WTO Export Subsidy Disciplines

Export subsidies are one of the most distortionary policy instruments applied to agricultural trade. The disciplines in this pillar not only address direct export subsidies, but also food aid, officially supported export credits and exporting state trading enterprises.

The Hong Kong Declaration set out the commitment by Members “to ensure the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect to be completed by the end of 2013.” This represented a major shift in the position of the EU, which is the major user of export subsidies, and which had initially only agreed to negotiate a reduction in their use. The July 2008 modalities set out the progress of the negotiations to date under this pillar.

Export Subsidies Commitment

Developed country Members would eliminate their remaining scheduled export subsidy entitlements by the end of 2013. Budgetary outlay commitments would be reduced by 50% by 2010 in equal annual instalments from the date of entry into force, with the remaining budgetary outlay commitments being reduced to zero in equal annual instalments so that all forms of export subsidies are eliminated by the end of 2013.

Quantity commitment levels have yet to be agreed. They would either be reduced in equal annual instalments from the applicable commitment levels or applied as a standstill from the commencement until the end of the implementation period at the lower of either the then current actual applied quantity levels or the bound levels reduced by 20%.

Developing countries would eliminate their remaining export subsidy entitlements by reducing to zero their scheduled export subsidy budgetary outlay and quantity commitment levels in equal annual instalments by the end of 2016.

Export Credits, Export Credit Guarantees or Insurance Programmes

Members would also agree not to provide export credits, export credit guarantees or insurance programmes with repayment periods greater than 180 days. Programmes would be self-financing. These disciplines would apply to any export financing support provided by or on behalf of government and their agencies from the first day of implementation of a new agreement or the last day of 2010, whichever comes first.

Developing country Members would have a phase-in-period of three years after the first day of the implementation period or the end of 2013, whichever comes first, within which to fully implement the maximum repayment term of 180 days. Self-financing periods will be 50% longer.

Least-developed and net food-importing developing countries would be allowed more favourable treatment comprising allowance for a repayment term between 360 and 540 days for the acquisition of basic foodstuffs, with extensions available for exceptionable humanitarian needs.

Agricultural Exporting State Trading Enterprises

Members should eliminate export subsidies to or by STEs, government financing, preferential access, government underwriting or special preferences to STEs. Different views exist on whether the monopoly power of exporting STEs should be prohibited or not, and this matter remains for further negotiations.

STEs in developing country Members which enjoy special privileges to preserve domestic consumer price stability and to ensure food security shall be permitted to maintain or use export monopoly powers, provided that the share of world exports of the agricultural product or products is less than 5%.

STEs in least-developed countries and small vulnerable economics will also be allowed to maintain monopoly powers for exports, whether or not they currently allow special privileges.

International Food Aid

The modalities reaffirm Members' commitment to maintaining an adequate level of international food aid to take into account the interests of food aid recipients and to ensure that the disciplines agreed under Doha do not unintentionally impede the effective delivery food aid. As agreed at the Hong Kong Ministerial Meeting, food aid with be brought under the oversight of the WTO in order to prevent the trade displacement effects of subsidised food aid. A ‘safe box’ for bona fide food aid will be provided to ensure that there is no unintended impediment to dealing with emergency situations.

Greater emphasis will also be placed on food aid being used as a support for the negative impacts that developing countries may face as a result of mandated trade liberalisation.

Links:

WTO Website – Export Subsidies
Specific section of the WTO Agricultural Portal that presents an explanation of domestic support in the WTO

Resources:

CTA Technical Centre for Agricultural and Rural Cooperation, WTO agreement on agriculture: Implications for the ACP, Agritrade Executive Brief, 2010
Provides an update on the state of play of WTO negotiations as of April 2010 looking particularly at the implications for ACP countries.

Gifford, M. and Montemayor, R., An Overview Assessment of the Revised Draft WTO Modalities for Agriculture, International Centre for Trade and Sustainable Development
Provides an overview assessment of the implications of the revised modalities text in terms of its ambition and balance as viewed from the perspective of both developed and developing countries, and identifies the key issues which will likely require ministerial decisions.

IPC, Options for the WTO Modalities for Agriculture (PDF), 2006
This paper focuses on the key operational issues that remain to be addressed in the agricultural modalities.

FAO, Export competition: selected issues and empirical evidence (PDF), Trade Policy Technical Note, 2005.