EU Farm Support Remains Minimally Trade-Distorting

EU farm support remains dominated by payments that are classified as only minimally trade-distorting, according to new data for the 2011-12 marketing year that the bloc has just submitted to the WTO.

“Green box” payments – which WTO rules require to have no more than minimal effects on trade or production – accounted for €70 billion out of a total of €81 billion that were reported to the global trade body last week. There are no caps or reduction commitments on these payments under current rules.

The most heavily trade-distorting subsidies, classified under the WTO’s “amber box,” hovered at just under €7 billion – a fraction of the €72 billion ceiling that Brussels has agreed to respect.

Another €1 billion of trade-distorting support was exempt from disciplines under the “de minimis” clause. This allows developed countries to provide trade-distorting payments up to 5 percent of the value of production in both product-specific and non product-specific support.

Wheat, skimmed milk powder, butter, and wine were among the products that have continued to receive relatively higher levels of support. Over the years, successive reforms aimed at improving farmers’ ability to respond to market signals have substantially reduced the levels of product-specific farm subsidies that EU producers receive.

“Blue box” support, for production-limiting farm payments, accounted for €3 billion, according to the notification. This support is still seen as trade-distorting, but as less damaging than amber box payments – where subsidies are directly linked to inputs or output levels, or provided as market price support.

Decoupled support still dominates

Decoupled income support payments continue to account for about half of all subsidies within the “green box” category, the new data from Brussels suggests.

The EU spent some €33 billion supporting farm incomes in this way, the report shows.

Within the green box, another €9 billion was allocated to general services, such as infrastructure spending, marketing services, pest and disease control, and research.

Other green box categories were also significant, however. Environmental programmes accounted for €8 billion, while another €7 billion was spent on investment aid.

Overall, support levels remained practically unchanged from the notification for spending in the previous year, the new data suggests.