MODULE
3
Introduction to the Agreement on
Agriculture
ESTIMATED TIME: 5 hours
OBJECTIVES OF MODULE 3

Introduce the Agreement on Agriculture and explain what is agricultural trade;

outline agricultural trade policies under the GATT (prior to the WTO);

explain the Uruguay Round agriculture negotiations.

Explain the structure of the Agreement on Agriculture;

describe the product coverage under the Agreement on Agriculture;

explain the disciplines and commitments in the Agreement on Agriculture;

outline Implementation under the Agreement on Agriculture;

describe the role of the Committee on Agriculture.

Explain the relationship of the Agreement on Agriculture to other WTO Agreements.
1
I.
INTRODUCTION
In Module 1, we reviewed the WTO, its structure and organization as well as the multilateral trading system.
Rules were explained generally with a special emphasis in goods in order to prepare for studying the
Agreement on Agriculture.
This Module and the others that follow look at the specific rules governing trade in agricultural products, a
subset of goods. At the end of this Module you should be able to explain:

agricultural trade and multilateral trade policies prior to the WTO and the Uruguay Round agriculture
negotiations;

the Agreement on Agriculture that came out of the Uruguay Round – its structure, product coverage,
disciplines and commitments, implementation;

the relationship of the Agreement on Agriculture to other WTO Agreements; and

the role of the Committee on Agriculture.
I.A.
AGRICULTURAL TRADE
The importance of agriculture and agricultural trade cannot be overemphasized. Trade in agricultural products,
for example, aids global food security by ensuring that temporary or protracted food deficits arising from
adverse climatic and other conditions can be met from world markets.
In addition, in many countries, agricultural trade is an important part of overall economic activity. It generates
income and wealth, creates jobs, plays a major role in domestic agricultural production and export activities,
and generates revenue and foreign exchange for governments.
I.B.
AGRICULTURE TRADE RULES UNDER THE GATT
International trade in agriculture products had been subject to the rules of the multilateral trading system
since the entry into force of the GATT back in 1947. However, there were several important differences with
respect to the rules that applied to agricultural primary products as opposed to industrial products.
Furthermore, there were exemptions and exceptions for agriculture trade and for subsidies to producers of
agriculture products.
For example, the GATT 1947 allowed Contracting Parties to use some non-tariff measures such as subsidies
and import quotas. In addition, many of the Contracting Parties operated so-called "grey area" measures that
were not clearly covered by the rules or commitments but were of dubious legality nonetheless.
GATT 1947 also permitted, at least to some extent, the use of (1) non-tariff barriers to imports, such as
quantitative restrictions, (2) subsidies to agricultural producers, and (3) export subsidies for primary products.
However, there were conditions attached to these flexibilities that often turned out to be quite strict.
2
I.B.1.
IMPORT RESTRICTIONS
Article XI.2(c) of the GATT 1947 permitted the use of quantitative import restrictions on imports of agricultural
products. But there were a lot of conditions attached as the import restriction had to be part of a national
supply management scheme which imports could undermine. In addition, the exception in Article XI.2(c) was
conditional on Contracting Parties maintaining a minimum proportion of imports relative to domestic
production. Thus, quantitative import restrictions on imports of agriculture goods were permitted but subject to
a list of conditions.
Article XI.2(c) was the subject of a lot of litigation in the GATT. For agriculture, the most important of the
cases was Japan – Restrictions on Certain Agriculture Products.1 The Panel effectively showed that the
requirements under Article XI.2(c) were quite strict and confirmed the view of some other Members that had
sought waivers for sensitive products. The US obtained such a waiver in 1955 for some cotton products, some
dairy products, peanuts, syrup and sugar.2 This waiver remained in place until the Uruguay Round was
completed and the provisions of the WTO Agreement on Agriculture applied to agricultural products.
Switzerland, on the other hand, negotiated an exemption for the agriculture sector in its protocol of accession
to the GATT.3
TIP
What is a protocol of accession?
States and Customs territories, which became Contracting Parties of the GATT between 1948 and
31 December 1994 had to negotiate the conditions of their accession to the GATT 1994. These conditions
and commitments are in protocols of accession, which form an integral part of the GATT 1994. Similarly,
WTO Members that joined the organization after its establishment have protocols of accession (see
Article XII of the WTO Agreement).
In addition, across the GATT only about one-third of agriculture products had bound tariff rates. Furthermore,
many Members used various measures to support exports of agricultural products, to subsidise domestic
production and to restrict imports using high tariffs or non-tariff measures.
Notwithstanding the conditions attached to import restrictions under Article XI of GATT, many non-tariff
barriers were applied to imports without any effective limits on domestic production and without maintaining
minimum import access. In some cases, this was achieved by the use of measures not specifically provided for
under Article XI (the General Elimination of Quantitative Restrictions).
1
L/6253 adopted on 2 February 1988, BISD/35S/163
2
BISD/3S/32; March 1955; United States – Import restrictions on agricultural products
3
In the WTO, the India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products
("India – Quantitative Restrictions"), was litigated based on Article XI of the GATT 1994. See the Panel Report,
WT/DS90/R, adopted 22 September 1999, as upheld by the Appellate Body Report, WT/DS90/AB/R,
paragraph 5.128
3
In other cases, restrictions were kept pursuant to exceptions and country-specific derogations (such as,
grandfather clauses, waivers and protocols of accession). In yet other cases, non-tariff import restrictions were
maintained without any apparent justification. Major agricultural products such as cereals, meat, dairy
products, sugar and a range of fruits and vegetables faced barriers to trade on a scale uncommon in other
merchandise sectors.
TIP
You have seen waivers in Module 1 and protocol of accession before- what is this reference to "grandfather
clause"?
Under a grandfather clause, a rule needs to be applied only to the extent that it is not inconsistent with
legislation in effect before the accession to the GATT (for grandfather clause applying to the GATT) or the
creation of the WTO for post-Uruguay Round Agreements.
I.B.2.
DOMESTIC SUPPORT
The rules on subsidies to farmers were not clear under the GATT, where Article III.8(b) stated that subsidies to
producers were not prohibited by the national treatment obligation. In addition, it was not even clear whether
or not price support measures were subsidies.
However, the value of tariff concessions affected by these subsidies was protected by Article XXIII which states
that concessions cannot be nullified or impaired, even by measures that comply with the GATT (that is, by
non-violation nullification or impairment).
The use of Article XXIII in the case EC – Payments and Subsidies Paid to Processors and Producers of Oilseeds
and Related Animal Feed4, brought by the US against the EU, highlighted the importance of non-violation
nullification or impairment. The EU had bound tariffs on oilseeds at zero and subsequently introduced a subsidy
that was paid to processors on condition that they bought EU produced oilseeds. The subsidy was later
changed to payments to producers based on the area of oilseeds planted and harvested.
The US claimed, and the Panel agreed, that the subsidy scheme nullified or impaired the benefits it had
expected from the zero tariff binding. The case was taken during the Uruguay Round and the results of the
dispute were incorporated into the EU's Schedule as limitations on the area of oilseeds planted and some
market access concessions to the US and some other countries.
However, disputes under Article XXIII would only be possible in cases where a bound tariff existed at a level
that would normally permit trade. If there was no bound tariff, or if it was bound at a level that would
effectively prevent any meaningful trade, then a domestic subsidy would be unlikely to nullify or impair the
value of a benefit under the GATT.
4
L/6627 Adopted on 25 January 1990, BISD/37S/86; July 1991 and BISD/39S/91; September 1993;
EC - Payments and subsidies paid to processors and producers of oilseeds and related animal feed
4
I.B.3.
EXPORT SUBSIDIES
On export subsidies, while the GATT 1947 prohibited export subsidies on industrial products, Article XVI:3
allowed Members to use them on primary products, provided they were not used to gain more than "an
equitable share of world trade". This provision referred to primary products and was taken to include primary
agricultural products.
The lack of legal precision meant some Members used export subsidies to dispose of excess production on the
world market. This had the effect of depressing world market prices and inducing other countries to do the
same.
This provision was adjudicated upon in the case EC – Refunds on Exports of Sugar5 brought by Australia
in 1980 against the EU. The Panel found that it could not rule on whether the export refund system used by the
EU had led to it having more than an equitable share of world trade. However, the Panel ruled that the system
had depressed world prices and had caused serious prejudice to Australia and that the uncertainty the system
brought to the market had led to a threat of injury. However, the Panel was not able to quantify the value of
the prejudice.
I.C.
URUGUAY ROUND AGRICULTURE NEGOTIATIONS
I.C.1.
HISTORICAL BACKGROUND
In part, the insulation of domestic markets by GATT Contracting Parties was the result of measures that were
