The Agreement on Agriculture

In one line

Agriculture was brought inside the rules in 1994 by converting every quota into a tariff, capping domestic support and capping export subsidies, and the caps were set high enough that the countries with most support kept most of it.

In exam wording: the Agreement on Agriculture applies to the products listed in its Annex 1 and disciplines three subjects, market access, domestic support and export competition, through commitments recorded in Part IV of each member's Schedule.

Why agriculture was outside the rules

Three exemptions accumulated. The 1955 waiver to the United States permitted import restrictions on agricultural products inconsistent with Article XI. Article XI:2(c) permitted import restrictions on agricultural products necessary to the enforcement of measures restricting domestic production. And Article XVI on subsidies was drafted so loosely for primary products that export subsidies on them were effectively permitted, requiring only that they not result in more than an equitable share of world export trade.

The result by the 1980s was a subsidy war. European and American support programmes generated surpluses that were dumped on world markets, world prices fell, and unsupported producers in developing countries bore the cost. Bringing agriculture under discipline was the central demand of the Cairns Group and one of the two things developing members were promised in the Uruguay Round.

Pillar one: market access

Tariffication. Article 4.2 provides that members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties, with a footnote listing quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through State trading enterprises, voluntary export restraints and similar measures.

So every non-tariff barrier became a tariff, and those tariffs were bound and scheduled. The criticism, called dirty tariffication, is that the converted rates were calculated on base period gaps that were often overstated, producing bound tariffs far above the protection actually being given, and leaving large binding overhang.

Tariff quotas were created to preserve existing access and to provide minimum access, with a lower in-quota rate up to a quantity and a higher out-of-quota rate beyond it.

Article 5 provides a special safeguard for tariffied products, triggered automatically by an import volume surge or a price fall, available only to members that reserved the right in their Schedules.

Pillar two: domestic support, and the boxes

The unit of account is the Aggregate Measurement of Support, a monetary measure of support to agricultural producers, and members with a scheduled commitment agreed to reduce their Total AMS.

Support is then sorted into boxes, and the boxes are the examinable part.