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Draft Paper – Not to be cited without author’s permission

government negotiating positions in this area. governments bitten hard on the market access bait.

Thus have most Third World

Export subsidies

This is the ‘Red box’ that should eventually be prohibited.

Direct export subsidies were subject to reductions by 36% in value and 21% in volume from 1986-88 average amounts for developed countries, and by 24% in

value and 14% in volume for developing countries over ten years.

Domestic support

The stated rationale for lowering domestic supports was to

reduce subsidies that might end up paying, one way or another,

for production

destined

for

export.

However,

separating

the

multiple

effects

of

complex

support schemes is a difficult task,

as many kinds of payments can directly or

indirectly

boost

production,

and

excess

production

may

spill

over

as

cut-rate

products placed in export markets—dumping—

,

or may crowd out imports from

competing in the home market,

reducing market access for others.

To deal with

this complexity, categories, called distorting and can

domestic support measures have been divided into three ‘boxes.’ The Amber Box refers to measures that are trade- lead to increased production, such as input subsidies and price

support. The Blue Box refers to programs that do the payments to farmers for programs to limit production. includes measures that are assumed to have no effect on

opposite, i.e. direct And the Green Box production, such as

public sector color boxes

financing of are subject

research, assistance for marketing crops, etc. Different to different degrees of what is called ‘discipline’

(reduction), or lack thereof. This is all explained in more the contents of the boxes are not always what they seem,

detail below. However, and, there are a number

of other kinds of domestic supports that fall outside the boxes, analyst to propose additional boxes, as discussed below.

leading

at

least

one

It should be clear that countries in the South have been subjected to virtually the same requirement to liberalize their agricultural sectors as the Northern countries—despite pre- existing asymmetries—the principal concession being somewhat lower rates of reduction over slightly longer time periods. The poorest countries do not have to reduce their tariffs or subsidies, but they cannot raise them either, something they might very need to do if they were ever to switch development tracks. Obviously the two biggest spenders on domestic support are the US and the EU. The boxes, which permit virtually unlimited spending on certain categories of domestic support, mean little or nothing to most

developing countries, who lack the financial wherewithal to provide significant

support programs.

However, the boxes are playing a critical

negotiations

and

conflicts,

as

they

are

widely

perceived

to

be

the

role on the mechanisms

domestic on-going by which

the and

North “hides” their subsidies, leading to Cancún, against what is widely perceived

a global backlash—most evident in Seattle as US and EU hypocrisy and doublespeak.

The ‘Hide the Subsidy’ Shell Game The three “boxes” to which domestic supports are assigned, constitute in many ways an enormous shell game in which the EU and the US repeatedly claim to the rest of the

37

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