originally introduced during the collapse of commodity prices that led to the 1930's Depression. High tariffs in
some countries led to retaliation by others that also increased tariffs or reduced the value of their currencies in
order to increase the cost of imports and reduce the cost of exports. The result was a cycle of ever more
restrictive measures. World trade fell sharply and the recovery was interrupted by Second World War.
In the aftermath of the Second World War many governments were concerned with getting agriculture
production and productivity back to pre-war levels with stable food prices for consumers and producers and
national food security. Therefore, many countries adopted land reform measures and supported agriculture
through market price support systems. That is, governments set target prices; if the domestic price rose above
these target prices imports were allowed in; if the domestic price fell below the target price export subsidies
were used to reduce domestic supply or the state bought and stored the product.
However, domestic pressures often meant that the target prices were always high which encouraged increased
production. At the same time productivity increased rapidly. The results were almost permanent surpluses,
which in turn led to huge government stocks and increasing use of export subsidies to dispose of these
surpluses on world markets. The impact on the world market and on those countries that did grant support and
protection was depressed prices and competition from - and between - subsidised exporters and producers.
5
BISD/26S/290-319, March 1980, European Communities – Refunds on Exports of Sugar
5
While high-income countries were encouraging high-cost over-production of agriculture products many
less-well-off countries were doing the opposite. With overvalued exchange rates and low food-price policies
that were meant to favour urban consumers, farmers in developing countries had little incentive to increase
production.
In the early 1970s, commodity prices were high and the main subsidisers, the EU and the US, were able to
increase production and to limit, or even reduce, subsidies as international demand and fear of food shortages
pushed up prices. However, demand fell in the early eighties due to recession and high interest rates. As a
result, prices declined and government stocks increased. The growing competition for world market share
resulted in worsening trade relations between the EU and the US.
Meanwhile increasing domestic production and increasing stockpiles had to be disposed of using export
subsidies. In 1983, the US started to use export subsidies for wheat flour to enter markets in North Africa and
in 1985 the Export Enhancement Program expanded export subsidies to other products. Other countries also
increased supports to their producers and sought to protect their export markets through subsidies.
Simultaneously, numerous commentators from independent economists to inter-governmental organisations
began to take a more active interest in agricultural policies.6 There were studies on the level of support and
effects on other countries. Some commentators criticised agriculture policies for their inefficiency and failure to
achieve objectives. They showed that subsidies did relatively little to support smaller agricultural producers
with most of the money going to a few large farmers or to the processing industries.
One of the most influential organisations was the Organisation for Economic Co-operation and Development
(OECD). In a report on "National Policies and Agricultural Trade" (1987), the OECD presented the results of its
research into agriculture policies in Australia, Austria, Canada, the EU, New Zealand, Japan and the United
States. Using a methodology that all OECD member countries had accepted, the report showed support levels
in each country. The report also showed that, if supports for agricultural products were reduced, production
would fall and prices would rise. It also showed that the policies of individual countries did affect the world
market. Market access barriers reduced export opportunities, market-price supports reduced domestic demand
while increasing supply and export subsidies were needed to dispose of the high priced surplus production. For
those that did not provide support, this meant fewer export opportunities and more competition and lower
prices in the world market.
The Cairns Group of exporters of agricultural products, formed in 1986, added to the pressure for reform. This
group was determined to bring agriculture effectively into the GATT framework of multilateral trading rules and
they were prepared to prevent any consensus on general liberalisation of trade unless they achieved this aim.
The Cairns Group was formed in 1986 in the town of Cairns in Australia. It was then made up of 14 countries:
Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Hungary, Indonesia, Malaysia, New Zealand, the
Philippines, Thailand and Uruguay. The Group is now made up of Argentina, Australia, Bolivia, Brazil, Canada,
Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Peru,
the Philippines, South Africa, Thailand and Uruguay.
6
Johnson, D. Gale; World Agriculture in Disarray, Second Edition; for the Trade Policy Research Centre,
Macmillan, 1991
6
I.C.2.
AGRICULTURE IN THE GATT
The exceptions and exemptions for agriculture within the GATT contributed to the widespread use of high levels
of support and protection for agriculture in most wealthy countries. At the same time, low food-price policies
and over-valued exchange rates made the impact on low-income countries even worse. Not only did they have
to compete with subsidised production and exports in wealthier countries but their own governments often
applied export taxes or enforced low procurement prices. The combination of these policies meant agricultural
trade was highly distorted.
However, the legal position was not as lax as some Contracting Parties believed. GATT panels, such as the
EC - Oilseeds case and the Japan – Import Restrictions case, showed that the exceptions in the rules had
conditions attached. At the same time academic work had begun to show the impact of subsidies and
protection on economic growth and welfare. Politically, the climate was changing as well and the Cairns Group
was formed to make sure agriculture was put on the agenda of trade negotiations and that it stayed on the
agenda until a satisfactory result was achieved.
TIP
What is "distortion"?
The WTO Dictionary of Trade Policy Terms defines distortion as "a measure, policy or practice that shifts
the market price of a product above or below what it would be if the product were traded in a competitive
market. Measures causing distortions include subsidies, import restrictions and restrictive business
practices". In the context of agricultural trade this would mean that producers', companies', importers' and
exporters' decisions are influenced by factors other than competitive market conditions.
In the lead-up to the Uruguay Round, it became increasingly evident that the causes of disarray in world
agriculture went beyond import access problems which had been the traditional focus of GATT negotiations.
Disciplines were needed on all policies that were causing trade-distortion, on all measures affecting agriculture
trade, including domestic agricultural policies and the subsidization of agricultural exports, as well as rules on
sanitary and phytosanitary measures.
The Contracting Parties of the GATT decided to launch a new multilateral round of negotiations with a view to
agree on further liberalization of international trade and that agriculture would be part of these negotiations.
The Ministerial Declaration launched the negotiations in Punta del Este, Uruguay, on 20 September 1986 and
committed the Contracting Parties of the GATT to negotiations on agriculture, giving a clear direction for those
negotiations. The Uruguay Round was successfully concluded in Marrakesh in 1994.
I.C.3.
OUTCOME
The Uruguay Round produced numerous changes in the trade rules for trade in agricultural products. Many old
rules were clarified, new areas brought within the rules, a new system for settling disputes was agreed, and
the first multilateral Agreements on Agriculture and on Sanitary and Phytosanitary Measures were concluded.
7
The WTO Agreement on Agriculture, together with individual countries' commitments to reduce export
subsidies, domestic support and import duties on agricultural products were a significant first step towards
reforming agricultural trade. For the first time, the Agreement on Agriculture required WTO Members to limit
the amount of agricultural export subsidies and trade-distorting domestic support they provide and to bind
tariffs on practically all agricultural products.
The reform programme seeks to strike a balance between agricultural trade liberalization and governments'
rights to pursue legitimate agricultural policy goals, including non-trade concerns.
The outcome of the agriculture negotiations in the Uruguay round can be divided in four main parts:
(1)
the WTO's Agreement on Agriculture - itself;
(2)
the Schedules which list each Members commitments on market access, domestic support and export
subsidies;
(3)
the Agreement on Sanitary and Phytosanitary Measures; and
(4)
the Ministerial Decision On Measures Concerning the Possible Negative Effects of the Reform
Programme on Least-Developed and Net Food-Importing Developing Countries.
Members that acceded to the WTO after the conclusion of the Uruguay Round may have specific rules
applicable to them which can be found either in their protocols of accession or their Schedules of
Commitments.
The Agreement on Agriculture came into force on 1 January 1995. It has:

A framework for future long-term reform of agricultural trade and domestic policies;

Strengthened rules governing agricultural trade for increased market orientation in agricultural trade
and will lead to improved predictability and stability for importing and exporting countries;

Provisions that, encourage the use of less trade-distorting domestic support policies to maintain the
rural economy, and allow actions to be taken to ease adjustment burden;

