WTO Negotiators Create New Loopholes

SYDNEY - Mar 8/05 - SNS -- New loopholes are being developed by World Trade Organization negotiators which will allow the United States, European Union, and other protectionist countries to increase farm subsidies, argues the Australian Bureau of Agricultural and Resource Economics (ABARE).

Releasing the report WTO Agreement on Agriculture: The Blue Box in the 2004 Negotiating Framework, Executive Director Dr Brian Fisher said, "Unless further controls are agreed, the door is open to expand farm payments in many protectionist countries."

Ironically, the goal of the current round of negotiations is to "reduce subsidies that distort trade. Recent progress has resulted in agreement to undertake cuts in subsidies, including those currently falling in the blue box," Fisher explains.

The 'blue box' comprises government support payments that are market distorting, but are agreed to be exempt from WTO cuts because they meet particular criteria. Until now, such payments have been restricted to production limiting arrangements. But the framework agreement has extended the category to include payments that do not require production. This will enable distorting price related payments to be included in the blue box and therefore exempt from cuts.

Changes to the definition of the blue box will allow a wider range of payments to be free from agreed subsidy cuts. This may result in more rather then less subsidization and this could be particularly relevant to United States farm payments for wheat, feed grain, rice, cotton and oilseeds.

Dr Fisher warned that "while the new rules will, for the first time, place a lid on blue box payments, the United States could maintain all their relevant payments under the new cap. The challenge for negotiators is to develop additional rules that will impose limits on the new blue box, so that the goal of substantial support reductions can be realized.

"Without such limits, neither the United States nor others who make use of blue box exemptions would be required to reduce their payments," Dr Fisher concluded.

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