Part 6: WTO Agreement on Agriculture
- Sections 43-45 provide the Secretary of State with the powers to ensure the UK’s compliance with its obligations under the World Trade Organisation (WTO) Agreement on Agriculture (AoA).
- The "Agreement on Agriculture" – as referred to in subsections 43(1), 43(5), 44(1), 44(4), 44(6), 44(8) and 45(2) - is an international treaty that sets out a number of general rules and commitments on agricultural trade practices as agreed by WTO members. These measures fall under three pillars; disciplines on domestic support, market access and export subsidies. The EU is a WTO member and the UK is also a member of the WTO in its own right; as such they are both signatories to the AoA and after EU exit the UK will continue to be subject to any commitments and obligations under the AoA. The UK Government will be responsible for ensuring that all UK policies on domestic support in relation to agriculture are WTO compliant.
- The domestic support provisions relate to various forms of (direct and indirect) government financial support given to producers of certain agricultural products (as defined in Part I of the AoA). Payments made to agricultural producers during the agricultural transition and through any future domestic support schemes will need to comply with the AoA.
- This section ensures that all support schemes are properly classified (as amber, green or blue box), and if they fall into the amber box, that they do not cause the UK to breach its Aggregate Measurement of Support (AMS) commitment (See Boxes 7-10). This section also ensures that the UK is able to meet its obligations to make notifications required under the AoA and respond to any challenges from other WTO members.
Box 7: Green box
Green box: Measures that have no, or at most minimal, trade-distorting effects (such as effects on prices or production levels). There is currently no WTO requirement to limit these payments but to be green box compliant (and hence exempt from the ‘reduction commitment’) they must meet both the basic and the scheme-specific criteria set out in Annex 2 of the AoA.
The basic criteria (set out in Annex 2 (paragraph 1) of the AoA) require support to be provided through a publicly funded government programme rather than transfers from consumers; and that the support shall not have the effect of providing price support to producers.
Scheme-specific criteria vary according to the intended aims of the policy and are set out in paragraphs 2-13 of Annex 2 of the AoA. Some examples of the scheme-types listed include: decoupled income support (direct payments decoupled from (i.e. not linked to) levels of production) and payments under environmental programmes. To be green box compliant, programmes must comply with the relevant Annex 2 criteria including, for payments made under environmental programmes that they must be limited to the extra costs or loss of income involved in complying with the programme.
Other examples include structural adjustment assistance provided through investment aids (the relevant green box criteria include a condition that eligibility for such payments must be determined by reference to clearly defined criteria in government programmes designed to assist the financial or physical restructuring of a producer's operations in response to objectively demonstrated structural disadvantages) and payments under regional assistance programmes whereby the relevant green box criteria include a condition that the payments must be limited to the extra costs or loss of income involved in undertaking agricultural production in the prescribed area.
Box 8: Blue box
Blue box schemes include direct payments coupled to limited levels of production. Such schemes do not meet the green box criteria for direct payments (because they are coupled (or linked to) levels of production) but it is considered that their negative effects are reduced by meeting the ‘production-limiting’ criteria set out in Article 6 paragraph 5(a) of the AoA. Hence, like green box schemes, blue box schemes are currently exempt from the reduction commitment (and are not included in the calculation of the AMS) as long as one or more of the following conditions is met:
· payments are based on fixed area and yields; or
· payments are made on 85 per cent or less of the base level of production (according to a fixed reference period); or
· livestock payments are made on a fixed number of head.
Box 9: Amber box
Payments that do not meet either the green box or blue box criteria are by default classified as amber box. Amber box payments may have trade-distorting effects and are therefore limited under the AoA.
All WTO members are allowed to provide de minimis levels of amber box support. For developed countries, the de minimis allowance is up to 5% of the value of production (for that product) for product-specific support plus 5% of the total value of production for non-product-specific support.
Some WTO members, including the UK, have provision to provide additional levels of amber box domestic support (above de minimis levels) but there is an upper limit on this additional support referred to as the AMS (Aggregate Measurement of Support) commitment.
The EU notifies the AMS to the WTO on behalf of all EU Member States combined. On leaving the European Union, the UK will be required to make its own annual AMS notification to the WTO.
Box 10: Aggregate Measurement of Support (AMS)
The AMS is the annual level of domestic support given to producers of the agricultural products listed in Annex 1 of the AoA not including support that is exempt under Article 6 of the AoA (blue box support), support that is exempt under Annex 2 of the AoA (green box support) or amber box support made within de minimis levels. Where amber box support exceeds de minimis levels all of that support must be included in the AMS calculation, not just the amount above de minimis levels.
- Subsection 43(2) links the three sections (43, 44 and 45) which give the Secretary of State power to make regulations for securing compliance with obligations of the United Kingdom under the AoA (the "purpose" specified in subsection 43(1)).
Section 43: Power to make regulations for securing compliance with WTO Agreement on Agriculture: general
- Subsection (3) enables the Secretary of State to confer functions on another person; provide for the delegation of functions and enable any other person to exercise a discretion in relation to the functions outlined above. The difference between (3)(a) and (3)(b) is that (a) provides for the regulations themselves to confer functions on another person, whereas (b) enables the Secretary of State to delegate functions through regulations.
- Subsection (4) specifies that any regulations introduced under this section are subject to the affirmative resolution procedure.
- Subsection (5) contains definitions.
Section 44: Regulations under section 43: limits on provision of domestic support in the United Kingdom
- WTO agreements permit some forms of trade-distorting support (classified by the WTO as amber box support). Controls on amber box use provide for some WTO members, including the UK, to provide capped levels of (permitted) trade-distorting support. Section 44 gives the Secretary of State powers to set limits on levels of domestic support (for the purpose of securing compliance with obligations of the United Kingdom under the AoA).
- Subsection (1) clarifies that this subsection applies to domestic support for which a limit applies to the United Kingdom under the AoA (domestic support of the "relevant kind"). Subsection (2) provides for the possibility that the limits on domestic support under the AoA may arise through exception for certain types of support, or by specific limits on certain types of support, or by a combination of these two mechanisms (note that amber box support is ‘identified’ in the AoA as support that is not exempted under either Annex 2 or Article 6 of the AoA (see Boxes 7-10 above)).
- Subsection (3)(a) gives the Secretary of State powers to set a limit on domestic support of the relevant kind for the United Kingdom as a whole, which under power in subsection (4), may be lower than the total amount allowable to the United Kingdom under the AoA to allow for a portion of that limit to be reserved for the purposes described in subsection (8); subsection (3)(b) provides power to divide the remainder of the limit between England, Wales, Scotland and Northern Ireland.
- Subsection (8) sets out the matters that the Secretary of State may take into account when deciding the limits set in regulations made under subsection (3) including domestic support that may need to be given across the whole of the UK, including crisis measures, and domestic support of the relevant kind given by offshore territories where that spending counts towards the amount allowable to the United Kingdom under the AoA.
Section 45: Regulations under section 43: classification of domestic support
- WTO members including the United Kingdom are obliged to classify domestic support in accordance with the definitions set out in the AoA. Subsections (2) and (3) give the Secretary of State the power to set out in regulations a process designed to classify and to facilitate review of, the classification of domestic support in accordance with this obligation. Subsection (3)(b) gives the Secretary of State powers to set out in regulations a process for resolving disputes between authorities regarding classification. The Secretary of State will be responsible for defending the classification of UK domestic support measures at the WTO and therefore may reserve the right to make a final binding decision on classification.
- WTO members are required to make notifications in support of their AoA obligations, including an annual notification on levels of domestic support to agricultural producers, and justification where support has been classified as green box or blue box.