Provisions that allow some flexibility in the implementation of commitments.
However, as you will see below, the Agreement on Agriculture is a result of numerous compromises and like
any product of negotiations the basic principles have a number of exceptions and, in some cases, the wording
is subject to different interpretations.7 There are also many other non-agriculture specific achievements in the
WTO that have influenced the multilateral rules governing agriculture, such as, the strengthened dispute
settlement system.
7
For a more detailed description of the history of agriculture in the GATT see Josling, Tangermann and Warley;
1996, "Agriculture in the GATT"; MacMillan Press Ltd (UK) or St Martin's Press Inc (USA)
8
EXERCISES:
1.
What are some of the measures that GATT 1947 allowed countries to use in agricultural exports that they
could not use on industrial products?
2.
What are some of the exceptions and country-specific derogations that allowed Contracting Parties to
apply non-tariff border restrictions to agriculture imports under the GATT 1947?
3.
What are some of the import restrictions that GATT Contracting Parties faced on their agriculture exports?
9
II.
THE AGREEMENT ON AGRICULTURE
II.A. INTRODUCTION
The Agreement on Agriculture establishes a number of generally applicable rules, primarily in the areas of
market access, domestic support and export competition (normally referred to as the "three pillars"). These
rules are backed up by each Members' specific commitments on tariffs, domestic support and export subsidies,
which are contained in the Schedules and constitute an integral part of the GATT 1994.
Many other WTO Agreements complement the Agreement on Agriculture. According to Article 21, the
GATT 1994 and all WTO agreements on trade in goods in Annex 1 apply to agriculture. However, in cases of
conflict, the rules in the Agreement on Agriculture prevail (Article 21.1).
There is also a Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on
Least-developed and Net Food-importing Developing Countries, which also formed part of the overall outcome
of the agriculture negotiations.
II.B.
AGREEMENT ON AGRICULTURE'S STRUCTURE
This section of the Module looks at the Agreement on Agriculture, its objectives, its three pillars, as well as
institutional provisions, such as, the "peace clause" and the "built-in agenda".
The Agreement on Agriculture is divided in thirteen parts (composed of 21 articles) and it has 5 annexes.
Figure 1:
Structure of the Agreement on Agriculture
10
II.B.1. THE PREAMBLE
The objective that led to the Agreement on Agriculture is contained in the second paragraph of the Preamble:
Recalling that their long-term objective as agreed at the Mid-Term Review of the Uruguay Round "is to
establish a fair and market-oriented agricultural trading system and that a reform process should be initiated
through the negotiation of commitments on support and protection and through the establishment of
strengthened and more operationally effective GATT rules and disciplines";...
The Preamble also refers to non-trade concerns, including food security and the need to protect the
environment, and provides special and differential treatment for developing countries, including an
improvement in the opportunities and terms of access for agricultural products of particular export interest to
these Members. See paragraphs 5 and 6:
Having agreed that in implementing their commitments on market access, developed country Members
would take fully into account the particular needs and conditions of developing country Members by
providing for a greater improvement of opportunities and terms of access for agricultural products of
particular interest to these Members, including the fullest liberalization of trade in tropical agricultural
products as agreed at the Mid-Term Review, and for products of particular importance to the diversification
of production from the growing of illicit narcotic crops;...
Noting that commitments under the reform programme should be made in an equitable way among all
Members, having regard to non-trade concerns, including food security and the need to protect the
environment; having regard to the agreement that special and differential treatment for developing countries
is an integral element of the negotiations, and taking into account the possible negative effects of the
implementation of the reform programme on least-developed and net food-importing developing countries;...
11
II.B.2. PRODUCT COVERAGE
The Agreement on Agriculture applies to agricultural products as defined in Article 2 and Annex 1 of the
Agreement on Agriculture. This definition of agricultural products is based on the 1992 Harmonised System
(HS92), as established and regulated under the World Customs Organization.
Annex 1 defines agricultural products as those within Chapters 1 to 24 of the Harmonized System (excluding
fish and fish products). Hence, the definition does not apply to fish, fish products, nor does it apply to forestry
products. It covers all agricultural food and beverage products, agricultural fibres and skins including, for
example:

basic agricultural products such as wheat, milk and live animals, as well as products derived there from,
such as, bread, butter and meat;

processed agricultural products, for example, chocolate and sausages;

trade in wines, spirits, and tobacco products;

fibres, such as, cotton, wool and silk; and

raw animal skins destined for leather production.
II.B.3. DISCIPLINES AND COMMITMENTS
The Agreement on Agriculture includes binding commitments to reduce support and protection in the areas of
domestic support, export competition and market access.
a.
MARKET ACCESS – ARTICLE 4
Article 4 of the Agreement on Agriculture is the legal basis for market access. However, all the details are
found in Members' Schedules. Article 4 makes these Schedules legally binding, but does not provide an
exemption from any other obligation in the GATT 1994.
Prior to the Uruguay Round, market access for many agricultural products was restricted by variable import
duties and non-tariff measures, such as quantitative restrictions or import prohibitions. Further, there were
many country specific exemptions for agriculture, acquired through accession negotiations, waivers, or
renegotiations.
WTO Members agreed to use the process called "tariffication" to convert all non-tariff measures as they existed
during the 1986-88 base period (whether they were in compliance with the GATT or country-specific
exemptions) into tariff equivalents. As a result of the Uruguay Round, WTO Members can only use ordinary
customs duties to restrict imports of agriculture goods with very few exemptions.
Tariffs (both those resulting from the "tariffication" process and existing tariffs on agricultural products) were
reduced by an average 36% in the case of developed countries and 24% in the case of developing countries,
with a minimum reduction of 15% for developed and 10% for developing countries. Reductions were
undertaken over a period six years in the case of developed countries and over ten years in the case of
12
developing countries. However, many developing countries were not required to undertake tariffication or
reductions in tariffs and all least-developed countries were exempted from tariff reductions.
In many cases, tariffs were so high or the import restrictions so severe that very little, if any, imports actually
got into the applying country. In other cases, the quantitative restriction applied allowed only limited amounts.
In such situations the tariff that resulted from tariffication would have been too high to permit trade.
Therefore, WTO Members also committed to maintain current market access opportunities and/or to create
new minimum market access opportunities. These access opportunities took the form of low tariffs at limited
quantities, called tariff rate quota (TRQ), of at least 3% of domestic consumption by 1995 rising to 5% in 2000
(the implementation period). These commitments are also set out in the Schedule of Commitments.
At present, many countries have bound their tariffs at relatively high rates but , in many cases, the applied
tariff rates are lower than the bound tariff. The provisions on market access as well as the safeguard provisions
(explained directly below) are explained further in Module 4 entitled "Market Access in the Agreement on
Agriculture".
b.
SAFEGUARD PROVISIONS – ARTICLE 5
Due to tariffication, tariff bindings and reductions, as well as the creation of tariff quotas there were fears that
tariff-only protection could lead to import surges or low priced imports. As part of the tariffication process
Article 5 was created. The provisions of Article 5 permit Members to impose a special safeguard duty on
products that had been subject to tariffication and that have the symbol "SSG" in the Schedule.
The "special safeguard" provision permits the imposition of a temporary additional duty on imports of these
products when:
(a)
the price of the product falls below a threshold level (price trigger); or
(b)
the quantity of imports exceeds a certain volume (volume trigger).
The rules are explained in detail in Module 4.
EXERCISES:
4.
Outline the current market access rules for agriculture.
5.
In what document can one find the tariff binding, minimum/current access commitments (TRQs), special
safeguard, and special treatment exemptions of WTO Members? What type of commitments are they?
13
c.
DOMESTIC SUPPORT COMMITMENTS & DISCIPLINES – ARTICLE 3, 6 AND 7
Many countries support farming in different ways. Some guarantee a minimum level of income, for example,
through market price support to farmers or similar methods, some provide input subsidies, many provide
veterinary and plant health services, etc.
The main complaint about policies which support domestic prices or directly subsidize production, is that they
encourage over-production and distort the market either by increasing exports or reducing imports.
On the other hand, there are many forms of support that do not directly influence production. The Agreement
on Agriculture distinguishes between support programmes that stimulate production directly, and those that
are considered to have at most a minimal direct effect on production or trade.
In recognition of the different impacts different policies have on production and trade there are different boxes
for the different types of export subsidies: "Green Box", the "Amber Box" and a "Blue Box".
Members can freely use domestic support measures with no more than minimal impact on trade or productionSuch measure are placed in a "Green Box" and include subsidies for government services, and programmes
such as direct payments to farmers that are decoupled from production as well as direct payments under
environmental and regional assistance programmes.
In addition to the Green Box policies, Members do not have to reduce:
(1)
their subsidies on direct payments to farmers under production limiting programmes ("Blue Box"
measures);
(2)
certain government assistance programmes to encourage agriculture and rural development in
developing country Members (as listed in Article 6.2 of the Agreement on Agriculture); and
(3)
other trade-distorting support maintained within the "de minimis" levels.
Domestic support measures that cannot be included in the above-mentioned exempt categories must be
accommodated within the ceilings set by the "Total Aggregate Measurement of Support" (AMS) or "Current
Total Aggregate Measurement of Support" which are expressed in terms of Annual and Final Bound
Commitment Levels.
In the Uruguay Round, WTO Members agreed to make the following reductions in the Base Total AMS (an
average during the base period of 1986-88):

