The empty promise and perilous game of the European Commission to slash its agricultural supports

Original Publication Date: 
2 November, 2005

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1. The European Commissioner for trade relations and the Head of the US Trade Department have made the 10 and 12 October 2005 reduction proposals of their trade-distorting agricultural domestic supports apparently impressive in order to unlock the Doha Round negotiations and to prompt developing countries to make parallel offers on the opening of their markets to the EU and US exports of services and non agricultural products. Lastly, the EU has just made new comprehensive proposals the 28 October, with only minor adjustments to its 12 October proposals on the domestic support components.

2. Peter Mandelson has proposed to reduce by 70% the EU total AMS ('Aggregate Measurement of Support') and by 80% the 'de minimis' supports for all developed countries. However, contrary to its first proposal of 12 October when the EU agreed on the principle to reduce its blue box subsidies below the 5% ceiling of the value of EU agricultural production, prescribed by the Framework Agreement of 31 July 2004, it is now telling that 'lowering the 5% overall ceiling' is not possible. On the other hand the EU underlines the necessity 'to develop disciplines to govern the new Blue Box in order to avoid that highly trade-distorting payments are moved into this new box without significant changes', which refers clearly to the US counter-cyclical payments.

We will show that these proposals would not challenge the common agricultural policy (CAP) at least as viewed from Brussels and would even leave space to increase significantly all domestic trade-distorting supports. On the other hand, since the EU has cheated massively in the notification of its agricultural supports in the various WTO boxes, the condemnation of these cheatings would make the CAP collapse. Another analysis will deal with the US offers on the reduction of its domestic trade distorting agricultural supports.

Viewed from Brussels, Peter Mandelson's proposals are compatible with the CAP

Preliminary definitions of the components of domestic trade distorting supports

3. The total AMS corresponds to the trade distorting (or 'coupled', implied to the price or production level of the current year), in other words to the 'amber box'. The total AMS is the sum of all product-specific AMSs and of the non product-specific AMS. Besides we have to distinguish between the allowed or bound total AMS and the applied or notified total AMS: the first has remained fixed at