for some increase. Transcript of press availability with Agriculture Secretary Tom Vilsack on how the
American Recovery and Reinvestment Act funding will stimulate the economy, create jobs and impact
on rural communities, 9 March 2009, obtained from www.usda.gov (accessed 21 March 2009).


enDnotes




29ICTSD Programme on Agricultural Trade and Sustainable Development


12 See also GSI (2008).


13 Steenblik (2006) goes on to note that the “decision helped in standardizing the classification
of biodiesel across countries, but did not deal with the problem of lack of specificity: biodiesel
shares the same subheading with numerous other chemical products completely unrelated to
it. For example, the 2005 edition of the Harmonized Tariff Schedule of the United States lists
25 chemical mixtures at the 10-digit level under 3824.90, ranging from cultured crystals to
“electroplating chemical and electrolessplating solutions and other materials for printed circuit
boards, plastics and metal finishings”.


14 The HS system is the internationally standardized nomenclature system for the description,
naming and coding of goods established by the World Customs Organization.


15 It is important to note that this classification does not distinguish between the various uses for
ethanol. It covers both denatured (HS220710) and undenatured (HS220720) ethanol.


16 Article 21 AoA provides that the SCM is subject to the specific provisions of the AoA.


17 See Article 1.2 SCM. See also Article 2 SCM, which sets out the principles that will apply in
determining whether a particular subsidy is specific.


18 Article 2 SCM.


19 The blue box covers subsidies that are linked to production but that are subject to certain
limits (Article 6.5 AoA). The amber and green boxes are most relevant to discussion of biofuels
subsidies.


20 If a domestic support measures falls below a de minimis level (5 percent of the value of
production for developed countries or 10 percent for developing countries), then it does not
have to be counted in a WTO Member’s AMS.


21 Article 15.2 AoA.


22 The AoA also contains provisions relating to food security and the provision of food at subsidized
prices to the poor (see Paragraphs 3 and 4 of Annex 2 of the AoA and related footnotes).


23 Article 1.1(a)(ii) SCM.


24 Panel report in US – Tax Treatment for Foreign Sales Corporations (DS108), Paragraphs 8.17–
8.19.


25 Appellate Body report in US –Tax Treatment for Foreign Sales Corporations, Recourse to Article
21.5 (DS108) (US–FSC) (Article 21.5 – EC), Paragraph 90.


26 Appellate Body report in US–FSC (Article 21.5 – EC), Paragraphs 91–92.


27 See also Laan et al. (2009).


28 Appellate Body report in Canada – Measures Affecting the Export of Civilian Aircraft (Canada –
Aircraft), Paragraph 157.


29 Appellate Body report in Canada – Aircraft, Paragraphs 157–158.




30 Toni Harmer — Biofuels Subsidies and the law of the WTO


30 Article 14(b) SCM.


31 Article 14(c) SCM.


32 Article 1(a) AoA: definition of AMS.


33 Annex III, Paragraph 7, AoA.


34 Appellate Body report in US – Subsidies on Upland Cotton (DS267).


35 The EU Energy Crops Scheme will expire after 2009: see Article 146 of Council Regulation (EC)
73/2009, 19 January 2009.


36 See earlier discussion of possible classification issues concerning feedstocks for second- and
third-generation biofuels, such as miscanthus and switchgrass. See also the discussion in Howse
et al. (2006).


37 Appellate Body report, US – Imposition of Countervailing Duties on Certain Hot-Rolled Lead
and Bismuth Carbon Steel Products Originating in the UK (US – Lead and Bismuth II) (DS138),
Paragraph 68.


38 Panel report, US – Preliminary Determinations with respect to Certain Softwood Lumber from
Canada (US – Softwood Lumber III) (DS236), Paragraphs 7.71–7.72.


39 The US ethanol tariff has two components: a bound 2.5 percent ad valorem tariff, and an
additional duty or secondary tariff of 54 cents a gallon. Some ethanol (including Brazilian
ethanol) enters the USA under the Caribbean Basin Initiative.


40 Brazil claims that the US tariff is above the bound rate to which the USA agreed in the WTO.
The USA argues that the secondary tariff is WTO-consistent, because during the Uruguay Round
negotiations the USA included the secondary tariff in its schedule as an “other duty or charge”.
See letter from Senator Grassley to USTR Schwab dated 9 August 2008, available at http://
grassley.senate.gov (accessed 24 March 2009).