developed country Members agreed to reduce the Base Total AMS by 20% over 6 years starting
in 1995;

developing country Members agreed to make 13.3% cuts over 10 years; and

least-developed countries were not required to make any cuts.
14
Note
In all cases where base periods, reductions and implementation periods are mentioned the actual periods
and reductions may differ and you may have to verify the exact details by referring to the Schedule of
Commitments or, in the case of recently acceded Members to the protocol of accession.
The disciplines and commitments on domestic support are found in Articles 3, 6 and 7 as well as Annexes 2, 3,
and 4 of the Agreement on Agriculture and, where relevant, in Section I of Part IV of a Member's Schedule.
The Uruguay Round also introduced a clearer and more comprehensive regime governing domestic subsidies in
general in the Agreement of Subsidies and Countervailing measures ("SCM Agreement"), which also applies to
agricultural products. However, as you will see below, WTO Members agreed on a "peace clause" (which has
already expired) to reduce the likelihood of challenge to these and some other forms of agricultural subsidies.
The rules on domestic support are explained in details in Module 4.
d.
EXPORT COMPETITION (ARTICLES 3, 8-11)
As you saw previously, GATT Article XVI:3 permitted the use of export subsidies for agriculture primary
products.
The Agreement on Agriculture does not prohibit the use of export subsidies, provided that Members remain
within their commitments, as set out in their Schedules, and subject to a c set of rules. Members that grant
export subsidies also agreed to reduce the amount spenditure and the quantities exported with subsidies.
Currently, only 25 Members have the right to subsidise exports, their reduction commitments are based on
exports subsidies granted during the 1986-90 base period. For other WTO Members, there is no distinction
between agricultural and non-agricultural products and therefore, export subsidies are prohibited in both cases.
The only exception is Article 9.4 of the Agreement on Agriculture, which permits certain transport and
marketing subsidies in developing countries.
Developed-country Members were required to reduce the value of export subsidies by 36% compared to the
1986-90 base period, over the six-year implementation period, and the quantity of subsidised exports by 21%.
For developing countries, the reductions were two-thirds those of developed countries over a ten-year period.
The Agreement on Agriculture also sets out criteria for food aid donations and refers to export credits.
The disciplines and commitments on export subsidies are found in Articles 3, 8, 9, 10, and 11 as well as in
Member's Schedule.
The rules on export competition are explained in detail in Module 5.
The table below summarizes the numerical targets for cutting subsidies and protection.
15
Developed countries
6 years: 1995–2000
Developing countries
10 years: 1995–2004
average cut for all agricultural products
–36%
–24%
minimum cut per product
–15%
–10%
–20%
–13%
value of subsidies (outlays)
–36%
–24%
subsidized quantities
–21%
–14%
Tariffs
Domestic support
cuts in total ("AMS") support for the sector
Exports
Table 1:
The reductions in agricultural subsidies and protection agreed in the Uruguay Round
Notes: Least-developed countries do not have to reduce tariffs or subsidies. The base level for tariff cuts was
the bound rate before 1 January 1995; or, for unbound tariffs, the actual rate charged in September 1986
(when the Uruguay Round began).
Only the figures for cutting export subsidies appear in the Agreement on Agriculture. The other figures were
targets used to calculate countries' legally binding "schedules" of commitments. Each country's specific
commitments vary according to the outcome of negotiations. As a result of those negotiations, several
developing countries chose to set fixed bound tariff ceilings that do not decline over the years.
EXERCISES:
6.
What are the two forms of measures included in the reduction of export subsidies in the Agreement on
Agriculture?
16
II.B.4. OTHER COMMITMENTS
Although market access, domestic support and export competition are often called the "three pillars" of the
Agreement on Agriculture, other provisions are equally important and form an integral part of it. These include
the provisions relating to special and differential treatment for developing countries, the Peace Clause and the
commitment to enter negotiations on continuing reform. Also related to the Agreement on Agriculture, is the
Decision on the Possible Negative Effects of the Reform Programme on Least-Developed and Net-Food
Importing Developing Countries.
a.
DISCIPLINES ON EXPORT PROHIBITIONS & RESTRICTIONS – ARTICLE 12
Article 12 of the Agreement on Agriculture requires WTO Members that introduce new export prohibition or
restrictions on foodstuffs to do so in accordance with Article XI:2(a) of the GATT 1994. It also requires the
Member introducing the restriction or prohibition to take account of the effect such a restriction will have on
other Members' food security, to notify the measure and, if asked, to consult with any Member that has a
substantial interest as an importer.
b.
DUE RESTRAINT – ARTICLE 13
To protect agricultural subsidies from challenge under GATT 1994 and the SCM Agreement, Article 13 of the
Agreement on Agriculture introduced a "Peace Clause". Article 13 provided limited protection for agricultural
subsidies granted in accordance with the Agreement on Agriculture from being challenged under specific
provisions of the GATT or the SCM Agreement for a period of 9 years. The Peace Clause expired at the end
of 2003. Hence the SCM Agreement now applies to subsidies for agricultural products, subject to Article 21 of
the Agreement on Agriculture.
The Peace Clause was the subject of dispute in the United States — Subsidies on Upland Cotton (DS267) case.
In that case, the Panel held that as long as countries do not respect their obligations with regard to the
Agreement on Agriculture, the Peace Clause affords them no protection.
EXERCISES:
7.
What are some of the requirements of the Agreement on Agriculture on WTO Members instituting new
export prohibition or restrictions on foodstuffs?
8.
Where is the peace clause found and what was its purpose?
17
c.
SPECIAL AND DIFFERENTIAL TREATMENT – ARTICLE 15
Article 15 of the Agreement on Agriculture recognizes the importance of differential and more favourable
treatment for developing country Members. In particular, it provides a legal basis for many special and
differential treatment provisions that are found in Schedules but are not expressed in the Agreement on
Agriculture itself, such as lower levels of tariff reductions. It also expressly states that developing countries can
have 10 years for implementation and that the least-developed countries do not need to undertake reductions.
Special and Differential Treatment measures in the Agreement on Agriculture took the form of:
1.
Lower reduction rates to be applied to trade-distorting domestic support (covered by Total Aggregate
Measurement of Support), tariffs and export subsidies, equivalent to two-thirds of the levels required
for developed countries in each of these three areas. No reductions were required for least developed
countries.8
2.
Developing countries were granted a longer period (10 years, 1995-2004) to implement various
reduction provisions, compared to six years for the developed countries.9
3.
Provisions that contain additional benefits for least-developed countries.10
The specific rules on market access, domestic support commitments, export subsidy commitments and the
fewer notification obligations as well as the technical assistance are explained in further modules.
d.
LEAST-DEVELOPED AND NET FOOD-IMPORTING DEVELOPING COUNTRIES –
ARTICLE 16
Article 16 provides a legal basis for the Marrakesh Decision on Measures Concerning the Possible Negative
Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries and the
follow-up work of the Committee on Agriculture.
e.
REVIEW OF IMPLEMENTATION - ARTICLES 17 AND 18
Article 17 of the Agreement on Agriculture established a Committee on Agriculture. The Committee meets
about four times a year in Geneva and regular reports are made to the Council for Trade in Goods on its work.
8
Agreement on Agriculture: Articles 6.2, 6.4, 9.2(b)(iv), 9.4, 12.2, 15.1, Annex 2, paragraph 3, and
footnotes 5 and 6, Annex 5
9
Examples: Agreement on Agriculture: Article 15.2
10
Agreement on Agriculture: Articles 16.1 and 16.2
18
The Committee:
1.
Oversees and monitors the implementation of the Agreement on Agriculture and Members'
commitments. Members can raise questions about the implementation of the Agreement on
Agriculture by other Members in the Committee;
2.
Provides a forum for Members to discuss matters related to agriculture trade and to consult on
matters relating to the implementation of commitments, including rules-based commitments.
This review work by the Committee is based on notification Members make on their commitments.
There is also a provision in Article 18.6 that allows Members to raise any matter relevant to the
implementation of the commitments under the Agreement on Agriculture. Of course, raising questions
in the Committee does not prevent any WTO Member from seeking formal dispute settlement at any
time; and
3.
Monitors the follow-up to the Decision on Measures Concerning the Possible Negative Effects of the
Reform Programme on Least-Developed and Net Food-Importing Developing Countries, as well as,
developments in the trade of agricultural products.
The negotiations pursuant to Article 20 of the Agreement on Agriculture (discussed below) and the Doha
Ministerial Declaration of November 2001, take place in "Special Sessions" of the Agriculture Committee.
f.
CONSULTATION AND DISPUTE SETTLEMENT – ARTICLE 19
While the Agreement on Agriculture has its own institutional mechanism to review and follow-up its
implementation, it is subject to the integrated dispute settlement system of the WTO. In the case of disputes
involving provisions of the Agreement on Agriculture, the general WTO dispute settlement procedures apply.
g.
CONTINUATION OF THE REFORM PROCESS – ARTICLE 20
The Agreement on Agriculture set up a framework of rules and started reductions in protection and
trade-distorting support. But this was only the first phase of the reform of trade in agricultural products.
Article 20 of the Agreement on Agriculture committed Members to start negotiations on continuing the reform
in 2000. The negotiations actually started in March 2000 and are still continuing as part of the Doha
Development Agenda
To assist the negotiations, the WTO Secretariat has produced a number of background papers at the request of
Members. Most of these can be found in the G/AG/NG/S and TN/AG/S series of official documents. In addition,
the Secretariat is also responsible for maintaining the WTO website which includes a comprehensive section on
the negotiations.11
11
See http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm
19
h.
FINAL PROVISIONS - ARTICLE 21
Article 21 stipulates that "the provisions of GATT 1994 and other Multilateral Trade Agreements in Annex 1A to
the WTO Agreement shall apply subject to the provisions" of this agreement.
In other words, in the event of conflict between the Agreement on Agriculture and another WTO Agreement,
the Agreement on Agriculture takes precedence.
This provision was reaffirmed in the United States — Subsidies on Upland Cotton (DS267) discussed above.
EXERCISES:
9.
What is the role of the Committee on Agriculture?
10. What are some of the special and differential treatment provisions for developing countries found the
Agreement on Agriculture?
20
III.
RELATIONSHIP OF THE AGREEMENT ON
AGRICULTURE TO OTHER WTO AGREEMENTS
III.A. INTRODUCTION
In some areas, the Agreement on Agriculture does not have specific rules. In these cases, either the
GATT 1994 or one of the other WTO Agreements apply (see Article 21 above). For example, the administration
of tariff quotas is governed by Article XIII of the GATT 1994 and the Agreement on Import Licensing
Procedures.
In fact, of the many disputes involving agricultural products, which have come before the WTO the majority,
have involved other WTO agreements, for example:

