Agreement On Agriculture Export Subsidies

When I started working in the field of development cooperation in the late 1980s, a third of EU agricultural subsidies – about 10 billion euros a year (about 17 billion euros today) – were spent on export subsidies. The EU`s Common Agricultural Policy was a centralised planning system, with administratively set intervention prices for key raw materials, huge stocks of cereals and milk, and high import tariffs. It felt like the imitation of Soviet-style central planning by the West. Paradoxically, farmers continue to complain, despite a sharp increase in subsidies. The main reason for this is that EU intervention agencies have largely taken away farmers` right to work as genuine entrepreneurs in free markets. This means that the reforms do not stop in Nairobi. For the world`s farmers to be fair and equitable, there is a need to further reduce production subsidies. The Nairobi decision is an important signal to policy makers in emerging countries that export subsidies are the best way to support agricultural interests. Farmers around the world are ready and able to work hard and be true entrepreneurs in competitive local markets and, increasingly, in global value chains. Subsidies to farmers in rich and emerging countries are undermining the prospects for fair trade and agricultural development in poor countries that import food. Members of developed countries are obliged to reduce the basic volume of subsidized exports by 21% and the corresponding budgetary expenditure on export subsidies in annual levels by 31% over a six-year period. For MEPs in developing countries, the necessary reductions amount to 14% over ten years in terms of volume and 24% over the same period in terms of budgetary expenditure.

The 1947 GATT initially applied to agriculture, but was incomplete, and the signatory states (or “contracting parties”) excluded this sector from the scope of the principles set out in the general agreement. During the period 1947-1994, members were allowed to use export subsidies for primary agricultural products and to impose import restrictions under certain conditions, so that major agricultural raw materials faced trade barriers in unusual proportions in other sectors. The road to a fair, market-oriented agricultural trade system has therefore been difficult and time-consuming; and the negotiations were finally concluded during the Uruguay Round. Agriculture has a special status in WTO agreements and trade agreements (signed in 1994 and entered into force on 1 January 1995), with the sector having a specific agreement, the agriculture agreement, whose provisions prevail. In addition, some provisions of the agreement on the application of plant protection measures (SPS) also concern agricultural production and trade. The same applies to the agreement on trade-related aspects of intellectual property rights (TRIPS) with respect to the protection of geographical denominations. In addition, the provisions of the agreement on agriculture are complemented by the Agreement on Technical Barriers to Trade (OTC) and by technical assistance mechanisms. Thank you very much for these comments. We agree on the main issue that the EU should phase out its non-target decoupled income aid. We also agree that the EU direct payments system is likely to encourage additional European production, although we do not agree on the level of this effect.

I think the effects on the production of direct payments (coupled with eco-conditionality) are relatively small, particularly in relation to the impact of market price support, as a result of export subsidies. A significant portion of direct payments is capitalized in higher rents and land prices and its most important effect is probably to slow the pace of structural changes by maintaining more