41 See Laan et al. (2009) for a description of how biofuel mandates interact with tariffs to provide
market price support.


42 See Schnepf (2007).


43 Commission Regulation (EC) No 194/2009 of 11 March 2009 imposing provisional countervailing
duty on imports of biodiesel originating in the USA, 67/60, Official Journal of the European
Union 12 March 2009.


44 Section 203 HR1242.


45 European Biodiesel Board press release, “Surge in B99 Exports Towards Europe – EBB Asks for
Systematic Registration of Biodiesel Imports”, 16 October 2008.


46 Although the SCM provides for Members to review and consider reinstating this exemption, this
has not occurred (Article 31 SCM).




31ICTSD Programme on Agricultural Trade and Sustainable Development


47 A database of US federal and state incentives for alternative fuels, including tax reductions
and exemptions, can be found at the US Department of Energy Alternative Fuels and Advanced
Vehicles Data Center website: www.afdc.energy.gov/afdc/progs/all_state_summary.php/afdc/0
(accessed 9 June 2009).


48 For the purposes of Paragraph 3 of this Annex, governmental stockholding programmes for food
security purposes in developing countries whose operation is transparent and conducted in
accordance with officially published objective criteria or guidelines shall be considered to be
in conformity with the provisions of this paragraph, including programmes under which stocks
of foodstuffs for food security purposes are acquired and released at administered prices,
provided that the difference between the acquisition price and the external reference price is
accounted for in the AMS.


49 For the purposes of Paragraphs 3 and 4 of this Annex, the provision of foodstuffs at subsidized
prices with the objective of meeting food requirements of urban and rural poor in developing
countries on a regular basis at reasonable prices shall be considered to be in conformity with
the provisions of this paragraph.


50 In accordance with the provisions of Article XVI of GATT 1994 (Note to Article XVI) and the
provisions of Annexes I through III of this Agreement, the exemption of an exported product
from duties or taxes borne by the like product when destined for domestic consumption, or the
remission of such duties or taxes in amounts not in excess of those which have accrued, shall
not be deemed to be a subsidy.


51 Objective criteria or conditions, as used herein, mean criteria or conditions that are neutral, that
do not favour certain enterprises over others, and that are economic in nature and horizontal
in application, such as number of employees or size of enterprise.


52 In this regard, in particular, information on the frequency with which applications for a subsidy
are refused or approved and the reasons for such decisions shall be considered.


53 This standard is met when the facts demonstrate that the granting of a subsidy, without having
been made legally contingent upon export performance, is in fact tied to actual or anticipated
exportation or export earnings. The mere fact that a subsidy is granted to enterprises which
export shall not for that reason alone be considered to be an export subsidy within the meaning
of this provision.


54 Measures referred to in Annex I as not constituting export subsidies shall not be prohibited
under this or any other provision of this Agreement.




32 Toni Harmer — Biofuels Subsidies and the law of the WTO


Abreu, F, Vieira, J. and Ramos, S. (2006). “National Program for the Production and Use of Biodiesel”.
Revista de Politica Agricola (english version) 16(3): 35-49. Brasilia. Brazil.


Blandford, D. and Josling, T. (2007). “Should the Green Box be Modified?”, International Food &
Agricultural Trade Policy Council discussion paper. Washington, DC. USA.


Food and Agriculture Organization of the United Nations (FAO) (2008b). “The State of Food and
Agriculture”. Food and Agriculture Organization of the United Nations. Rome. Italy.


Global Subsidies Initiative (GSI) (2008). “Biofuels – At What Cost? Government Support for Ethanol and
Biodiesel in China”. International Institute for Sustainable Development. Geneva. Switzerland.


International Bank for Reconstruction and Development and World Bank (2008). “Agriculture for
Development”. World Development report. Washington, DC. USA.


International Herald Tribune (2008). “Brazil Presses US, EU to Include Ethanol in any WTO Trade
Pact”. International Herald Tribune 28 July 2008.


Kojima, M, Mitchell, D. and Ward, W. (2007). “Considering Trade Policies for Liquid Biofuels”. Energy
Sector Management and Assistance Program, World Bank. Washington, DC. USA.