the cases taken on alcohol against Japan12, Korea13 and Chile14 have all involved the principle of
national treatment;

the EC – Bananas15 case involved Article XIII of GATT, the Import Licensing Agreement and the General
Agreement on Trade in Services; and

the safeguards on milk powder case against Korea16 was a complaint under the Agreement on Subsidies
and Countervailing Measures, etc.
Although other Agreements may apply to trade in agricultural products, under Article 21 of the Agreement on
Agriculture, if conflict arises between the rules of the Agreement on Agriculture and any other WTO provision,
the Agreement on Agriculture prevails.
12
Japan – Taxes on Alcoholic Beverages, Panel Report WT/DS8/R, WT/DS10/R, WT/DS/11R, 11 July 1996.
Appellate Body Report WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, 4 October 1996.
13
Korea – Taxes on Alcoholic Beverages, Panel Report WT/DS75/R, WT/DS/84/R, 17 September 1998.
Appellate Body Report WT/DS75/AB/R, WT/DS84/AB/R, 18 January 1999.
14
Chile – Taxes on Alcoholic Beverages, Panel Report WT/DS87/R, WT/DS110/R, 15 June 1999.
15
European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/R/ECU,
GTM, HND, MEX, USA, 22 May 1997, WT/DS27/AB/R 9 September 1997.
16
Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/R 21 June 1999 and
Corr.1 22 July 1999, WT/DS98/AB/R, 14 December 1999.
21
III.A.1. THE GATT 1994
Article 21 of the Agreement on Agriculture states explicitly that the GATT 1994 applies to agriculture.
Agricultural products are "goods" for the purposes of the GATT 1994. Some of the most relevant provisions to
agriculture are: the country schedules established within the GATT 1994 Article II, the principles of the
GATT 1994 of: Most-Favoured-Nation Treatment of Article I and National Treatment; the General Elimination of
Quantitative Restrictions of Article XI; the Non-discriminatory, Administration of Quantitative Restrictions of
Article XIII and General Exceptions of Article XX.
III.A.2. THE AGREEMENT ON IMPORT LICENSING PROCEDURES
Agricultural trade is sometimes administered through licences, both for import and export purposes. The key
provisions regulating import licensing are to be found in the Agreement on Import Licensing Procedures.
The EC – Poultry and EC - Bananas cases included the Agreement on Import Licensing Procedures.17
In that case of EC – Poultry Brazil complained about the allocation of an EU tariff-rate quota for frozen poultry
meat and the use by the EU of a special safeguard measure under the Agreement on Agriculture.
The dispute involved the interpretation of the EU's tariff schedule and its relationship with a separate bilateral
agreement between the EU and Brazil, which provided for a global annual duty-free tariff-rate quota for frozen
poultry meat. Brazil argued that, as a result of the agreement, the tariff-rate quota should be allocated
exclusively to Brazil and not shared on an MFN basis with other WTO Members.
The WTO Appellate Body found that the bilateral agreement was not part of WTO law and therefore could not
be applied directly as law in WTO dispute resolution. Instead, the Appellate Body interpreted the relevant EU
tariff schedule. As the EU was bound by its tariff schedule which provided for MFN non-discriminatory
treatment, Brazil could not seek preferential treatment on the basis of tariff concessions negotiated bilaterally.
The Appellate Body further found that the EU's administration of this tariff quota did not violate the WTO
Import Licensing Agreement.
On the Agreement on Import Licensing Procedures, the Appellate Body made several findings and reiterated
that:
(1)
The preamble to the Licensing Agreement stresses that the Agreement aims at ensuring that import
licensing procedures "are not utilized in a manner contrary to the principles and obligations of
GATT 1994" and are "implemented in a transparent and predictable manner".
17
European Communities – Measures Affecting the Importation of Certain Poultry Products ("EC – Poultry"),
WT/DS69/R and WT/DS69/AB/R. WT/DS69/R, adopted 12 March 1998 and WT/DS69/AB/R, adopted
13 July 1999
22
(2)
Articles 1.2 and 3.2 make it clear that the Licensing Agreement is also concerned with, among other
things, preventing trade distortions that may be caused by licensing procedures. It follows that
wherever an import licensing regime is applied, these requirements must be observed. The
requirement to prevent trade distortion found in Articles 1.2 and 3.2 of the Licensing Agreement refers
to any trade distortion that may be caused by the introduction or operation of licensing procedures,
and is not necessarily limited to that part of trade to which the licensing procedures themselves apply.
There may be situations where the operation of licensing procedures, in fact, have restrictive or
distortive effects on that part of trade that is not strictly subject to those procedures.18
The Agreement on Import Licensing Procedures also featured in the EC – Bananas19 dispute - a case with a
long and complex history, involving both GATT and WTO dispute settlement.
In April 1996, Ecuador, Guatemala, Honduras, Mexico and the United States requested the establishment of a
panel to examine the EU regime for the importation, sale and distribution of bananas established by Council
Regulation 404/93.20
The WTO Panel ruled that the EU bananas import regime violated WTO obligations under the GATT, the GATS
and the Agreement on Import Licensing Procedures. In relation to the Agreement on Import Licensing
Procedures the Panel in EC – Bananas III found that this Agreement applies to licensing procedures for tariff
quotas. The Appellate Body upheld this finding as well as the Panel's finding that both Article 1.3 of the
Licensing Agreement and Article X:3(a) of the GATT 1994 apply to the EU import licensing procedures.
18
19
Appellate Body Report, EC – Poultry, paragraph 121
GATT Panel Report, EEC - Members States Import Regimes for Bananas ("EC – Bananas I"), DS32/R,
adopted on 19 May 1993; GATT Panel Report, EEC – Import Regime for Bananas ("EC – Bananas II"), DS38/R,
adopted on 11 February 1994; Panel Report, European Communities - Regime for the Importation, Sale and
Distribution of Bananas ("EC – Bananas III"), WT/DS27/R/ECU, adopted 25 September 1997, as modified by
the Appellate Body Report, WT/DS27/AB/R; European Communities - Regime for the Importation, Sale and
Distribution of Bananas ("Recourse to Article 21.5 by Ecuador"), ("EC - Bananas (21.5)"), WT/DS27/RW/ECU,
adopted 12 April 1999, European Communities - Regime for the Importation, Sale and Distribution of Bananas
("Recourse to Article 21.5 by European Union"), ("EC - Bananas (21.5)"), WT/DS27/RW/EEC, adopted 12 April
1999, Decision by the Arbitrators ("Recourse to Arbitration by the EU under Article 22.6"), WT/DS27/ARB,
adopted 9 April 1999, Decision by the Arbitrators ("Recourse to Arbitration by the EU under Article 22.6"),
WT/DS27/ARB/ECU, adopted 24 March 2000.
20
Council
Regulation
404/93
on
the
common
organization
of
the
market
in
bananas.
OJ L 47,
25 February 1993, pp. 1-11
23
TIP
If you want to know more about the above cases or to read the cases in full, see:
http://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm
http://www.wto.org/english/res_e/booksp_e/dispu_summary06_e.pdf
See also the WTO Analytical Index at:
http://www.wto.org/english/res_e/booksp_e/analytic_index_e/agriculture_e.htm
III.A.3. AGREEMENT ON SANITARY & PHYTOSANITARY MEASURES AND
THE AGREEMENT ON TECHNICAL BARRIERS TO TRADE
The SPS Agreement applies to measures that affect agriculture products. Article 14 of the Agreement on
Agriculture provides that "Members agree to give effect to the Agreement on the Application of Sanitary and
Phytosanitary Measures".
Sanitary (human and animal health) and phytosanitary (plant health) measures apply to domestically produced
food or local animal and plant diseases, as well as to products coming from other countries.
Countries may require that both domestically produced and imported goods should satisfy certain minimum
levels of quality, health and safety standards. These standards are particularly important with respect to
agricultural, food and health products. Food standards may facilitate trade by alleviating consumer fears about
imported products. But they can also act as trade barriers when different standards exist in different countries.
Clearer rules for sanitary and phytosanitary measures were also considered to be required, both in their own
right and to prevent circumvention of stricter rules on import access through unjustified, protectionist use of
food safety as well as animal and plant health measures. Hence, this agreement was negotiated in conjunction
with the Agreement on Agriculture in the Uruguay Round.
The TBT Agreement is also relevant to agricultural trade. It covers all products, including industrial and
agricultural products. The TBT, SPS and the Agreement on Agriculture are closely related. For example, the
TBT Agreement governs the packaging as well as the minimum size of a fruit, the SPS Agreement the use of
anti-pest spray, while the Agreement on Agriculture governs trade in the fruit itself (tariffs and other
measures).
24
Numerous disputes concerning agricultural products and the SPS and TBT Agreement have been referred to the
WTO. Three of the major WTO disputes are described below:
(1)
The Australia - Salmon21 dispute concerned an import prohibition on uncooked salmon from certain parts
of the northern Pacific Ocean. In 1975, Australia imposed an import restriction which provided that fresh
chilled and frozen salmon could only be imported to Australia if it had first been heat-treated.
In 1995, Canada requested consultations over the matter and argued that the import restriction was a
violation of Australia's obligations under both the GATT 1994 and the SPS Agreement and that the
measure nullified or impaired benefits that Canada had bargained for in the Uruguay Round.
First, the Panel then the Appellate found Australia to be in violation of Article 5.5 of the Agreement. The
Appellate Body concluded that the Australian import restriction was, in reality, a disguised restriction on
trade and therefore a violation of Article 5.5 of the SPS Agreement. They found that:
1. Australia limited its import ban to salmon, while at the same time tolerating imports of herring used as
bait, and live ornamental finfish, both of which posed an equal or greater risk of spreading disease to
the very domestic stocks that the salmon ban ostensibly protected; and
2. the absence of any controls on the internal movement of the salmon products when compared with
