THE NEVER ENDING AGRICULTURAL TRADE LIBERALIZATION: THREE SUBSTANTIAL PROBLEMS

Abstract

Agricultural Trade Liberalization has been one of the most controversial issues in International Trade. The conservative position assumed by WTO Members regarding the trade liberalization of agricultural barriers is rooted, amongst other reason, on the fact that countries do not want to depend on other governments for food (National Security). Due to the special treatment that countries give to agricultural goods, WTO Members negotiated in the Uruguay Round a separate agreement for agricultural trade, tailor-made for these goods, with an specific object and purpose: establish a fair and market-oriented agricultural trade policy. 

The Agreement on Agriculture is built upon three pillars on into which WTO Members made commitments to reduce market protection. Accordingly, members made commitments on the areas of market access, domestic support and export subsidies. Since domestic support and export subsidies is nowadays one of the most controversial subjects when talking about international trade, this article will focus exclusively on this two issues, including both its regulation, and effects. Regarding Domestic Support Measures, the Agreement on Agriculture classified different types of support as “Boxes”. The first type of support are Green Box Measures” which include all those domestic support payments that are deemed to have no or at most minimal trade distorting effects; “Amber Box Measures” which are those measures that do have trade
distorting effects, and thus Members are bound to reduce these kinds of payments. Finally, Blue Box Measures, which are direct payments made under production limiting programs not subject to reduction commitments. Regarding Export Subsidies, the Agreement on Agriculture constitutes an exception to the general regime included in the Subsidies and Countervailing Measures Agreement (hereinafter SCM), as it allows Members to grant export subsidies provided that they comply both with
their budgetary outlays and quantity commitment levels. Moreover, it prevents agricultural export subsidies from being challenged under SCM provisions if they caused adverse effects to the interests of other Members.Even though the Agreement on Agriculture constitutes a significant breakthrough regarding agricultural trade liberalization, there are still some issues that erode the purpose of establishing a fair and market oriented agricultural trade policy.

The first problem arises with the expiration of the Peace Clause, which poses the question whether Members are able to challenge agricultural export subsidies under SCM provisions when the subsidy causes adverse effects to the interests of  another WTO Member; or if Members are going to continue protected from claims under the SCM Agreement even if their measures cause trade distorting effects. The second problem that the Agreement on Agriculture fails to address is that Members are able to disguise export subsidies within domestic support schemes. Finally, the third problem refers to how blue box subsidies cause trade distorting effects as much as amber box measures.

This article will present the existing problems in agricultural trade liberalization within the frame of the WTO. Subsequently it will show a hypothetical WTO case that includes the abovementioned problems in agriculture nowadays and it will address a possible solution to the case for both the Claimant and Defendant parties. Finally, it will propose a solution to stop these problems that do not allow agricultural trade to be
fair and market oriented.