Koplow, D. (2006). “Biofuels – At What Cost? Government Support for Ethanol and Biodiesel in the
United States”. Global Subsidies Initiative, International Institute for Sustainable Development.
Geneva. Switzerland.


Koplow, D. (2007). “Biofuels – At What Cost? Government Support for Ethanol and Biodiesel in the
United States: 2007 Update”. Global Subsidies Initiative, International Institute for Sustainable
Development. Geneva. Switzerland.


Kutas, G., Lindberg, C. and Steenblik, R. (2007). “Biofuels -At What Cost? Government Support for
Ethanol and Biodiesel in the European Union”. Global Subsidies Initiative, International Institute for
Sustainable Development. Geneva. Switzerland.


Laan, T., Litman, T. and Steenblik, R. (2009). “Biofuels – At What Cost? Government Support for
Ethanol and Biodiesel in Canada”. Global Subsidies Initiative, International Institute for Sustainable
Development. Geneva. Switzerland.


Mitchell, D. (2008). “A Note on Rising Food Prices”, policy research working paper no. 4682. World
Bank. Washington, DC. USA.


Organisation for Economic Co-operation and Development (OECD) (2007). “A Review of Policy Measures
supporting Production and Use of Bioenergy”, TAD/CA/APM/WP (2007)24/FINAL. Organisation for
Economic Co-operation and Development. Paris. France.


Organisation for Economic Co-operation and Development (OECD) (2008). “Biofuels: An Economic
Assessment”. Organisation for Economic Co-operation and Development. Paris. France.


Renewable Fuel Association (undated). “The Importance of Preserving the Secondary Tariff on
Ethanol”. URL: www.ethanolrfa.org/resource/facts/trade/documents/WebUpdateTariffandTrade.
pdf (accessed 24 March 2009)


RefeRenCes




33ICTSD Programme on Agricultural Trade and Sustainable Development


Schnepf, R. (2007). “Brazil’s WTO Case Against U.S. Agricultural Support: A Brief Overview”,
Congressional Research Service report RS22728. Congressional Research Service. Washington, DC.
USA.


Schnepf, R. and Womach, J. (2007). “Potential Challenges to US Farm Subsidies in the WTO”,
Congressional Research Service report RL33697. Congressional Research Service. Washington, DC.
USA.


Steenblik, R. (2006). “Liberalisation of Trade in Renewable Energy and Associated Technologies:
Biodiesel, Solar Thermal and Geothermal Energy”, OECD trade and environment working paper
2006/1. Organisation for Economic Co-operation and Development. Paris. France.


Steenblik, R. (2007). “Biofuels – At What Cost? Government Support for Ethanol and Biodiesel
in Selected OECD Countries”. Global Subsidies Initiative, International Institute for Sustainable
Development. Geneva. Switzerland.


US Department of Agriculture (USDA) (2007). “India – Biofuels Annual”, Global Agriculture Information
Network report IN7047, United States Department of Agriculture. Washington, DC. USA.


US Department of Agriculture (USDA) (2008a). “Brazil – Biofuels Annual”, Global Agriculture
Information Network report BR8013 United States Department of Agriculture. Washington, DC.
USA.


US Department of Agriculture (USDA) (2008c). “People’s Republic of China – Biofuels Annual”,
Global Agriculture Information Network report CH8052, United States Department of Agriculture.
Washington, DC. USA


Yacobucci, B. (2008). “Biofuels Incentives: A Summary of Federal Programs”, Congressional Research
Service report. RL33572, Congressional Research Service. Washington, DC. USA.


World Trade Organization (WTO) (2005). “Environmental Goods for Development, Submission by
Brazil”, TN/TE/W/59, Word Trade Organization. Geneva, Switzerland.


World Trade Organization (2007a). “United States – Domestic Support and Export Credit Guarantees for
Agricultural Products, Request for Consultations by Brazil”, WT/DS365/1. World Trade Organization.
Geneva. Switzerland.


World Trade Organization (2007b). “United States – Subsidies and Other Domestic Support for Corn
and Other Agricultural Products, Request for Consultations by Canada”, WT/DS/357/1. World Trade
Organization. Geneva, Switzerland.




