The World Trade Organization (WTO) was established in 1995, forming the cornerstone of a rules-based, multilateral system for trade. The WTO is a member-driven organisation with 164 members (July 2019). Its core activities are:
- multilateral negotiations aimed at progressive liberalisation of markets;
- setting the legal ground-rules for trade in the form of agreements;
- resolving trade disputes between states;
- monitoring members’ trade policies.
The European Union is a member of the WTO and as the world’s largest trading bloc, the EU is a key player in the WTO. The European Commission represents the EU, negotiating as a single entity on behalf of all the EU countries. The EU actively supports the work of the WTO in multilateral rule-making and trade liberalisation, seeking to:
- maintain open markets and ensure new markets for European companies;
- strengthen multilateral rules and ensure their observance by others;
- promote sustainable development in trade.
The current rules were negotiated during the Uruguay Round (1986-1994), leading to the Marrakesh Agreement establishing the World Trade Organisation. The Marrakesh Agreement is in fact a series of agreements on various aspects of trade rules. They include a revision of the 1947 General Agreement on Tariffs and Trade (GATT), as well as agreements on intellectual property, dispute settlement, technical barriers to trade, sanitary and phytosanitary rules, and, in particular, agriculture.
The WTO provides a mechanism for member countries to resolve disputes between members related to the implementation of WTO agreements.
WTO and agriculture
The importance of agriculture in global trade led to a specific agreement on agriculture, which notably governs domestic support, export subsidies and market access.
The Agreement on Agriculture
The WTO Agreement on Agriculture aims at establishing “a fair and market-oriented agricultural trading system”. It sets out rules applicable to all WTO members to provide for substantial progressive reductions in agricultural support and protection. The agreement was part of the results achieved during the Uruguay Round, making a decisive move towards increased market orientation in global agriculture.
It consists of general rules that apply to all WTO Members. In addition, specific commitments made by individual members, including on agricultural trade and support, as well as tariffs and tariff-rate quotas, are laid down in ‘schedules’.
The committee on agriculture oversees the implementation of the commitments stemming from the agreement. All WTO members are represented in the committee and may consult each other on implementation of the agreement. Members notify their implementation of commitments and answer questions from other members. The review of notifications is part of the committee’s key responsibility to oversee members’ compliance with commitments.
Domestic Support and the “boxes”
The Uruguay Round changed the way in which governments may design domestic agricultural policies. The Agreement on Agriculture classifies domestic agricultural support into different types, which are often described as falling into different “Boxes”. Trade-distorting support (‘Amber Box’) measures are subject to limits: a “de minimis” limit applies to all members with additional amounts (described in WTO as “Aggregate Measurement of Support” or ‘AMS’ commitments) applying to some members based on pre-Uruguay Round expenditure. Other support – that has no or minimal trade – or production-distorting effects (‘Green Box’) – and certain production limiting programmes (‘Blue Box’) – are not subject to limits.
The Uruguay Round in agriculture replaced many non-tariff measures with ordinary customs duties as well as providing for cuts in tariffs. In return, the Agreement on Agriculture provided for the special safeguard mechanism to allow temporary additional tariffs on imports of some agricultural products in case of special circumstances, such as a sudden surge in imports. Thirty-eight WTO Members, including the EU, have the right to use special safeguard measures as set out in their schedules.
Under the Agreement on Agriculture, the use of export subsidies and some other export measures was restricted. However, at the Nairobi Ministerial Conference in December 2015, WTO members went much further and agreed to abolish export subsidies. Developed countries had to do so with immediate effect (with some transitional periods until end-2020), developing countries by end-2023 and least developed countries by end 2030. In addition, the Nairobi Decision imposes disciplines on export credits and export credit guarantees, international food aid and agricultural exporting state trading enterprises.
WTO Ministerial Conferences
The Ministerial Conference is the highest decision making body at the WTO. All WTO members, including the EU, may attend the conference, which usually takes places every two years. In recent years, two conferences have resulted in important changes for the trade in agricultural products
- In Bali in 2013, four important steps were taken. Members reached an agreement on a temporary “peace clause” with a view to negotiating a permanent solution on public stockholding for food security purposes. They also adopted a declaration on utmost restraint in the use of all forms of export subsidies, and expanded the list of ‘General Services’ in the Green Box. In addition, a decision was adopted providing for further transparency in tariff-rate quota administration, with mechanism for systematically under-filled quotas.
- In Nairobi 2015, WTO members continued the work started in Bali and adopted a decision on abolishing export subsidies for farm exports and providing for disciplines on export credits and export credit guarantees, international food aid and agricultural exporting state trading enterprises. They also agreed to continue negotiations on agriculture, on public stockholding for food security purposes and market access and a linked special safeguard mechanism for developing countries.
The next ministerial conference will take place in Nur-Sultan, Kazakhstan in June 2020.
The EU has transformed its agricultural support programme to further develop a market based, fair and transparent policy. This process started even before the Uruguay Round and has continued to the present day. It promotes the use of less trade-distorting policy instruments. Most support to farmers is now granted in the form of decoupled direct payments with no obligation to produce. The graph below shows the shift in the EU’s policy from Amber Box measures to non-trade-distorting Green Box support. The other graphs below show developments for other major trading partners.
Developments in EU Domestic Support
Developments in notified Domestic Support for other members
The current negotiation round was launched in November 2001 in Doha, Qatar. The so-called ‘Doha Round’ or the ‘Doha Development Agenda’ focussed on further liberalising trade, whilst making it easier for developing countries, in particular least developed countries, to integrate into the WTO multilateral system. Despite the EU's efforts, negotiations in agriculture have stalled. Changes in levels of economic development have in particular increased the importance of some developing countries as major exporters and players in agricultural trade. Negotiations in particular are blocked due to the lack of readiness from some WTO members to reform their agricultural policies.
Nevertheless, WTO members continue to negotiate to reform agricultural trade. This takes place at Special Sessions of the Committee on Agriculture with a view making proposals for the WTO Ministerial Conference that take place every two years.
EU priorities in agricultural negotiations
The EU will continue to promote multilateralism and international cooperation. The WTO and a rules-based and inclusive international trading system are vital for global food security and development. Concerning agricultural trade, the EU will carry on working towards a fairer, more transparent system. For the three pillars of the Agreement on Agriculture, the EU has the following priorities:
Domestic support: Reducing trade-distorting measures is an important step towards a fair agricultural trading system. The EU has transformed its domestic support system which now mostly comprises non-trade distorting measures. This has improved the functioning of the market for agricultural goods and trade. The EU will continue to press for other members to do the same.
Market access: Market access for agricultural products forms an integral part of the global trading system. Improvements in market access at the WTO could be achieved best by inclusive and comprehensive negotiations that encompass both agricultural and non-agricultural market access and services. Market access issues are also naturally at the heart of bilateral negotiations for free-trade agreements.
Export competition: The EU considers that further negotiations should build on the steps taken in Nairobi notably as regards further disciplines on export credits and export credit guarantees, international food aid and agricultural exporting state trading enterprises.