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WTO subsidies regulation in agricultural sector
Azizbek TOYIROV
1
Tashkent State University of Law
ARTICLE INFO
ABSTRACT
Article history:
Received August 2024
Received in revised form
15 September 2024
Accepted 25 September 2024
Available online
15 October 2024
Agricultural subsidies have long been a contentious issue in
international trade, with debates tracing back to the GATT
system. These subsidies, which include both export subsidies
and domestic support measures, remain essential tools for WTO
members to sustain and enhance their agricultural sectors.
However, such measures often have far-reaching consequences,
potentially disrupting the economic development and trade
interests of other member states, particularly those dependent
on fair competition in agricultural markets.
The regulatory framework for subsidies within the WTO is
primarily governed by Articles VI and XVI of the GATT 1994,
alongside the WTO Agreement on Subsidies and Countervailing
Measures (SCM Agreement). However, agricultural subsidies
are specifically addressed under the Agreement on Agriculture
(AoA), which establishes tailored rules for this critical sector.
The AoA takes precedence over other WTO Multilateral Trade
Agreements in cases of disputes concerning agricultural
subsidies, underscoring the unique and sensitive role of
agriculture in global trade dynamics. This article aims to
examine the regulation of subsidies in the agricultural sector
and explore their specific characteristics.
2181-
1415/©
2024 in Science LLC.
https://doi.org/10.47689/2181-1415-vol5-iss1
This is an open access article under the Attribution 4.0 International
(CC BY 4.0) license (https://creativecommons.org/licenses/by/4.0/deed.ru)
Keywords:
WTO,
subsidy,
agriculture,
agreement,
trade,
GATT,
market.
JSTda Qishloq xo
‘
jaligi sohasida subsidiyalarning tartibga
solinishi
ANNOTATSIYA
Kalit so‘zlar
:
JST,
subsidiya,
Qishloq xo‘jaligi sohasidagi subsidiyalar tarixan GATT
tizimidan boshlangan xalqaro savdo sohasida juda bahsli
masala bo‘lib kelgan. Eksport subsidiyalarini ham, ichki qo‘llab
-
1
Senior Lecturer, Tashkent State University of Law. E-mail: azizbektoyirov7@gmail.com
Жамият
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инновациялар
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Общество
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Society and innovations
Special Issue
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10 (2024) / ISSN 2181-1415
426
qishloq xo
‘
jaligi,
kelishuv,
savdo,
GATT,
bozor.
quvvatlash chora-
tadbirlarini ham o‘z ichiga olgan ushbu
subsidiyalar JST a’zolari uchun qishloq xo‘jaligi tarmoqlarini
qo‘llab
-
quvvatlash va rivojlantirish uchun asosiy vosita bo‘lib
qolmoqda. Biroq,
bunday subsidiyalar ko‘pincha boshqa a’zo
davlatlarning, xususan, qishloq xo‘jaligi savdosidagi halol
raqobatga tayanadiganlarning iqtisodiy rivojlanishi va savdo
manfaatlarini buzishi mumkin bo‘lgan keng qamrovli
oqibatlarga olib keladi. JST doirasida subsidiyalar uchun
me’yoriy
-huquqiy baza birinchi navbatda GATT 1994ning
VI va XVI moddalari, shuningdek, JSTning Subsidiyalar va
kompensatsiya choralari to‘g‘risidagi bitimi (SKCH bitimi)
asosida o‘rnatiladi. Biroq, qishloq xo‘jaligi subsidiyalari ushbu
muh
im sektor uchun moslashtirilgan qoidalarni ta’minlaydigan
Qishloq xo‘jaligi to‘g‘risidagi bitim doirasida ko‘proq ko‘rib
chiqiladi. Qishloq xo‘jaligi subsidiyalari bilan bog‘liq nizolar
paydo bo‘lganda, Qishloq xo‘jaligi to‘g‘risidagi bitim boshqa JST
ko‘p
tomonlama savdo bitimlaridan ustun bo‘lib, global savdo
dinamikasida qishloq xo‘jaligining o‘ziga xos va nozik
xususiyatini aks ettiradi. Ushbu maqolada biz qishloq xo‘jaligi
sohasida subsidiyalarni tartibga solish va uning xususiyatlarini
ko‘ribchiqamiz.
