RESTRICTED
WORLD TRADE WT/ACC/SPEC/LTU/2
30July1996
ORGANIZATION(96-3022)
Original: English
ACCESSION OFLITHUANIA
Commitments onDomestic Support andExport Subsidies
TheRepublic ofLithuania hassubmitted thefollowing offerofinitial commitments relating
todomestic support andexport subsidies inagriculture taking intoaccount theformats prescribed in
document WT/ACC/4.
_______________
TABLE OFCONTENTS
1. Introductory note
2. Table DS.1
“Measures exempt from thereduction commitments -“Green Box”
3. Table DS.4
“Calculation oftheTotal Aggregate Measurement ofSupport ”
4. Table DS.5
“Product -Specific Aggregate Measurement ofSupport: Market Price Support ”
5. Table DS.6
“Product-Specific Measurements ofSupport: Non-Exempt Direct Payments ”
6. Table DS.9
“Non-Product-Specific AMS”
7. Table ES.1
“Export subsidies: outlay andquantity ”WT/ACC/SPEC/LTU/2
Page2
Introductory Note
Reform ofagriculture inLithuania
AsexplainedinLithuania'sMemorandumontheForeignTradeRégime(L/7551),therestoration
ofindependence on11March 1990 wasfollowed byafundamental restructuring oflandtenure and
hence ofagriculture (fordetails seeLithuania 'sanswer toquestion 39indocument WT/ACC/LTU/2,
theanswer toquestion 81inWT/ACC/LTU/4 andtheanswer toquestion 256inWT/ACC/LTU/7).
Theprevious system ofsupport foragriculture wasended. Intheyears immediately following
independence, agricultural production inLithuania fellbyapproximately half,andforbotheconomic
andsocial reasons therebuilding andrestructuring oftheagricultural sector areanessential national
priority. Newschemes ofsupport havebeenintroduced, andthose nowinforce apply onlyfromthe
year1995. Itisobviously notpossible toruleouttheneedforfurther changes tothecurrent system
inthelightofexperience.
Against thisbackground, Lithuania considers thatitsonlypracticable course istoprovide
information about agricultural support onthebasis oftheschemes nowinoperation andtobaseits
commitments astofuture support levels onthese systems inrealterms.
Forthesame reasons, itisnotpossible toprovide information relating toaperiod ofthree
years asrequested inWT/ACC/4. Ineachcasetheperiod covered isspecified intheschedules, but
mostly these arebased onactual budgetary costs (payments andrevenue foregone) intheyear1995,
andonbudget forecasts fortheyear1996.
Agricultural prices inLithuania areprogressively adjusting towards world price levels. As
thisprocess goesontherewillbeanapparent increase inthevalue ofagricultural output independently
ofwhether there isanyincrease inoutput volume. Thisstatistical effect istaken intoaccount in
Lithuania 'sproposals forfuture AMS commitments.
Legal requirements regarding agricultural support
Thestructure andfinancial support ofagriculture inLithuania aregoverned bytheLawon
theState Regulation ofEconomic Relations inAgriculture (No.I-734), promulgated on
22December 1994. Thepurpose andbasic provisions ofthislawareasfollows.
Theagricultural sector, asproducer offoodstuffs, iscentral totheLithuanian economy. During
theperiod immediately following independence, in1990-1993, theprices ofinputs usedinagricultural
production increased more than3.5times ascompared withfarmgateprices formost agricultural
products. Consequently, aserious decline inagricultural output wasunavoidable andthefallinincomes
ofagricultural producers wasgreater thanthefallinindustrial wages. Themost serious impact on
thefinancial position ofthefarming sector wascaused bytheincreasing indebtedness tofarmers of
theagricultural processing sector. Thegovernment support toagriculture which wasinforce atthat
timewasineffective because oftheveryhighinflation ratesexperienced afterindependence andthe
monopolistic buying power oftheprocessing sector incomparison withtheweakness ofthenewly-
established, small-scale private farms which hadbeenestablished following landreform in1991 and
which hadnothadtimetoorganize.
The1994 Lawtherefore recognizes agriculture asapriority sector oftheeconomy because
ofitseconomic, social, environmental andethnocultural functions. Article 5provides foranumberWT/ACC/SPEC/LTU/2
Page3
ofmeans bywhich theGovernment mayregulate economic relations between agricultural entities and
State institutions andagricultural market partners. These include:
(i) guaranteeing thebuying upofagricultural produce according toquotas;
(ii) supplementing orselling partofState reserves offoodproducts;
(iii) supporting agricultural investment;
(iv) regulating theimport andexport ofagricultural produce andfoodproducts;
(v) controlling thequality ofproduce;
(vi) restricting theactivities ofagricultural entities which haveadominant position onthemarket;
(vii) promoting orlimiting output ofcertain agricultural products; and,
(viii) protecting theinterests ofagriculture byinternational agreements.
TheLawrequires inArticle 16thatnolessthan10percentofState budget expenditure as
wellasforeign targeted loans andother funds shallbegenerally allocated forimplementing thenational
agriculture development programme andrelated measures. Thisisbecause ofthevitalneedtorebuild
andre-equip Lithuanian farms andtoencourage theconsolidation ofsmall farms intolarger andmore
viable units.
Among themain provisions oftheLawaremeasures providing forState purchase ofcertain
agricultural products andarequirement forprompt payment tofarmers; implementation ofaminimum
price scheme forcertain products; softcredits; and"targeted financing". Under thislatter heading
financing isallocated byvirtue ofArticle 9forthefollowing purposes:
(i) supporting thebuying upofagricultural produce according toquotas;
(ii) reorganizing theeconomic activities ofagricultural entities which arebased onlowproductivity
landandreducing thedifferences intheeconomic conditions offarming;
(iii) organizing theproduction ofecologically pureagricultural produce andeliminating thecentres
ofconcentrated pollution;
(iv) developing cooperation andagricultural services;
(v) implementing programmes forthesettling offarmers anddeveloping production infrastructure;
(vi) compensation forreduction infarmers 'income caused byState-imposed restrictions on
production;
(vii) conducting scientific research inagriculture andproviding advice andtraining;
(viii) purchasing more productive varieties ofplants, animals andpoultry forbreeding; and,
(ix) landreclamation andliming ofacidsoils.
