AGRICULTURE: Fact sheet

Export subsidies and other export support measures

The elimination of agricultural export subsidies - in parallel with new disciplines on export credits, international food aid and agricultural exporting state trading enterprises - is one of the central elements of the “Nairobi Package” adopted at the WTO’s Tenth Ministerial Conference in December 2015. Collectively, these agricultural issues are known as “export competition”.

This briefing document explains current agricultural issues in the negotiations. It has been prepared by the Information and External Relations Division of the WTO Secretariat to help public understanding about the agriculture negotiations. It is not an official record of the negotiations.

 

Due to high commodity prices in recent years, many countries have significantly reduced their export subsidies and only a handful of WTO members still use export subsidies, according to a WTO survey in 2017. In times of low prices, however, countries have often resorted to export subsidies — and history has shown that once one country does so, others quickly follow suit. Thanks to the decision adopted by ministers in Nairobi, WTO members will no longer be able to resort to such action in the future.

Under the Ministerial Decision on Export Competition (WT/MIN(15)/45) adopted in Nairobi, developed countries have agreed to immediately remove export subsidies, except for a handful of agriculture products, and developing countries will do so by 2018, with a longer time-frame in some limited cases. In addition, developing countries will keep the flexibility of covering marketing and transport costs for agriculture exports until the end of 2023, while the poorest and food-importing developing countries will enjoy additional time to cut export subsidies.

The Nairobi decision also contains rules to minimize the possible distorting impact on international trade of other export policies, such as export finance, international food aid and operations of agricultural exporting state trading enterprises, so that these policies cannot be used to support agriculture exports and circumvent the provisions on export subsidies. These policies include maximum repayment terms for export financing programmes for agriculture exporters supported by the government, provisions on state trading enterprises engaging in agriculture trade, and disciplines to ensure that food aid does not displace trade and does not cause adverse effects on domestic production.

Export competition has been a longstanding issue in the WTO’s agricultural negotiations and the elimination of all forms of agricultural export subsidies was one of the key targets in the United Nations Sustainable Development Goals launched in 2015.

The proliferation of export subsidies in the years leading up to the launch of the Uruguay Round in 1986 was one of the major issues addressed in these negotiations and they remained a heated topic for many years in the WTO. While export subsidies for industrial products have been generally prohibited for over 50 years, such subsidies in agricultural products had only been subject to limited disciplines. Ministers finally agreed at the WTO 2013 Bali Ministerial Conference that members would “exercise utmost restraint” in using any form of export subsidy, and “ensure to the maximum extent possible” that progress would be maintained in eliminating all forms of export subsidies. The Nairobi decision represents a major step forward by fully eliminating any form of agricultural export subsidies.

Implementation of the Nairobi decision

Who could subsidize exports before the Nairobi ministerial decision?

As of December 2015, 16 WTO members could subsidize exports for products on which they had commitments to reduce the subsidies. Those without commitments could not subsidize agricultural exports at all. Among the 16, some had decided to greatly reduce their use of these subsidies or drop them completely. In brackets are the numbers of products involved for each country. 

Australia (5)
Brazil (16)
Canada (11)
Colombia (18)
EU (20)
Iceland (2)

Indonesia (1)
Israel (6)
Mexico (5)
Norway (11)
South Africa (62)
Switzerland-
Liechtenstein (5)

Turkey (44)
United States (13)
Uruguay (3)
Venezuela (72)

The Agriculture Agreement also includes a temporary exemption for developing countries, allowing them to subsidize marketing, cost reduction and transport (Article 9.4)

Following the 2015 Nairobi Ministerial Conference, WTO members with export subsidy entitlements have taken steps to eliminate them from their WTO schedule of commitments. Australia was the first member to modify its schedule, renouncing its entitlement to subsidize agricultural exports as of 22 May 2017. The European Union became the second WTO member to do so.

The Committee on Agriculture monitors the implementation of the Nairobi decision. The committee undertakes annual reviews of members' agriculture export subsidies and other export measures. To aid the review, the WTO Secretariat compiles background information on members' export subsidies, export finance support, agriculture state trading enterprises and international food aid.

In addition, the committee will review every three years the disciplines contained in this decision. The first such review will take place in 2018.

Post-Nairobi negotiations

In May 2016, Canada submitted a proposal calling for stronger disciplines on export financing support. A few members reiterated that reforms in export competition were still an unfinished business, and negotiations needed to continue in particular in the areas of export finance and international food aid.

JARGON BUSTER

Subsidies: A form of financial aid or support extended to an economic sector. There are two general types of subsidies: export and domestic. An export subsidy is a subsidy conferred on a firm by the government that is contingent on exports. A domestic subsidy is a subsidy not directly linked to exports.

Export competition: Export subsidies and the “parallel” issues, which could provide loopholes for governments’ export subsidies commitments — export finance (credit, guarantees and insurance), exporting state trading enterprises, and international food aid.

Maximum repayment term: In export credit or financing programmes, the longest period allowed between the starting point of a credit and the contractual date of the final payment, also known as “maximum repayment period”. 
Modality: In WTO negotiations, modalities set broad outlines — such as formulas or approaches for tariff reductions — for final commitments.