Регулирование субсидий ВТО в аграрном секторе
АННОТАЦИЯ
Ключевые слова:
ВТО,
субсидия,
сельское хозяйство,
соглашение,
торговля,
ГАТТ,
рынок.
Сельскохозяйственные субсидии исторически были
весьма спорным вопросом в сфере международной
торговли, начиная с системы ГАТТ. Эти субсидии,
охватывающие как экспортные субсидии, так и меры
внутренней
поддержки,
остаются
ключевыми
инструментами для членов ВТО для поддержания и
укрепления их сельскохозяйственных секторов. Однако
такие субсидии часто имеют далеко идущие последствия,
потенциально нарушая экономическое развитие и
торговые интересы других государств
-
членов, особенно
тех, которые зависят от честной конкуренции в торговле
сельскохозяйственной продукцией. Нормативная база для
субсидий в ВТО в первую очередь установлена в статьях VI
и XVI ГАТТ 1994 года, а также в Соглашении ВТО по
субсидиям и компенсационным мерам (Соглашение СКМ).
Однако сельскохозяйственные субсидии более конкретно
рассматриваются в Соглашении по сельскому хозяйству
(ССХ), которое предусматривает специальные правила для
этого важнейшего сектора. ССХ имеет приоритет
над другими многосторонними торговыми соглашениями
ВТО,
когда
возникают
споры
относительно
сельскохозяйственных
субсидий,
что
отражает
уникальный и чувствительный характер сельского
хозяйства в динамике мировой торговли. В этой статье мы
проиллюстрируем
регулирование
субсидий
в
Жамият
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сельскохозяйственной сфере и его особенности.
Agriculture was initially integrated into the subsidy framework established under
the General Agreement on Tariffs and Trade (GATT). Early efforts to regulate subsidies,
including export subsidies, were enshrined in the original GATT provisions,
*
which
required parties to notify other contracting members about the nature and impact of
their subsidies. Additionally, these provisions mandated consultation with other
contracting parties upon request to address concerns about subsidy effects. A significant
milestone in this framework was the prohibition of export subsidies for non-primary
products, accompanied by measures to limit export support for primary products. These
initial steps laid the foundation for the treatment of agricultural subsidies within the
GATT system, setting the stage for future developments.
The Tokyo Round concluded in 1979 and introduced the Subsidies Code, the first
multilateral agreement aimed explicitly at addressing subsidy rules. This agreement
sought to establish discipline over subsidies for both agricultural and industrial goods.
However, despite its ambition, the Tokyo Round Subsidies Code faced significant
challenges due to its non-binding nature, which limited its effectiveness and
enforcement. While these early attempts underscored the need for clear and enforceable
rules regarding subsidies, particularly in agriculture, they highlighted the difficulties of
achieving consensus and implementing binding commitments in this sensitive area of
international trade. These efforts set the stage for the development of more robust and
comprehensive subsidy regulations, later formalized under the WTO’s Agreement on
Subsidies and Countervailing Measures (SCM Agreement) and the Agreement on
Agriculture (AoA).
The liberalization of the agricultural sector advanced significantly during the
Uruguay Round of negotiations, driven by active lobbying from influential states and non-
state actors such as the United States and the Cairns Group. These stakeholders strongly
advocated for an agreement aimed at liberalizing trade in agriculture. Their efforts
culminated in the initiation of agricultural negotiations under the Punta del Este
Declaration in 1986. Reaching a consensus on agricultural regulation, however, proved to
be a complex and contentious process. Initially, negotiators considered integrating
agricultural policies within the broader framework of industrial trade regulation.
Ultimately, they opted for a specialized regime to address the unique challenges and
sensitivities of the agricultural sector. Although the General Agreement on Tariffs and
Trade (GATT) 1994 formally applies to both industrial and agricultural goods,
agricultural subsidies and trade policies were carved out from the general rules outlined
in the Agreement on Subsidies and Countervailing Measures (SCM Agreement). Instead,
they were regulated under a distinct and sector-specific framework: the Agreement on
Agriculture (AoA).
The AoA remains unique within the WTO framework as the sole sector-specific
multilateral agreement, reflecting the highly sensitive and contentious nature of
agricultural trade. Its establishment marked a significant milestone in multilateral trade
*
During the 1955 Review Session of the General Agreement on Tariffs and Trade (GATT), significant advancements
were made in refining subsidy regulations, culminating in the introduction of
Section B of Article XVI
of the GATT. This
provision was specifically designed to address the growing concerns over the impact of subsidies, particularly export
subsidies, on international trade fairness and competition.
Жамият
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428
negotiations, balancing the interests of exporting and importing countries while
addressing the trade-distorting effects of subsidies and domestic support in agriculture.
Commentators have highlighted that the successful inclusion of the AoA as an
Annex 1 instrument of the WTO Agreement following the GATT 1994 represents one of
the most noteworthy achievements of the Uruguay Round. This accomplishment
underscores the ability of multilateral trade negotiations to address deeply entrenched
economic and political interests through a tailored regulatory framework. The AoA's
creation also signified a critical step toward integrating agricultural trade into the
broader rules-based system of the WTO, paving the way for further discussions on
sustainable and equitable agricultural practices in global trade.
The Agreement on Agriculture (AoA) is among the most intricate frameworks
within the WTO system, encompassing three key pillars: provisions governing market
access, regulations on agricultural export subsidies, and rules concerning domestic
agricultural support measures. These pillars collectively form the foundation for
addressing trade distortions and ensuring fair competition in the agricultural sector.
Under the AoA, agricultural subsidies are categorized into distinct "boxes"
–
Amber, Blue, and Green
–
based on their impact on producers' decision-making and their
potential to distort trade. Each classification reflects varying levels of permissibility and
regulatory oversight, with the Green Box representing non-trade-distorting support
measures, while Amber and Blue Boxes address varying degrees of trade impact. The
subsequent sections of this research will explore each of these pillars and subsidy
classifications in greater detail, providing a comprehensive analysis of their implications
for international agricultural trade and their role in the broader WTO regulatory
framework. This discussion will also highlight the practical challenges and policy
considerations associated with implementing these rules, particularly in the context of
developing economies striving to balance trade liberalization with domestic agricultural
sustainability.
One of the most notable outcomes of the Uruguay Round negotiations in the
context of market access was the introduction of compulsory tariffication. This policy
mandated the conversion of non-tariff barriers into their tariff equivalents, marking a
significant step towards transparency and predictability in international trade. Under
this framework, all trade-distorting non-tariff measures
–
excluding customs duties
–
were required to be replaced by tariff equivalents. This comprehensive approach
encompassed various border measures, including quantitative restrictions, import
quotas, and variable levies, thereby simplifying and standardizing trade regulations. The
implementation of tariffication was designed to enhance the transparency of trade
practices, providing a clearer and more predictable system for regulating agricultural
trade. By replacing opaque and often unpredictable non-tariff measures with quantifiable
tariffs, this policy aimed to create a level playing field for WTO members while facilitating
easier monitoring and enforcement of market access commitments. This development
underscored the WTO's commitment to reducing barriers to trade and fostering a fair
and open global trading environment.
During the Uruguay Round, another significant policy initiative focused on
reducing customs duties on agricultural goods. This culminated in an agreement
establishing tariff reduction commitments. Under this framework, WTO members
committed to an average tariff reduction of 36% for each tariff line, with a minimum
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reduction of 15%. Importantly, all tariff lines were required to be bound, ensuring that
members could not impose tariffs exceeding their agreed levels on imports from other
WTO members. This binding of tariffs enhanced predictability and stability in agricultural
trade, creating a more transparent trading environment. However, it also led to the
retention of relatively high tariffs for certain sensitive agricultural products, as members
sought to protect their domestic industries while adhering to reduction commitments.
Notably, the Agreement on Agriculture (AoA) does not mandate minimum market access
requirements. This absence allows WTO members to maintain certain levels of trade
protection for their domestic agricultural sectors, which can limit the full realization of
liberalized trade in agriculture despite tariff reductions. This balance between
liberalization and domestic protection remains a critical and contentious aspect of
agricultural trade under the WTO framework.
It is important to highlight that the World Trade Organization's (WTO) Most-
Favoured Nation (MFN) principle extends beyond merely prohibiting discrimination
among member states. The MFN principle also carries broader implications for trade
practices and market access. Specifically, it plays a role in the administration of tariff-rate
quotas (TRQs). Under this framework, WTO members can establish minimum access
opportunities through the application of TRQs, which allow a specified quantity of a
product to be imported at a reduced tariff rate, with higher tariffs applied to quantities
exceeding that threshold. This mechanism is designed to balance the principle of non-
discrimination while enabling controlled market access for sensitive products,
particularly in sectors such as agriculture. By integrating the MFN principle into the
administration of TRQs, WTO members ensure equitable opportunities for exporters
from all member states while simultaneously addressing domestic sensitivities in global
trade practices. This dual functionality underscores the nuanced application of the MFN
principle within the WTO framework.
As the Agreement on Agriculture (AoA) does not explicitly regulate tariff-rate
quotas (TRQs), their administration is governed by Article XIII of the GATT 1994. Article
XIII:1 prohibits discrimination in the application of quantitative restrictions, ensuring
that TRQs are administered in a manner consistent with equitable trade practices.
Specifically, it requires that quota shares allocated to supplying countries be distributed
fairly, based on anticipated trade flows and historical trade patterns over a
representative period. Additionally, Article XIII:2(d) permits WTO member states to
allocate quota shares among members with a significant supplying interest. However,
this provision does not authorize deviations from the fundamental Most-Favoured Nation
(MFN) principle enshrined in Article XIII:1. Thus, while specific allocations may address
the interests of key suppliers, they must still align with the broader non-discriminatory
framework of the GATT. The determination of a "representative period" for calculating
historical trade patterns under Article XIII:2(d) is at the discretion of the member state
introducing the TRQ. Typically, a three-year period is employed as the basis for these
calculations, reflecting a balanced approach to ensure consistency with historical trade
flows and equitable market access. This governance framework underscores the careful
balance the GATT seeks to achieve between respecting the MFN principle and
accommodating specific trade interests within TRQ allocations.
Article XIII:4 of the GATT 1994 provides flexibility in the administration of quotas,
allowing for adjustments in their distribution among supplying countries. This includes
the possibility of revising the previously selected base period used to determine trade
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shares. Additionally, it permits the reconsideration and modification of any special
factors that may have influenced the initial allocation of quotas.
These provisions are designed to ensure that quota administration remains
equitable and reflective of changing trade dynamics, while maintaining alignment with
the Most-Favoured Nation (MFN) principle. By allowing for such adjustments, Article
XIII:4 acknowledges that trade patterns, market conditions, and other relevant factors
can evolve, necessitating periodic revisions to uphold fairness and transparency in quota
allocation.
The WTO's regulation of agricultural subsidies, particularly through the AoA,
represents a significant achievement in multilateral trade governance. However, the
evolving dynamics of global trade necessitate continuous reforms to address persistent
challenges and ensure that the framework remains relevant, equitable, and effective. By
enhancing transparency, revising tariff and quota policies, promoting non-distorting support
measures, and addressing the specific needs of developing countries, the WTO can
strengthen the AoA's role in fostering a fair and sustainable agricultural trading system.
As global trade continues to evolve, the integration of sustainability considerations
and the promotion of inclusive policies will be essential for balancing economic growth,
environmental stewardship, and equitable trade practices. The AoA's legacy as a
pioneering sector-specific agreement underscores the potential of multilateral trade
negotiations to address complex and contentious issues, paving the way for future
advancements in global trade governance.
REFERENCES:
1.
The General Agreement on Tariffs and Trade (GATT) 1994.
2.
The Agreement on Agriculture.
3.
Agreement on Subsidies and Countervailing Measures (SCM Agreement).
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Peter Van den Bossche, Werner Zdouc, “World Trade Organization Text, Cases
and materials”, (4
th
edition, Cambridge University Press, 2017).
5.
Petros C. Mavroidis, “Trade In Goods”, (Oxford University Press, 2008).
6.
O’Connor B. “Agriculture in WTO Law”, (London, 2007).
7.
Zelenska, Kataryna, “Grain Subsidies in Ukraine: The Role of WTO law and the
EU-
Ukraine Association Agreement”, (BRIL,2018).
8.
Ricardo Melendez-
Ortiz, Christophe Bellman, Jonathan Hepburn, “Agricultural
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(Cambridge University Press, 2010).
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Andreas F. Lo
wenfeld, “International Economic Law”, (2
nd
edition, Oxford
University Press, 2008).
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Appellate Body Report
EC-Bananas III
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