RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/UKR/6/Add.2 
8 September 2004 
 (04-3798) 
Working Party on the 
Accession of Ukraine Original:   English 
 
 
 
ACCESSION OF UKRAINE 
 
Questions and Replies on Domestic Support and  
Export Subsidies in the Agricultural Sector  
 
Addendum  
  The following submission, dated 2 September 2004,  is being circulated at the request of the 
Delegation of Ukraine. 
 
 
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 WT/ACC/SPEC/UKR/6/Add.2 
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 Question 1 
Methodology of calculation of amounts of the ma rket price support (namely, the application of 
calculations of products acquisitions under govern ment procurements to the total production 
outputs). 
Answer:
 
In accordance with paragraph 8 of Annex 3 to  the WTO Agreement on Agriculture, eligible 
production is the quantity of production eligible to receive the applied administered prices. 
The issue of determining the eligible production is a debatable one. Each country has its own special 
conditions for the application of administrative prices, market price support programmes differ from 
one another in their procedure, and therefore, different countries have different approaches to 
determining the eligible production. 
When calculating the market price support for th e basis period 1994-1996, Ukraine has used, as the 
eligible production, volumes of product purchases pur suant to state orders/contracts which could be 
carried out at administered prices, but not the whole of the production. 
In the basis period, not the whole of the production may be considered as the volume of production 
subject to support through administrative prices.  Th e Ukrainian Government has stated fixed volumes 
of products purchased pursuant to  government orders/contracts, on the basis of government funds 
allocated for this purpose. 
When calculating Market Price Support in Table DS :5, Ukraine has been guided by the following 
reasoning: the volume of products purchased at  administrative prices depended on amounts of 
government funds available for such purchases.  Ho wever, if the total volume of production is 
reported as "the eligible production", then the AM S would grow.  Reporting volumes of government 
procurement as "the eligible production", Ukraine wa nted to be more objectiv e and not to overstate, 
thereby, the AMS for the period 1994-1996, durin g which the volumes of government procurement 
were dependent on funds available for this purpose. 
If other countries had used the same approach when  calculating the Market Price Support, then the 
level of Market Price Support would have been cl oser to these countries' actual budget expenditures 
for product support. For instance, the EU's actual  budget expenditures to support the price of white 
sugar in 1998 amounted to € 1,776.6 million, but Table DS:5 for years 1998/99 showed the Market 
Price Support amounting to € 5,754.6 million, 3.2 times as much, precisely because the volume of production, not intervention purchases of sugar, was u sed as the eligible production.  Ukraine believes 
that the WTO methodology of Market Price Support calculation must be revised so that WTO 
member countries undertake more credible co mmitments to reduce yellow box programmes. 
Question 2 
Possibility of use in AMS calculations of negative components of the support amounts. 
Answer:
 
If negative price support is changed to zero, in Tables DS:5 –DS:7, Ukraine's AMS would grow. 
When showing negative support, Ukraine wanted to be more objective and thereby not to overstate 
the AMS for the period 1994-1996.  Besides, certain countries, which now are WTO members, were allowed to include negative support values in Tables on support, WT/ACC/4.  For instance, the EU 
included, in DS:5, the negative Market Price S upport for durum wheat, for MP 1998/99 to the amount  WT/ACC/SPEC/UKR/6/Add.2 
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 of € -230.4 million.  India states amounts of ne gative support for almost all products except for 
sugarcane, when calculating the Market Price Suppor t in Table DS:5.  Some Members show negative 
amounts for tobacco, when calculating the Market Price Support. 
Ukraine believes that when negative amounts of Ma rket Price Support are included, the level of 
support to the domestic producers is calculated co rrectly as far as economy is concerned, and AMS 
reduction commitments can be formulated on a well substantiated and credible basis.  
Question 3 
Use 1994 – 1996 as a base period for calculation purposes. 
Answer:  
When selecting a basis period as such, Ukraine was guided by recommendations in the Secretariat's 
Technical Note, Document WT/ACC/4, which said that information about support programmes was 
normally provided for each of the last three years.  Since negotiations on agriculture as part of the 
Working Party on Ukraine Accession to the WTO started in 1997, that is four years after Ukraine had 
applied for WTO membership, it was 1994 - 1996 that were the years on which basis Ukraine prepared information on the level of agricu lture support, for the WTO Secretariat.  
As regards comments on whether it is relevant to use a new basis period if WTO accession process 
takes a number of years, [it should be noted that] the Round of Uruguay started in August 1986 and 
ended in April 1994, but the period used in agri culture support reduction commitments for countries 
which signed the Marrakech Agreement, - 1986 - 1994 - was not revised, though the negotiations 
lasted for long eight years.  Besides, the WTO Agreement on Agriculture does not contain clear 
instructions on which period should be accepted as the basis one. 
Question 4 Need to consider in AMS determination the amounts of support provided through taxation 
mechanisms.  
Answer:
 