34 Toni Harmer — Biofuels Subsidies and the law of the WTO


Agricultural Trade and Sustainable Development
Constructing a Composite Index of Market Acess.By Tim Josling.
Issue Paper No.23, 2009


Comparing safeguard measures in regional and bilateral agreements. By Paul Kruger, Willemien Denner and JB Cronje,
Issue Paper No.22, 2009


How would a WTO agreement on bananas affect exporting and importing countries? By Giovanni Anania,
Issue Paper No.21, 2009


Biofuels Subsidies and the Law of the World Trade Organisation. By Toni Harmer,
Issue Paper No.20, 2009


Biofuels Certification and the Law of the World Trade Organisation. By Marsha A. Echols,
Issue Paper No.19, 2009


US Trade Policies on Biofuels and Sustainable Development. By Jane Earley,
Issue Paper No.18, 2009


EU Support for Biofuels and Bioenergy, ‘’Environmental Sustainability’’ Criteria, and Trade Policy. By Alan Swinbank,
Issue Paper No.17, 2009


The Implications for Burkina Faso of the July 2008 Draft Agricultural Modalities.
By Abdoulaye Zonon, 2008. (Also available in French)


Implications for Mauritius of the July 2008 Draft Agricultural Modalities
By Gowreeshankursing Rajpati, 2008


Implications for Japan of the July 2008 Draft Agricultural Modalities
By Kazuhito Yamashita, 2008


Implications for Brazil of the July 2008 Draft Agricultural Modalities
By Andre Nassar, Cinthia Cabral da Costa and Luciane Chiodi, 2008


Implications for India of the May 2008 Draft Agricultural Modalities
By Munisamy Gopinath and David Laborde, 2008


Implications for the European Union of the May 2008 Draft Agricultural Modalities
By Sebastien Jean, Tim Josling and David Laborde, 2008


Implications for the United States of the May 2008 Draft Agricultural Modalities
By David Blandford, David Laborde and Will Martin, 2008


An Overview Assessment of the Revised Draft WTO Modalities for Agriculture
By Mike Gifford and Raul Montemayor, 2008


Implications of the July 2008 Draft Agricultural Modalities for Sensitive Products
By Ariel Ibañez, María Marta Rebizo and Agustín Tejeda
Issue Paper No. 16, 2008


How will the May 2008 “Modalities” Text Affect Access to the Special Safeguard Mechanism, and the Effectiveness of
Additional Safeguard Duties? By Raul Montemayor,
Issue Paper No. 15, 2008


Value Chains and Tropical Products in a Changing Global Trade Regime. By Charles Mather.
Issue Paper No. 13,2008


Trade Effects of SPS and TBT Measures on Tropical and Diversification Products. By Anne-Celia Disdier, Belay Fekadu,
Carlos Murillo, Sara A. Wong.
Issue Paper No. 12, 2008


Tropical and Diversification Products Strategic Options for Developing Countries. By Santiago Perry.
Issue Paper No. 11, 2008


Implications of proposed modalities for the Special Safeguard Mechanism: a simulation exercise. By Raul Montemayor,
Issue Paper No.10, 2007


seLeCteD ICtsD IssUe PAPeRs




35ICTSD Programme on Agricultural Trade and Sustainable Development


Trade and Sustainable Land Management in Drylands.
Selected Issue Briefs, 2007.


A Comparison of the Barriers Faced by Latin American and ACP Countries’ Exports of Tropical Products.By Jean-
Christophe Bureau, Anne-Celia Disdier and Priscila Ramos
Issue Paper No. 9, 2007.


South-South Trade in Special Products. By Christopher Stevens, Jane Kennan and Mareike Meyn,
Issue Paper No.8, 2007


The ACP Experience of Preference Erosion in the Banana and Sugar Sectors: Possible Policy Responses to Assist in
Adjusting to Trade Changes by Paul Goodison
Issue Paper No. 7, 2007


Special Products and the Special Safeguard Mechanism: Strategic Options for Developing Countries. By ICTSD
Issue Paper No. 6, 2005


Lessons from the Experience with Special Products and Safeguard Mechanisms in Bilateral Trade Agreements. By Carlos
Pomareda
Issue Paper No.5