the import prohibition on ocean-caught Pacific salmon.
(2)
The Japan – Agricultural Products II22 case concerned the standards for different varieties of fruits. The
US argued that a Japanese import restriction on certain types of fresh fruit was in violation of the SPS
Agreement, especially Articles 2.2 and 5.6. The measures in dispute generally prohibited any imports of
fresh apricots, cherries, plums, pears, quince, peaches, apples and walnuts originating from the
continental US because they were potential hosts for the coddling moth. This moth, although common in
the US, is a pest of "quarantine-level" significance for Japan. The Japanese import restriction contained an
exemption from the import ban on a variety-by-variety basis. This exemption provided that the efficiency
of quarantine treatment for each variety of these agricultural products had to be tested before these
products could be imported into Japan. These tests could take up to two years.
The Panel first found that Japan had violated Article 7 of the SPS Agreement by failing to publish its
testing requirements. The Japanese Government had simply "made available" the testing guidelines, while
Article 7 and Annex B oblige WTO Members to "publish promptly" all SPS measures.
In February 1999, the WTO Appellate Body essentially upheld the Panel's findings. The Appellate Body
concluded that the Japanese requirement of testing for some of the products was not based on science. It
was therefore found to be in violation of the SPS Agreement. For apricots, pears, plums and quince the
Appellate Body found that Japan had failed to conduct a proper risk assessment and, therefore, was in
violation of Article 5.1 of the SPS Agreement.
21
Australia – Measures Affecting Importation of Salmon ("Australian – Salmon"), WT/DS18/R, adopted
12 June 1998, WT/DS18/AB/R, adopted 20 October 1998
22
Japan – Measures Affecting Agricultural Products ("Japan – Agricultural Products II"), WT/DS76/R, adopted
27 October 1998, WT/DS76/AB/R, adopted 22 February 1999
25
(3)
The EC – Hormones23 dispute concerned certain EU measures that banned the sale of beef derived from
cattle that had been given growth hormones. The US and Canada contested the ban, arguing that it
violated the SPS Agreement.
The EU measures banning hormone treated beef were found to be in violation of the SPS Agreement,
because these measures were not based on a risk assessment as required by Article 5.1 of the
SPS Agreement. It was also found that the precautionary principle, although represented in Article 5.7 of
the SPS Agreement, did not override any stated obligations, especially not Articles 5.1 and 5.2.
These Panel's findings were upheld by the Appellate Body. The Panel found and the Appellate Body upheld
the determination that the EU had failed to conduct a risk assessment that satisfied its obligations under
Article 5 of the SPS Agreement.
The Appellate Body further stated that the EU by maintaining, without justification under Article 3.3 of the
SPS Agreement, SPS measures which were not based on existing international standards, acted
inconsistently with Article 3.1 of the SPS Agreement. Finally, both the Panel and the Appellate Body found
that the EU measures were inconsistent with Article 5.5, which strives to avoid arbitrary or unjustifiable
distinctions in the levels of sanitary protection set by Members, when such distinctions can inhibit
international trade.
TIP
If you want to know more about the above cases or to read the cases in full, see:
http://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm
http://www.wto.org/english/res_e/booksp_e/dispu_summary06_e.pdf
See also the WTO Analytical Index at:
http://www.wto.org/english/res_e/booksp_e/analytic_index_e/agriculture_e.htm
III.A.4. DUMPING & ANTI-DUMPING MEASURES IN AGRICULTURE
GATT 1994 allows WTO Members to impose anti-dumping duties, provided that such imports are causing, or
threatening to cause injury to a domestic industry. Special procedures must be followed by national authorities
in deciding whether to impose such measures.
There is nothing in the Agreement on Agriculture which exempts agricultural products from the application of
the Article VI of the GATT 1994 and the Anti-dumping Agreement. Furthermore, Article 21 of the Agreement on
Agriculture explicitly states that the provisions of GATT 1994 and of other agreements in Annex 1A to the
WTO Agreement apply to agriculture, therefore including the Anti-dumping Agreement.
23
EC – Measures Concerning Meat and Meat Products ("EC – Hormones"), WT/DS26/R/USA, adopted
18 August 1997, WT/DS48/AB/R, adopted 16 January 1998
26
III.A.5. AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
(SCM AGREEMENT)
The SCM Agreement applies to agricultural goods as well as industrial products, except when the subsidies
conform to the Agreement on Agriculture. Article 13 of the Agreement on Agriculture (the "Peace Clause")
established that, until the end of 2003, there should be some protection from challenge and action under the
SCM Agreement for agricultural subsidies that complied with a Member's commitments.
However, as explained above, under the heading "Due Restraint", since the end of 2003, the SCM Agreement
applies to subsidies for agricultural products, as set forth in its Article 21. The provisions of the SCM Agreement
firmly state that its provisions apply, subject to the Agreement on Agriculture.
See the peace clause above, for more details.
III.A.6. THE AGREEMENT ON SAFEGUARDS
WTO Members may restrict imports of a product temporarily if its domestic industry is injured or threatened
with injury caused by a surge in imports. "Safeguard measures" may result in the imposition of quantitative
import restrictions or in a tariff increase above bound rates.
The provisions on safeguard measures under Article XIX of the GATT 1994, entitled "Emergency Action on
Imports of Particular Products" is now complement by the WTO Agreement on Safeguards, which established
specific rules for the application of safeguard measures.
The GATT 1994 Article XIX:2 allows provisional measures to be imposed in critical circumstances where delay
would cause damage that would be difficult to repair. Such measures may take the form of tariff increases
only, and may be kept in place for a maximum of 200 days. In addition, the period of application of any
provisional measure must be included in the total period of application of a safeguard measure.
If the safeguard measure is the introduction of a quantitative restriction, that quota comes in effect subject to
the provisions of the GATT 1994 Article XIII On the administration and allocation of quotas.
GATT 1994 Article XIX safeguard measures apply to all products subject to the GATT 1994 including all
agricultural and food products. In fact, there have been numerous cases concerning agriculture that has been
referred to the WTO dispute settlement regarding safeguards measures.
The Korea – Dairy case24 (WT/DS98) arose out of the imposition by the Republic of Korea of definitive
safeguard measures in the form of a quantitative restriction on imports of dairy products. The EU challenged
the safeguard measures before the WTO under the GATT 1994 Article XIX:1(a) and Articles 2.1, 4.2(a), 4.2(b),
5.1 and 12(1) to (3) of the Agreement on Safeguards.
24
Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products ("Korea – Dairy"), WT/DS98/R,
adopted 21 June 1999, WT/DS98/AB/R, adopted 14 December 1999
27
The Panel found and the Appellate Body upheld that the definitive safeguard measure was imposed
inconsistently with the provisions of Article 4.2(a) of the Agreement on Safeguards. The Appellate Body also
upheld the Panel's finding that the first sentence of Article 5.1 of the Agreement on Safeguards imposes an
obligation on a Member applying a safeguard measure to ensure that the measure applied is not more
restrictive than necessary to prevent or remedy serious injury and to facilitate adjustment.
The US – Wheat Gluten case25 arose from of the imposition by the United States of definitive safeguard
measures on imports of wheat gluten, in the form of a quantitative restriction. The safeguard measure
excluded imports from Canada due to its partnership status under NAFTA. The EU challenged the safeguard
measures before the WTO under the GATT 1994 Article XIX, and Articles 2, 4.2, 8 and 12 of the Agreement on
Safeguards.
The United States was found to be in violation of Article 4.2 of the Agreement on Safeguards, because its
authorities failed to take into account certain "relevant factors" in their investigation. The Appellate Body
specified that national authorities conducting safeguard investigations were obliged to consider all
relevant factors, regardless of whether they had been clearly raised by the parties to the dispute. The
Appellate Body also found that the United States, having included Canada in its safeguard investigation,
could not exclude Canada from its safeguard measure, requiring correspondence between the
investigation and the measures applied.
In the US – Lamb (WT/DS177 and WT/DS178)26 dispute, Australia and New Zealand challenged the
United States safeguard measure, in the form of a tariff rate quota, on imports of fresh, chilled and frozen
lamb meat under the GATT 1994 Article XIX, and Article 4 of the Agreement on Safeguards.
The Panel and the Appellate Body confirmed the requirement, under Article XIX:1(a) of the GATT 1994, for a
finding of causation by "unforeseen developments". The Panel found and the Appellate Body upheld the finding
that the United States had acted inconsistently with Article 2.1, 4.2(a) and 4.2(c) of the Agreement on
Safeguards and with Article XIX:1(a) of the GATT 1994 by failing to demonstrate as a matter of fact the
existence of "unforeseen developments".
TIP
If you want to know more about the above cases or to read the cases in full, see:
http://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm
http://www.wto.org/english/res_e/booksp_e/dispu_summary06_e.pdf
See also the WTO Analytical Index at:
http://www.wto.org/english/res_e/booksp_e/analytic_index_e/agriculture_e.htm
25
United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the EC ("US –Wheat
Gluten"), WT/DS166/R, adopted 31 July 2000, WT/DS166/AB/R, adopted 22 December 2000
26
US – Safeguard Measures on Imports of Fresh, Chilled, or Frozen Lamb Meat from New Zealand and
Australia ("US – Lamb"), WT/DS177/R and WT/DS178/R, adopted 21 December 2000, WT/DS177/AB/R and
WT/DS178/AB/R, adopted 1 May 2001
28
III.A.7. TRIPS & AGRICULTURE
Some elements of the TRIPs Agreement relating to agriculture include:

geographical indications "GIs" (Articles 22-24);

patent protection of agricultural chemical products (Articles 70.8 and 70.9);

plant variety protection (Article 27.3(b)).
a.
GEOGRAPHICAL INDICATIONS
Article 22.1 of the TRIPs Agreement defines geographical indications (GIs) as:
"… indications which identify a good as originating in the territory of a Member, or a region or locality in that
territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its
geographical origin."
GIs may be used for a wide variety of agricultural products. However, GIs also protect non-agricultural
products such as the production process or manufacturing skills associated with an area.
The TRIPS Agreement requires that all WTO Members protect GIs. WTO Members must provide the legal
means for interested parties to prevent:
a)
"the use of any means in the designation or presentation of a good, that indicates or suggests that the
good in question originates in a geographical area, other than the true place of origin in a manner
which misleads the public as to the geographical origin of the good;
b)
any use which constitute an act of unfair competition within the meaning of Article 10bis of the Paris
Convention (1967)."
Geographical indications for wines and spirits have additional protection compared to that provided in Article 22
for all products.
For wines and spirits, WTO Members have to provide higher levels of protection, i.e. even where there is no
danger of the public being misled and the GI is accompanied by expressions such as "imitation" of the GI
(Article 23).
Under Article 23.1, the use of a geographical indication identifying a wine or spirit not originating in the place
indicated by the geographical indication is prohibited, even where the true origin of the wine or spirit is
indicated or the geographical indication is used in a translation or accompanied by expressions such as "kind",
"type", "style", "imitation" or the like.
29
b.
PATENT PROTECTION OF AGRICULTURAL CHEMICAL PRODUCTS (ARTICLES 70.8
AND 70.9)
WTO Members must provide patent protection for any invention, whether a product (such as a medicine) or a
process (such as a method of producing the chemical ingredients for a medicine), except when an exception
applies (Article 27.1).
A patent is a set of exclusive rights granted by a state to a patentee (the inventor or assignee) for a fixed
period of time in exchange for the regulated, public disclosure of certain details of a device, method, process or
composition of the invention, which is new, involves an inventive step and is capable of industrial application.
The exclusive right granted to a patentee in most countries is the right to prevent or exclude others from
making, using, selling, offering to sell or importing the claimed invention. Such protection is not new, since
patents were already protected by the Paris Convention of 1883.
Article 2.1 of the TRIPS Agreement incorporates the provision of the Paris Convention. It obliges WTO Members
to comply with Articles 1 through 12 and 19 of the latest act of the Paris Convention (1967). This also applies
to WTO Members that are not parties to the Paris Union, such as Macao and Hong Kong and the EU (as they
are not states).
c.
PLANT VARIETY PROTECTION (ARTICLE 27.3(B))
WTO Members must protect new varieties of plants developed by plant breeders though patents, or by an
effective sui generis system, or by any combination thereof. However, Members can exclude plants and
animals and essentially biological processes for the production of plants or animals. (Article 27.3(b))
Article 27.3(b):
3. Members may also exclude from patentability:
(b) plants and animals other than microorganisms, and essentially biological processes for the production of
plants or animals other than non-biological and microbiological processes. However, Members shall provide
for the protection of plant varieties either by patents or by an effective sui generis system or by any
combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry
into force of the WTO Agreement.
III.A.8. GATS AND AGRICULTURE
As you have seen before, both the rules on goods (in GATT 1994) and those on intellectual property (in the
TRIPS Agreement) apply to agriculture. What about those on services?
30
This was the issue in a case concerning agricultural products - the EC - Bananas III case.27 The European
Union had a licensing system for the allocation of the right to import bananas within a TRQ. This system was
challenged in the WTO.
The Panel found that there is no legal basis for an a priori exclusion of measures within the EU banana import
licensing regime from the scope of the GATS.28
This was confirmed by the Appellate body. The EU argued that the GATS did not apply to the EU import
licensing procedures because they were "not measures 'affecting trade in services' within the meaning of
Article I:1 of the GATS".29
The Appellate Body, however, noted that:
"(…) Article I:1 of the GATS provides that "[t]his Agreement applies to measures by Members affecting
trade in services". In our view, the use of the term "affecting" reflects the intent of the drafters to give a
broad reach to the GATS. The ordinary meaning of the word "affecting" implies a measure that has "an
effect on", which indicates a broad scope of application. This interpretation is further reinforced by the
conclusions of previous panels that the term "affecting" in the context of Article III of the GATT is wider
in scope than such terms as "regulating" or "governing". (…) Article I:3(b) of the GATS provides that
"'services' includes any service in any sector except services supplied in the exercise of governmental
authority" (emphasis added), and that Article XXVIII(b) of the GATS provides that the "'supply of a
service' includes the production, distribution, marketing, sale and delivery of a service". There is nothing
at all in these provisions to suggest a limited scope of application for the GATS. We also agree that
Article XXVIII(c) of the GATS does not narrow "the meaning of the term 'affecting' to 'in respect of'".30
The Appellate Body also agreed with the Panel and confirmed that that the GATS and the GATT 1994 are not
mutually exclusive agreements. They held that the EU banana import licensing procedures were subject to both
the GATT 1994 and the GATS, and that the GATT 1994 and the GATS may overlap in application to a particular
measure. In particular, the Appellate Body noted:
"... Certain measures could be found to fall exclusively within the scope of the GATT 1994, when they
affect trade in goods as goods. Certain measures could be found to fall exclusively within the scope of
the GATS, when they affect the supply of services as services. There is yet a third category of measures
that could be found to fall within the scope of both the GATT 1994 and the GATS. These are measures
that involve a service relating to a particular good or a service supplied in conjunction with a particular
27
EC – Regime for the Importation, Sale, and Distribution of Bananas ("EC – Bananas III") WT/DS27/R/ECU,
WT/DS27/R/MEX, WT/DS27/R/USA, adopted 22 May 1997, WT/DS27/AB/R, adopted 9 September 1997
28
Panel Report, European Communities – Regime for the Importation, Sale, and Distribution of Bananas –
Complaint by Ecuador ("EC – Bananas III (Ecuador)"), WT/DS27/R/ECU, adopted 25 September 1997, as
modified by the Appellate Body Report, paragraph 7.286
29
Appellate Body Report, European Communities – Regime for the Importation, Sale, and Distribution of
