WORLD TRADE ORGANIZATION
G/AG/NG/W/35
22 September 2000
(00-3818)
Committee on Agriculture
Special Session Original: English

Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay submit the following Cairns Group proposal which deals with domestic support issues in the WTO negotiations.

The Uruguay Round committed WTO Members to fundamental reform resulting in correcting and preventing restrictions and distortions in world agricultural markets. Yet today agriculture remains the most highly subsidised sector in the world economy. The OECD has confirmed that support to farmers in industrialised countries, calculated at more than US$360 billion in 1999, has returned to the high levels existing before the end of the Uruguay Round.

The Uruguay Round disciplines governing domestic support distinguished between trade and production-distorting forms of support (aggregate measurement of support (AMS) and "blue box") and those which have no, or at most minimal, trade and production-distorting effect ("green box"). However, current disciplines and reductions are clearly inadequate and have not resulted in a fundamental shift away from trade and production-distorting forms of domestic support.

High levels of, and wide disparities in, trade and production-distorting domestic support continue to corrupt world agricultural markets. Such support, provided mainly by some wealthy developed countries, encourages inefficient production which competes unfairly with producers in other WTO Member countries. Only 30 WTO Members have the right to provide AMS support at above de minimis levels. In addition "blue box" support measures which distort trade and production are exempt from Uruguay Round reduction commitments, while other policies claimed as "green box'' measures are also causing, or have the potential to cause, distortions.

The Cairns Group seeks major reductions in domestic support leading to the elimination of all forms of trade and production-distorting support. Only non-distorting forms of support should be permitted within the context of declining levels of support. The Cairns Group recognises the need for enhanced special and differential treatment provisions to address the agricultural and rural development needs of developing and least developed countries, and increase the living standards of their populations.

Consistent with the objective of the reform process, and taking into account that, from 2004, WTO Members will not be restricted from taking action against domestic support under the GATT 1994 and the Agreement on Subsidies and Countervailing Measures, the Cairns Group proposes that WTO Members decide on the following general approach to domestic support:

• A formula approach will be used to deliver major reductions in trade and production distorting domestic support, including AMS and blue box, leading to the elimination of such support and thus the removal of disparities in the levels of this support provided by countries;
• The time period, and other parameters, of the reduction formula for trade and production-distorting domestic support will be agreed in the negotiations;
• The formula will include a substantial downpayment during the first year of the implementation period (eg. not less than a 50% initial reduction in trade and production-distorting domestic support);
• The formula will result in commitments on a disaggregated basis to ensure that trade and production-distorting support will be reduced for all agricultural products;
• The basic and policy-specific criteria for "green box" support not subject to reduction and elimination (Annex 2 of the Agreement on Agriculture) will be reviewed to ensure that all such domestic support meets the fundamental requirements of no, or at most minimal, trade-distorting effects or effects on production.

In order to ensure that the reform process continues during the course of the WTO negotiations, countries should show maximum restraint and reduce the extent to which trade and production-distorting forms of support are provided.

The Cairns Group recognises the importance of providing concrete special and differential treatment (S&D) provisions in the area of domestic support to assist developing countries, including least-developed and net food-importing developing countries. Provisions should enable developing countries to address their legitimate and varied needs, including agricultural and rural development, food security, and subsistence and small scale farming for the development of domestic food production. The final provisions for developing and least-developed countries will need to take into account the outcome of the negotiations, but S&D outcomes must ensure that developing countries have adequate flexibility to pursue their development needs. S&D provisions relating to domestic support should build on the existing WTO provisions and include:

• Enhanced green box provisions for developing countries which would address their specific concerns regarding food security, rural development and poverty eradication;
• Differentiated AMS formula and commitments for developing countries, including preserving de minimis provisions and exceptions for investment and input subsidies, and domestic support to encourage diversification from growing illicit narcotic crops;
• Enhanced technical assistance and the promotion of international cooperation to assist agricultural and rural development, and food security programs in developing countries.