Methodology for the Identification of Special Products (SP) and Products for Eligibility Under Special Safeguard
Mechanism (SSM) by Developing Countries. By Luisa Bernal, Issue Paper No. 4, 2005


Special Products: Options for Negotiating Modalities. By Anwarul Hoda,
Issue Paper No. 3, 2005


Tariff Reduction, Special Products and Special Safeguards: An Analysis of the Agricultural Tariff Structures of G-33
Countries. By Mario Jales
Issue Paper No. 2, 2005


The New SSM: A Price Floor Mechanism for Developing Countries. By Alberto Valdés and William Foster,
Issue Paper No. 1, 2005


Competitiveness and Sustainable Development
Looking for a meaningful Duty Free Quota Free Market Access Initiative in the Doha Development Agenda. By David Laborde.
Issue Paper No.4, 2008


Impact of Origin Rules for Textiles and Clothing on Developing Countries. By Munir Ahmad. Issue Paper No.3, 2007


Special and Differential Treatment for Small and Vulnerable Countries Based on the Situational Approach. By Werner Corrales-
Leal, Felipe Baritto, and Sarah A. Mohan
Issue Paper No.2, 2007.


Basic Concepts and Proposals on the use of Policy Spaces in Trade-supported Strategies for Sustainable Development. By
Werner Corrales-Leal
Issue Paper No. 1, 2007.


Dispute Settlement and Legal Aspects of International Trade
Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System. By Joseph Francois and Henrik Horn
Issue Paper No. 6, 2008


Developing Countries, Countermeasures and WTO Law: Reinterpreting the DSU against the Background of International Law.
By Andrea Bianchi and Lorenzo Gradoni
Issue Paper No. 5, 2008.


Does Legal Capacity Matter? Explaining Dispute Initiation and Antidumping actions in the WTO. By Marc L. Busch, Eric
Reinhardt and Gregory Shaffer
Issue Paper No. 4, 2008.


Compliance and Remedies against Non-Compliance under the WTO System: Towards A More Balanced Regime for All Members.
By Virachai Plasai
Issue Paper No.3, 2007.


Access to Justice in the WTO: The Case for a Small Claims Procedure, A Preliminary Analysis. By Håkan Nordström and Gregory
Shaffer
Issue Paper No. 2, 2007.


Appeal Without Remand: A Design Flaw in the WTO Dispute Settlement System. By Joost Pauwelyn
Issue Paper No. 1, 2007.




36 Toni Harmer — Biofuels Subsidies and the law of the WTO


Fisheries, International Trade and Sustainable Development


Fisheries, Aspects of ACP-EU Interim Economic Partnership Agreements: Trade and Sustainable Development Implications. By
Liam Campling
Issue Paper No.6, 2008


Fisheries, International Trade and Sustainable Development.
Policy Discussion Paper, By ICTSD, 2006.


Aquaculture: Issues and Opportunities for Sustainable Production and Trade. By Frank Asche and Fahmida Khatun
Issue Paper No. 5, 2006.


Market Access and Trade Liberalisation in Fisheries. By Mahfuz Ahmed
Issue Paper No. 4, 2006.


Trade and Marketplace Measures to Promote Sustainable Fishing Practices. By Cathy Roheim and Jon G. Sutinen
Issue Paper No. 3, 2006.


Fisheries Access Agreements: Trade and Development Issues. By Stephen Mbithi Mwikya
Issue Paper No. 2, 2006.


Intellectual Property Rights and Sustainable Development
The Global Debate on the Enforcement of Intellectual Property Rights and Developing Countries. By ICTSD
Issue Paper No.22,. 2009


Intellectual Property and Competition Law. By Carlos M. Correa
Issue Paper No.21, 2007.


Intellectual Property Provisions in European Union Trade Agreements: Implications for Developing Countries. By Maximiliano
Santa Cruz S
Issue Paper No. 20, 2007.


Maintaining Policy Space for Development: A Case Study on IP Technical Assistance in FTAs. By Pedro Roffe and David Vivas
with Gina Vea
Issue Paper No. 19, 2007.


New Trends in Technology Transfer: Implications for National and International Policy. By John H. Barton
Issue Paper No. 18, 2007.


