OECD Domestic Support and Developing Countries

Abstract

Most studies of global agricultural trade liberalization are primarily focused on market price support — that is, agricultural support provided indirectly through border measures, either import barriers or export subsidies, designed to boost domestic relative to world market prices. In the late 1980s, this form of support accounted for about 75 per cent of total producer support in agriculture in the member countries of the Organization for Economic Cooperation and Development (OECD) (OECD, 2002a). Prior to the Uruguay Round Agreement on Agriculture (URAA), this was also the only area of agricultural protection under negotiation in the international arena. A very important innovation in the URAA was to put domestic subsidies on the table. More specifically, support policies are placed in ‘boxes’ according to their impact on international trade. Those policies that have ‘no, or at most minimal trade-distorting effects or effects on production’ are placed in the ‘green box’ and are not subjected to reduction requirements under the URAA. Those policies that are deemed to be trade-distorting are placed in the ‘amber box’ and are subjected to reductions. However, if the payments are accompanied by programmes aimed at limiting production, they may be placed in yet a third box, the ‘blue box’. As a consequence, they are exempt from the negotiated reductions in support.