The Ukrainian party continues to protect (insist on) its right to include the support amounts through 
VAT mechanism in the calculations of AMS, referring to the following reasons. 
As is shown by the practice of WTO negotiations  with various countries, especially developing 
countries or countries with transitional economy, every individual country has its own specific 
features.  In practice, the WTO makes some c oncessions to certain countries, in the negotiation 
process which proves that there are exceptions from the generally accepted practice regarding 
concrete commitments, that the WTO respects each i ndividual country's specifics and that the WTO's 
policies are flexible. For instance, Kyrgyzstan h as been given a concession in classifying investment 
subsidies, including preferential loans to the agricu lture, and other subsidies for inputs as measures of 
the Special and Differential Regime.  The latter, as a rule, is provided to developing countries while 
Kyrgyzstan, as well as Ukraine, are countries with transitional economy.  For example, Bulgaria has 
been allowed to use the four-year-long basis peri od (1991 - 1994), instead of the normal three-year-
long one. 
Ukraine also has its own specific features with rega rd to the development of the support system for 
the agriculture. WT/ACC/SPEC/UKR/6/Add.2 
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 Lacking sufficient budgetary funds to make dir ect budgetary transfers under agriculture support 
programmes, the Government of Ukraine has resorted to providing support through the tax system, 
while WTO member countries have been able to spend far more budgetary funds on supporting these 
branches of their economy (with no tax benefits included in AMS). 
Ukraine plans to cancel most of the agriculture's tax benefits, at  the same time providing for the 
appropriate amount of direct budgetary transfer s from the State budget and local budgets.  This 
amount is to be adequate to the amount of the s upport which was provided in the period 2000 - 2002 
and is currently provided, to the agriculture. If Ukraine excludes this amount from the Tables on 
support, that would mean that Ukraine would be forced to abandon a significant portion of the agriculture support, which in essence would mean the acceptance of the support reduction 
commitments which are stricter than those accepte d by other WTO member countries.  For instance, 
while WTO developed member countries have committe d to reduce the support by 20 per cent within 
six years, Ukraine acceding to the WTO (without reserving the appropriate amount of the support in tables with AMS calculations), would have to redu ce the actual total support by 75 per cent within 
one year. 
Moreover, Article 6 of the Agriculture Agreement a nd Annex 3 (paragraph 2) to this Agreement show 
that the AMS calculation should include both bu dgetary expenditures a nd revenue foregone (to 
benefit of agricultural producers). Ukraine does consider all support measures which have been 
provided through the tax system and included in Ta ble DS:9 exactly as revenue foregone (to benefit 
of agricultural producers).  
Question 5 
Inadvisability of preparation of a “transitiona l box” in regard to support to agriculture. 
Answer:
 
It is not expedient for Ukraine to prepare the tr ansitional box regarding the agriculture's domestic 
support.  This is WTO non-consistent because the Agriculture Agreement, technical notes and other 
WTO documents do not provide for the preparati on of any transitional boxes in the negotiation 
process on agriculture. 
Besides, it would take quite long to prepare and get the Working Party's other member countries 
familiarized with, new tables.  Argentina-proposed  new methodology may reverse the negotiations on 
agriculture and the completion of the process of Uk raine's accession to the WTO, the process which is 
supported by the members of the Working Pa rty on Ukraine's accession to the WTO. 
As part of the WTO activities, it is necessary to employ those boxes which are normally accepted in 
WTO practice, that is, the green, yellow and blue on es. In negotiations, Ukrain e has already raised the 
issue of the blue box.  The negotiations have encount ered a debatable issue of whether it is correct to 
include in the green box the programme "Compensa tion to agricultural enterprises for the costs of 
constructing non-production facilities in rural areas".  A number of countries have already agreed that 
amounts to compensate agricultural enterprises for their expenses on the construction of non-
production facilities in rural areas may be excluded fro m the Part "General Services, Infrastructural 
Services" and reported as "Exempt Direct Payments To  Producers" in the auxiliary Table DS:3 or the 
blue box which should be added to  the Ukraine's tables WT/ACC/4. 
This is well-grounded on the part of Ukraine b ecause Paragraph 5, Annex 2 to the Agriculture 
Agreement states that "Where exemption from reducti on is claimed for any existing or new type of 
direct payment other than those specified in paragr aphs 6 through 13, it shall conform to criteria (b) 
through (e) of paragraph 6, Annex 2 to the Agricultu re Agreement, in addition to the general criteria  WT/ACC/SPEC/UKR/6/Add.2 
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 set out in paragraph 1".  Ukraine's measure "Compe nsation to agricultural enterprises for the costs of 
constructing non-production facilities in rural areas" m eets criteria (b)-(e) of paragraph 6, Annex 2 to 
the Agriculture Agreement, as well as general criteria stated in paragraph 1. 
Therefore, Ukraine believes that preparing the transitional box is not an expedient measure. 
Question 6 
Concerning the development of a clearly de fined agriculture support action program. 
Answer:  
The Cabinet of Ministers of Ukraine has prepared  a Draft Law of Ukraine On Principal Foundations 
of State Agricultural Policy.  Further to that, a group of people's deputies of Ukraine has prepared 
Draft Laws of Ukraine "On State Financial and Budgetary Support to Agro-Industrial Sector of 
Ukraine" and "On Amendments to Certain Laws of Ukraine Concerning Taxation of Agricultural 
Producers and Maintaining Social Standards of Ag ricultural Workers".  These bills are currently 
pending approval at the Verkhovna Rada of Ukraine and must be reviewed during 2004.  These Draft 
Laws are aimed at institution of main premises of the state agrarian policy focused on ensuring 
sustainable development of the agricultural sector of Ukraine's economy for the period of up to 2015, 
main areas of support to agriculture, systemic a nd comprehensive approach to implementing by all 
state power authorities and local self-governments of activities envisaged by the state agricultural policy. 
The state agricultural policy is based on national pr iorities and gives due account to the imperatives of 
Ukraine's integration in the global economic environment. 
 
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