Trade in Services and Sustainable Development
Maritime Transport and Related Logistics Services in Egypt. By Ahmed F. Ghoneim, and Omneia A. Helmy,
Issue Paper No 8, 2007


Opportunities and Risks of Liberalising Trade in Services in Pakistan. By Abid A. Burki, Issue Paper No 7, 2007


Regulatory Principles for Environmental Services and the General Agreement on Trade in Services. By Massimo Geloso Grosso,
Issue Paper No 6, 2007


Opportunities and Risks of Liberalising Trade in Services in Mozambique. By Alberto Teodoro Bila, Eduardo Mondlane, Hélder
Chambal and Viriato Tamele,
Issue Paper No 5, 2007


Opportunities and Risks of Liberalizing Trade in Services in Tanzania. By Daima Associates Limited, National Consultant,
Issue Paper No.4, 2007


Trade and Sustainable Energy
Climate Change and Trade on the Road to Copenhagen
Policy Discussion Paper, 2009.


Trade, Climate Change and Global Competitiveness: Opportunities and Challenge for Sustainable Development in China and
Beyond. By ICTSD
Selected Issue Briefs No.3, 2008.


Intellectual Property and Access to Clean Energy Technologies in Developing Countries: An Analysis of Solar Photovoltaic,
Biofuel and Wind Technologies.
By John H. Barton,
Issue Paper No. 2, 2007




37ICTSD Programme on Agricultural Trade and Sustainable Development


Climate, Equity, and Global Trade.
Selected Issue Briefs No. 2, 2007.


The WTO and Energy: WTO Rules and Agreements of Relevance to the Energy Sector. By Julia Selivanova
Issue Paper No. 1, 2007.


Linking Trade, Climate and Sustainable Energy.
Selected Issue Briefs, 2006.


These and other ICTSD resources are available at http://www.ictsd.org




www.ictsd.org


Constructing a Composite Index of Market Acess.. •
By Tim Josling.
Issue Paper No.23, 2009


Comparing safeguard measures in regional and bilateral agreements. •
By Paul Kruger, Willemien Denner and JB Cronje,
Issue Paper No.22, 2009


How would a WTO agreement on bananas affect exporting and importing countries? •
By Giovanni Anania,
Issue Paper No.21, 2009


Biofuels Subsidies and the Law of the World Trade Organisation. •
By Toni Harmer,
Issue Paper No.20, 2009


Biofuels Certification and the Law of the World Trade Organisation. •
By Marsha A. Echols,
Issue Paper No.19, 2009


US Trade Policies on Biofuels and Sustainable Development. By Jane Earley, •
Issue Paper No.18, 2009


EU Support for Biofuels and Bioenergy, ‘’Environmental Sustainability’’ Criteria, and Trade Policy. •
By Alan Swinbank,
Issue Paper No.17, 2009


The Implications for Burkina Faso of the July 2008 Draft Agricultural Modalities. •
By Abdoulaye Zonon, 2008. (Also available in French)


Implications for Mauritius of the July 2008 Draft Agricultural Modalities •
By Gowreeshankursing Rajpati, 2008


Implications for Japan of the July 2008 Draft Agricultural Modalities •
By Kazuhito Yamashita, 2008


Implications for Brazil of the July 2008 Draft Agricultural Modalities•
By Andre Nassar, Cinthia Cabral da Costa and Luciane Chiodi, 2008


Implications for India of the May 2008 Draft Agricultural Modalities •
By Munisamy Gopinath and David Laborde, 2008


Implications for the European Union of the May 2008 Draft Agricultural Modalities•
By Sebastien Jean, Tim Josling and David Laborde, 2008


Implications for the United States of the May 2008 Draft Agricultural Modalities•
By David Blandford, David Laborde and Will Martin, 2008


An Overview Assessment of the Revised Draft WTO Modalities for Agriculture•
By Mike Gifford and Raul Montemayor, 2008


For further information, visit www.ictsd.org


ABOUT ICTSD
Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an
independent non-profit and non-governmental organization based in Geneva. By empowering
stakeholders in trade policy through information, networking, dialogue, well-targeted research and
capacity building, the centre aims to influence the international trade system such that it advances
the goal of sustainable development.


ICTSD’s Programme on Agricultural Trade and Sustainable Development aims to promote food security,
equity and environmental sustainability in agricultural trade. Publications include:




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