Bananas ("EC – Bananas III"), WT/DS27/AB/R, adopted 25 September 1997, paragraph 218
30
Appellate Body Report, EC – Bananas III, paragraph 220
31
good. In all such cases in this third category, the measure in question could be scrutinized under both
the GATT 1994 and the GATS. However, while the same measure could be scrutinized under both
agreements, the specific aspects of that measure examined under each agreement could be different.
Under the GATT 1994, the focus is on how the measure affects the goods involved. Under the GATS, the
focus is on how the measure affects the supply of the service or the service suppliers involved. Whether
a certain measure affecting the supply of a service related to a particular good is scrutinized under the
GATT 1994 or the GATS, or both, is a matter that can only be determined on a case-by-case basis."31
TIP
If you want to know more about the above cases or to read the cases in full, see:
http://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm
http://www.wto.org/english/res_e/booksp_e/dispu_summary06_e.pdf
See also the WTO Analytical Index at:
http://www.wto.org/english/res_e/booksp_e/analytic_index_e/agriculture_e.htm
EXERCISES:
11. Besides the Agreement on Agriculture what are some of the WTO Agreements that related to Agriculture
as listed in Annex 1A?
31
Appellate Body Report, EC – Bananas III, paragraph 221
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IV.
SUMMARY
The results of the Uruguay Round provide a framework for the long-term reform of agricultural trade and
domestic policies. The Agreement on Agriculture reflects the compromises made to satisfy the multiple
negotiating interests in the Uruguay Round.
The new Agreement, created a definition of agricultural products, and converted all non-tariff barriers into
ordinary customs duties. The new rules and commitments apply to market access, domestic support and
export competition. It includes provisions that limit the use of distorting domestic support policies, export
subsidies and subjected these limits to reductions.
The Agreement on Agriculture does allow governments to support their rural economies, but preferably
through policies that cause a minimal or none distortion to trade. It also allows some flexibility in the way
commitments are implemented.
Developing countries do not have to cut their subsidies or lower their tariffs as much as developed
countries, and they are given extra time to complete their obligations. Least-developed countries do not
have any reduction commitments. Special provisions deal with the interests of countries that rely on
imports for their food supplies, and the concerns of least-developed economies.
The Agreement on Agriculture also includes a "Peace Clause" which was designed to reduce the likelihood
of disputes or challenges on agricultural subsidies over a period of nine years. This provision expired at the
end of 2003.
The Agreement on Agriculture includes a commitment to continue the reform through new negotiations.
These were launched in 2000 and continue as part of the Doha Development Agenda.
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PROPOSED ANSWERS:
1.
Export subsidies on agricultural primary products provided that agricultural export subsidies were not
used to capture more than an "equitable share" of world exports of the product concerned (Article XVI:3
of GATT).
2.
(i)
Waivers;
(ii)
Protocol of accession; and
(iii) Article XI.2(c).
3.
(i)
import bans;
(ii)
quotas setting the maximum level of imports;
(iii) variable import levies;
(iv) minimum import prices; and
(v)
4.
non-tariff measures imposed by state trading enterprises.
All agricultural NTBs have been abolished and replaced by tariffs.
Tariffs are bound and subject to reduction. They are not to be increased in the future.
There are avenues for the maintenance of current access opportunities and the establishment of minimum
access tariff quotas (at reduced-tariff rates) where current access is less than 3% of domestic
consumption. These minimum access tariff quotas were to be expanded to 5% over the implementation
period.
A special safeguard was introduced which can be used on products that were tariffied and which have the
letters SSG in the Schedule.
5.
These are market access commitments found in the Schedule of Tariff Concession.
6.
(1)
reduction of the amount of money spent on export subsidies; and
(2)
reduction of the quantity of export benefiting from such subsidies.
7.
They are to:
(1)
do so in accordance with Article XI:2(a) of the GATT 1994;
(2)
give due consideration to the effects of such restrictions on importing Members' food security;
(3)
if requested, to consult with any other Member having a substantial interest as an importer
This rule applies to developing countries only in so far as they are net exporters of the foodstuff in
questions.
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8.
The peace clause is found in Article 13 of the Agreement on Agriculture. It expired on 31 December 2003.
It gave some protection to agricultural subsidies provided in accordance with the Agreement on
Agriculture from being challenged under specific provisions of the GATT or the SCM Agreement for a
period of 9 years.
9.
Oversees the implementation of the Agreement on Agriculture;
Provides a forum for Members to discuss matters related to agriculture trade and to consult on matters
relating to the implementation of commitments, including rule-based commitments;
Reviews notifications. At the Committee meetings, Members pose questions to Members who make
notifications. Under Article 18.6 of the Agreement on Agriculture other matters related to the reform
programme can be raised, and under Article 18.7 counter-notifications can be made when one Member
has information which suggests that another Member should have notified a particular measure or action
to the Committee; and
Monitors the follow-up to the Decision on Measures Concerning the Possible Negative Effects of the
Reform Programme on Least-Developed and Net Food-Importing Developing Countries, as well as,
developments in the trade of agricultural products.
10.
1. Differential and more favourable treatment for developing country Members is an integral part of the
negotiation.
2. Lower reduction rates to be applied to fixed base period values of trade-distorting domestic supports
(covered by Total Aggregate Measurement of Support), tariffs and export subsidies - which was
two-thirds for the developing countries of the levels required for the developed countries in each of
these three areas. Least developed countries were not required to make reductions.
3. Longer implementation period - developing countries are given a longer period (10 years, 1995-2004)
to implement various reduction provisions, compared to six years for the developed countries.
4. Waiver of tariffication - the elimination of non-tariff barriers, by converting quotas and other
quantitative import restrictions to tariffs.
11. General Agreement on Tariffs and Trade (GATT 1994);
Agreement on Sanitary and Phytosanitary Measures;
Agreement on Textiles and Clothing (terminated on 1/1 2005);
Agreement on Technical Barriers to Trade;
Agreement on Trade Related Investment Measures;
Agreement on Anti-dumping;
Agreement on Customs Valuation;
Agreement on Preshipment Inspection;
Agreement on Rules of Origin;
Agreement on Import Licensing;
Agreement on Subsidies and Countervailing Measures; and
Agreement on Safeguards.
35