Taking Stock and Looking Forward on Domestic Support under the WTO Agreement on Agriculture

Abstract

This paper evaluates the space the domestic support rules of the WTO Agreement on Agriculture (AoA) generate for different members to provide support subject to limits and exempt from limits. It reviews economic analysis of direct payments and market price support (MPS) and summarizes discussions over the information members notify to the WTO. The paper identifies a shift over time toward less-distorting support, a concentration of support among a small number of members, and the rise of China and India as top support providers. In examining the measurement of MPS in recent disputes involving China and India, the paper finds that China’s MPS for wheat and rice can be accommodated within its limits while hardly constraining its economic support. Conversely, some measurements of India’s MPS for sugarcane are far greater than the economic support. An alternative MPS that uses lagged international border prices as the reference price would more closely track economic support. The paper highlights the domestic support issues in the ongoing negotiations and recognizes that new policy priorities have gained prominence, notably climate change but related also to productivity growth, biosecurity, water management and biodiversity. Governments may address these and other priorities through green box support exempt from limit. The paper summarizes the major problematic aspects of the AoA and suggest options to improve and strengthen the WTO rules and commitments on domestic support in agriculture.

Keywords: Agreement on Agriculture, domestic support, price support, payments, notifications, disputes, negotiations, climate change, Committee on Agriculture, World Trade Organization

JEL Classification: F13, F55, K33, Q17, Q18