International Trade Daily | October 25, 2001 | By Daniel Pruzin
GENEVA--The head of a Canadian farmers group said Oct. 23 that his association will be pushing for limits on the use of so-called "green box" subsidies as one of its priority goals for the World Trade Organization's negotiations on agricultural trade.
Speaking to BNA in Geneva, Canadian Federation of Agriculture president Bob Friesen said his group wants an overall cap on all forms of domestic support provided to farmers, including "green box" subsidies, with the cap fixed as a percentage of the value of farm gate production.
Under the WTO's Agreement on Agriculture, green box subsidies are exempted from reduction commitments as long as they have a minimal or no impact on trade. Examples of green box subsidies include spending on agricultural research, pest control, marketing, and promotional services; income insurance and income "safety-net" programs; payments for natural disasters; structural adjustment assistance; and payments for environmental and regional assistance programs.
U.S. Farm Bill Impact
Blue box subsidies, which cover direct payments to farmers by governments under production-limiting programs, are also exempt from subsidy-reduction commitments. Amber box subsidies in contrast are considered to have a distorting effect on trade and are subject to WTO subsidy-reduction commitments.
Friesen said that while both the United States and the European Union are complying with their commitments to reduce amber box subsidies, "the real implications for Canadian farmers are the very high levels of domestic support in the United States," in particular "green box expenditures without limits."
"The concern is that we may be trapped into a position where we have increased market access and trade liberalization, but we allow countries with unlimited treasuries to spend unlimited amounts through the green box," Friesen declared. "If domestic support levels are too high, even direct, decoupled projects can become very trade distorting."
According to a report issued by the Organization for Economic Cooperation and Development last April, the use of green box subsidies has been increasing, particularly by the United States, the EU and Japan. Domestic food aid was the biggest category of green box measures, most of it accorded by the United States in the form of the government's food stamp program, child nutrition program, special milk program for schools, and special supplemental nutrition aid for low-income mothers, children and the elderly.
The WTO noted in its own report on green box subsidies issued in April 2000 that the United States was by far the largest user of green box subsidies between 1995 and 1997, with support in the latter year totaling $51.25 billion. Green box subsidies as a percentage of total U.S. farm supports increased from 75.6 percent in 1995 to 87.9 percent in 1997, the WTO said.
Friesen said developments in the United States on agriculture policy will have "huge implications" for the WTO negotiations. On Oct. 5 the U.S. House of Representatives passed a farm bill setting out a 10-year program with $73.5 billion in extra spending above baseline spending of nearly $97 billion. Sen. Richard Lugar (R-Ind.) has introduced a bill setting out a more modest $21.7 billion in spending over five years, a bill which has the support of the Bush administration.
"How can other countries negotiate in good faith when some are already spending as much if not more on agriculture?" Friesen declared.
Canada Should be Cautious, Friesen Says
Friesen said Canada should continue to maintain a more cautious approach from its Cairns Group partners in regards to market access demands in the WTO negotiations. Canada refused to endorse a Cairns Group proposal on market access issued last November which called for a substantial increase in all tariff quota volumes and strengthened disciplines on the use of tariff rate quotas.
"Certainly, the Canadian Federation of Agriculture doesn't agree with the entire Cairns approach," Friesen said. "We have an important supply management industry in Canada, and the maintenance of that domestic policy depends on effective TRQ management of imports."
"We certainly have allies in the Cairns Group with regards to our call for the elimination of export subsidies and reductions in domestic support," he added. "But we have a disagreement on how to improve market access."
Members of the Cairns Group of agricultural exporters are Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, and Uruguay.
Copyright c 2001 by The Bureau of National Affairs, Inc., Washington D.C.International Trade Daily:
