The end of subsidy in sight—the
impact on the CAP
112. If agreed in its current form, the Doha
agreement could have a beneficial effect on the EU budget. Savings
of €1.5-3 billion could be made annually if the EU was no
longer allowed to fund its current export subsidies. However this
saving could be wiped out by possible payments of compensation
that would have to be paid to those sectors hit hardest by the
reduction and removal of export subsidies and the scaling down
of import tariffs—most notably, the dairy and sugar sectors
(Q 150 and QQ 211-2).
113. Our witnesses were confident that a Doha
agreement would not require a significant change to the level
of EU domestic support for farmers. This was mainly due to the
2003 reform agreement having moved most of the Union's agricultural
support from the proscribed blue and amber box classifications
of support into the permitted green box (Q 60, Q 247 and Q 433).
BOX
9
What are the WTO trade boxes?
In WTO terminology, agricultural subsidies are identified
by "boxes" which are given different colours depending
upon their acceptability or otherwise. There are exemptions for
developing countries.
Amber box
All domestic support measures considered to distort
production and trade (with some exceptions) fall into the amber
box. These include measures to support prices, or subsidies directly
related to production quantities. The reduction commitments are
expressed in terms of a "Total Aggregate Measurement of Support"
which includes all supports for specified products together with
supports that are not for specific products, in one single figure.
Blue box
This is the "amber box with conditions"
— conditions designed to reduce distortion. Any support
that would normally be in the amber box, is placed in the blue
box if the support also requires farmers to limit production.
At present there are no limits on spending on blue box subsidies.
In the current negotiations, some countries want to keep the blue
box as it is because they see it as a crucial means of moving
away from distorting amber box subsidies without causing too much
hardship.
Green box
In order to qualify, green box subsidies must not
distort trade, or at most cause minimal distortion. They have
to be government-funded (not by charging consumers higher prices)
and must not involve price support.
They tend to be programmes that are not targeted
at particular products, and include direct income supports for
farmers that are not related to (are "decoupled" from)
current production levels or prices. They also include environmental
protection and regional development programmes. "Green box"
subsidies are therefore allowed without limits, provided they
comply with policy-specific criteria.
Source: Based on WTO Fact Sheet: Domestic Support
in Agriculture - The Boxes
114. The National Farmers' Union pointed out
that "CAP reform has anticipated some of the changes that
the Doha Development Round is expected to bring about, most notably
the reduction (or even eventual elimination, subject to the adoption
of total decoupling by all countries) in support currently classified
within the Blue Box"(p 14). Decoupled payments have allowed
for the reclassification of most direct agricultural supports
into the Green Box. The decoupling objective of the 2003 reforms
is commendable. The EU must build on this to reform the CAP fully
and eliminate all market support measures.
115. The National Farmers' Union and other farm
linked organisations however were concerned that, in the absence
of export subsidies and with tariffs being reduced, "only
the introduction of a quota system and/or a reduction in the support
provided by the intervention price could prevent a potential dramatic
increase in intervention support expenditure" (p 14).
116. We acknowledge these views but do not consider
that they justify the continuation of measures which cause trade
distortion. We recommend that the EU should push ahead to attain
a successful Doha agreement. Political will to cut subsidies and
create freer trade must be met with strong action to move all
EU subsidies into the Green Box by a specified date. Such action
must be accomplished if the CAP is to be fully reformed.
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