Other Influences on the CAP:
WTO Negotiations
27. The widespread decoupling of farm payments
as part of the 2003 CAP reforms means that most direct subsidies
to farmers now qualify for "green box" status in world
trade negotiations under the WTO. Green box subsidies must either
not distort trade, or distort it only minimally. Box 5 explains
how the WTO boxes work.
28. However, the coupled payments that remain,
together with the market intervention and price support instruments
that are still in use, continue to distort production and trade.
Export subsidies encourage the release of surpluses onto world
markets, thus pushing world prices downwards, which affects third-country
producers. Meanwhile import tariffs protect the EU's internal
market in agricultural commodities, affecting third-country producers
who wish to export into the EU market, and keeping prices within
the EU artificially high, which affects EU consumers.
29. If successful, the current Doha round of
world trade negotiations would target some of these forms of support.
Early on in the negotiations, the EU made a commitment to phase
out all its export subsidies by 2013, and to begin removing some
of those subsidies two or three years earlier. The European Commissioner
for Trade, Peter Mandelson, told us that there is also room for
agreement on the "green box" that would allow the EU
to continue with the Single Farm Payment scheme and its rural
development programme. On market access, he suggested that the
proposed ranges of the tiered formula[14]
for tariff reductions "are a perfectly acceptable basis for
political agreement" (Q 747).
30. However, the treatment of sensitive products[15]
remains "the most sensitive area for our Member States and
the most difficult for us to handle internally within the EU".
Negotiations on geographical indications[16]
are also proving tense—Mr Mandelson admits that the
EU does "not have many friends" on geographical indications,
which are "very, very important for our southern Member States"
(Q 747).
31. The Commissioner stressed, however, that
"there is nothing happening in the Health Check that I would
either want or expect to impinge on the offers we are making in
this trade round"(Q 753). He insisted that the EU was
"at the outer limit of what we can offer in those trade talks
and I would not ask for or expect any Health Check to deliver
a better offer" (Q 754).
BOX 5
What are the WTO Trade Boxes?
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In the context of WTO negotiations, subsidies are categorized into coloured "boxes" that indicate the degree to which they are considered acceptable. Exceptions apply for developing countries.
Amber Box
Domestic support measures considered to distort production and trade (with some exceptions) fall into this category. Examples are measures that support prices or subsidies that are directly linked to production quantities.
These types of subsidies are subject to limits. Those WTO members that exceed the limit are committed to reductions.
Blue Box
Agricultural subsidies that would qualify for the Amber Box, but are linked to conditions designed to limit production, fall into the more acceptable Blue Box instead.
At present there are no limits on spending on blue box subsidies, but this is under negotiation in the current round of trade talks.
Green Box
In order to qualify for the Green Box, subsidies must not distort trade, or at most cause limited distortion. They must be government-funded (rather than the result of higher prices charged to consumers), and must not involve price support. Subsidies that fall into this category tend not to target particular products. They include direct income supports for farmers that are not linked to (i.e. are decoupled from) current production levels or prices. They also include environmental protection and regional development subsidies.
There are currently no limits on spending on Green Box subsidies. There is disagreement among WTO members, however, over the types of payments that should qualify for the Green Box. Some countries argue that the current criteria are too lax, and that certain types of subsidies (e.g. direct payments to producers, income safety-nets, subsidised income insurance) should not qualify as they do distort trade more than minimally. Others view the current criteria as adequate and indeed wish to expand their scope, for example to include payments for environmental protection and animal welfare commitments.
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