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Phase 1: Domestic support — amber, blue and green boxes
In WTO terminology, subsidies in general are identified by boxes which are given the colours of traffic lights: green (permitted), amber (slow down i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production. There are also exemptions for developing countries (sometimes called an S&D box).
The amber box back to top
For agriculture, all domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box. The total value of these measures must be reduced. Various proposals deal with how much further these subsidies should be reduced, and whether limits should be set for specific products rather than having overall aggregate limits.
30 WTO members have commitments to reduce their trade-distorting domestic supports in the amber box (i.e to reduce the “total aggregate measurement of support” or AMS). Members without these commitments have to keep within 5% of the value of production (i.e. the “de minimis” level) 10% in the case of developing countries.
For more details, see WTO Secretariat background paper Domestic Support G/AG/NG/S/1, downloadable here
In order to qualify for the green box, a subsidy must not distort trade, or at most cause minimal distortion. These subsidies 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 directed at particular products, and include direct income supports for farmers that are not related to (are decoupled from) current production levels or prices. Green box subsidies are therefore allowed without limits, provided they comply with relevant criteria. They also include environmental protection and regional development programmes (for details, see Article 6 and Annex 2 of the Agriculture Agreement). Canada has proposed setting limits on all boxes combined, which would mean limits on green box subsidies as well.
Some countries say they would like to review the domestic subsidies listed in the green box because they believe that some of these, in certain circumstances, could have an influence on production or prices. Some others have said that the green box should not be changed because it is already satisfactory. Some say the green box should be expanded to cover additional types of subsidies.
The blue box is an exemption from the general rule that all subsidies linked to production must be reduced or kept within defined minimal (de minimis) levels. It covers payments directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land. Countries using these subsidies and there are only a handful say they distort trade less than alternative amber box subsidies. Currently, the only members notifying the WTO that they are using or have used the blue box are: the EU, Iceland, Norway, Japan, the Slovak Republic, Slovenia, and the US (now no longer using the box).
At the moment, the blue box is a permanent provision of the agreement. Some countries want it scrapped because the payments are only partly decoupled from production, or they are proposing commitments to reduce the use of these subsidies. Others say the blue box is an important tool for supporting and reforming agriculture, and for achieving certain non-trade objectives, and argue that it should not be restricted as it distorts trade less than other types of support (see non-trade concerns). The EU says it is ready to negotiate additional reductions in amber box support so long as the concepts of the blue and green boxes are maintained.
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