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The Blue Box Distr. GENERAL UNCTAD/DITC/COM/2003/6 19 November 2003 ENGLISH ONLY UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT AN ANALYSIS OF THE AGRICULTURAL DOMESTIC SUPPORT UNDER THE URUGUAY ROUND AGREEMENT ON AGRICULTURE: THE BLUE BOX Study prepared by the UNCTAD secretariat NOTE The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the secretariat of UNCTAD concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the definition of its frontiers or boundaries. ACKNOWLEDGEMENTS This study was prepared, under the overall supervision of Olle Ostensson, by Olivier Combe of the UNCTAD secretariat. Useful comments, suggestions and contributions were also received from Miho Shirotori (UNCTAD). ii Contents Chapter Page Introduction................................................................................................................................1 I. Definitions of the Blue Box domestic support measures ....................................................3 A. The Agreement on Agriculture.....................................................................................3 1. Description.............................................................................................................3 2. Blue Box support in figures ...................................................................................4 (a) In a common currency: US dollar ...................................................................4 (b) Blue Box expenditures as a percentage of agricultural production value ................................................................................................................6 (c) Taking account of inflation .............................................................................6 3. The "Peace Clause" issue.......................................................................................8 (a) End of the clause in 2003 ................................................................................8 (b) The ceiling mentioned in the "Peace Clause": The amount of subsidies in the 1992 marketing year ..............................................................9 B. The products subsidized by the Blue Box ..................................................................11 1. European Communities........................................................................................11 2. Iceland..................................................................................................................18 3. Japan.....................................................................................................................18 4. Norway.................................................................................................................19 5. Slovak Republic...................................................................................................20 6. Slovenia................................................................................................................20 7. United States........................................................................................................21 C. Blue Box support: Distorting measures? ....................................................................22 II. The Blue Box and the other measures...............................................................................25 A. Blue Box, Green Box, AMS and de minimis..............................................................25 B. If the Blue Box measures were included into Current Total AMS.............................26 1. Graphical results..................................................................................................26 2. The classification of the measures in the different boxes ....................................27 3. The de minimis clause and its possibilities ..........................................................28 C. Why so few countries have used the Blue Box ..........................................................28 III. Some proposals in the agricultural negotiations ...............................................................31 A. The European Communities' proposal........................................................................31 1. The EU proposal for WTO negotiations on agriculture ......................................31 2. The integration of Central and Eastern European countries ................................32 3. The mid-term review of Agenda 2000.................................................................33 B. The United States proposal.........................................................................................34 1. The US proposal for WTO negotiations on agriculture.......................................34 2. The US Farm Bill.................................................................................................35 C. The proposal by Japan ................................................................................................36 D. The Cairns Group proposal.........................................................................................36 IV. Conclusion.........................................................................................................................39 Bibliography ............................................................................................................................43 iii Annexes I Graphs of the different support measures for the European union, Iceland, Japan, Norway, Slovenia, the Slovak Republic and the United States ........................49 II Graphical results of the integration of the Blue Box into the Amber Box for the European Union, Iceland, Japan, Norway, Slovenia, the Slovak Republic and the United States ....................................................................................57 List of tables Table 1 Price support and direct payments for cereals in the EU from 1992 ......................9 Table 2 Subsidies by commodities in 1992 and from 1995 to 1999 in the European Union ....................................................................................................10 Table 3 Blue Box payments and price support to sheep and goats in the EU....................12 Table 4 Blue Box payments and price support to beef and veal in the EU........................14 Table 5 International prices, intervention prices and compensatory payments to main arable crops in the EU (in Euro) ..............................................................15 Table 6 Compulsory area to be set aside and set-aside payment from 1995 to 2001.......................................................................................................................16 Table 7 Blue Box payments and price support to cereals in the EU..................................16 Table 8 Blue Box payments and price support to oleaginous and other protein crops in the EU......................................................................................................17 Table 9 Blue Box payments and price support per product in Iceland ..............................18 Table 10 Blue Box payments and price support per product in Japan.................................19 Table 11 Blue Box payments and price support per product in Norway.............................20 Table 12 Blue Box payments and price support per product in Slovenia............................21 Table 13 Blue Box payments and price support per product in the United States...............22 Table 14 Ranking of trade-distorting and income transfer efficiency measures .................24 Table 15 Ceilings and reductions of support in the EU and the United States according to the EU proposal for the WTO negotiations......................................32 Table 16 Ceilings and reductions of support in the EU and the United States according to the US proposal for the WTO negotiations......................................34 Table 17 Ceilings and reductions of support in the EU and the United States according to the Cairns Group proposal for the WTO negotiations .....................37 Table 18 Measures that could be modified and WTO members’ positions.........................40 List of graphs Graph 1 Blue Box support in millions US dollars ................................................................5 Graph 2 Blue Box expenditures as a percentage of agricultural production value at farm gate....................................................................................................6 Graph 3 Blue Box support in national currencies in real terms (1995 base) ........................7 iv ACRONYMS AMS Aggregate Measurement of Support, a tool to measure the extent of domestic support a country provides to its agricultural products CAP Common Agricultural Policy, the whole of rules regulating agriculture in the European Union CMO Common Market Organisation, rules organising certain agricultural products markets in the European Union EC The European Communities EU The European Union FAIR Act The Federal Agriculture Improvement and Reform Act 1996 is the law ruling agriculture sector in the United States from 1996 to 2002, amended in 1998 with the introduction of LDP FSRIA Farm Security and Rural Investment Act 2002 is the new law replacing the FAIR Act GATT General Agreement on Tariffs and Trade IMF International Monetary Fund LDP Loan Deficiency Payments, implemented from 1998 onwards by the United States as an emergency measure to compensate
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