TheLawalsoprovides thatpreferential taxratesshallapply toagricultural entities. Details
ofthebenefits provided bythese means areincluded intheattached schedules.
Current schemes
Theschedules listcurrent costs under thespecific schemes foragriculture which havebeen
introduced under thepowers described above. Lithuania 'scommitments astofuture levels ofsupport
foragriculture reflect national needs andpriorities asembodied intheLaw. Since theschemes listed
above anddescribed inmore detail intheattached schedules haveonlyrecently entered intoforce,
take-up rateshavetobeestablished insome cases. Itisalsonotexcluded thatfurther adjustments
maybeneeded inthelightofexperience.
Itwillbenoted thatLithuania applies onlyminimal export subsidies.WT/ACC/SPEC/LTU/2
Page4
Relationship between different schemes inforce
Theattached schedules include alltheindividual methods ofagricultural support which are
currently inoperation. Technically some ofthese schemes fallwithin theNational Agriculture
Development Programme andsome come under Agricultural Support Fund, buttaken together they
represent theaggregate amount ofsupport foragriculture inLithuania. Fortherelationship between
theumbrella schemes, seetheanswers toquestion Nos. 40and41inWT/ACC/LTU/2 andtoquestion
Nos. 258and260inWT/ACC/LTU/7. Where figures aregiven inthose earlier answers these were
insome cases prepared onadifferent basis from thescheme-by-scheme datanowsubmitted inthe
attached schedules, which supersede theearlier figures.
Minimum price support scheme
Schedule DS.6 includes details ofLithuania 'sminimum price support scheme forcertain
agricultural products. Itisnecessary toexplain whythisproduct-specific scheme isincluded there
rather thanonschedule DS.5.
Article 6ofthe1994 Lawprovides fortheGovernment ofLithuania oranauthorized agency
toestablishpurchasequotasandminimumpricesforcertainimportantagriculturalproducts.Theamount
ofproductiontowhichthequotasystemappliesissettakingintoaccountdemand,theneedsofprocessors
andconsumers, conditions andtraditions ofproduction, capacity ofprocessing industries, andlocation.
Minimum prices forthequota aresettaking intoaccount production costs, current andforecast prices
andsupply anddemand. Decisions oneligible products, quota amounts, minimum prices andlevels
ofsubsidy aretaken annually afteradoption ofthenational budget andoncefunds havebeenallocated
forthispurpose, onthebasisofrecommendations made totheGovernment bytheBoard ofRegulation
andCoordination ofAgricultural Product Purchasing.
Support measures under thisscheme were introduced in1995, butnotfrom thestartofthe
year(e.g.subsidies forcattle began from 1February 1995 andformilkfrom 1May1995).
Thescheme differs from other types ofprice support scheme because notallproduction of
agiven product iseligible forsupport -onlytheamount represented bythequota, which isrestricted
tohigher-quality products. Further, thescheme depends ondirect cashsubsidies which arepaidnot
tofarmers buttoprocessing firms, which reduces theadministrative burden. Subsidy ispaidonly
iftheprocessor paystothefarmer asettrigger price foraspecified product. Inaddition, hemust
thenpayovertothefarmer theamount ofsubsidy applicable, thetwoamounts together constituting
theofficial minimum price setforthatproduct.
Inpractice, theminimum prices which aresetforeligible products under thisscheme arebased
onconditions inLithuania andnotoncomparisons withexternal prices. Insome cases these prices
arebelow current world prices.
External comparisons
Forreasonsexplainedabove,ithasnotbeenpracticabletoincorporateintotheattachedschedules
meaningful comparisons based onworld prices. Itshould benoted thatin1994, outofLithuania 's
top15export markets andthetop15exporters toLithuania, respectively 10and7werecountries of
Eastern Europe ortheformer Soviet Union. Inagriculture, Lithuania 'stradeisoverwhelmingly with
herneighbouring States. Thus, world prices arenotnecessarily themost appropriate standard ofWT/ACC/SPEC/LTU/2
Page5
comparison. Additionally, thecollapse oftheformer rouble zonehasmade itdifficult toestablish
relevant price comparisons, evenforthemost recent period.
Unitofaccount
Lithuania 'snational currency, theLitas, wasintroduced on25June1993. Under theLaw
onLitas Stability of17March 1994, itispegged at4LTL =US$1. Asimilar provision covering
theyears1994-1997isincludedinArticleXIoftheMemorandumonEconomicPolicybetweenLithuania
andtheIMF.
Theinflation rateinLithuania for1996isestimated tobeabout 30percent. TheGovernment
continues tomake every effort tocontain andreduce theinflation rate. Nevertheless, ithastobe
assumed thatsome degree ofinflation willcontinue tobeexperienced inthecoming years.
Lithuania hasconsidered whether international comparisons could bemost easily facilitated
byconverting dataregarding itsagricultural support schemes andfuture commitments intoUSdollars
orintosome other internationally recognized unit. Depending onfuture rates ofinflation, AMS
commitments expressed incurrent Litaswould besubject toerosion byinflation, aswould commitments
expressed inUSdollars solongastheLitasremains pegged tothedollar. Useofanalternative measure
suchasSpecial Drawing Rights hasbeenconsidered, butthatwould require assumptions tobemade
bothabout future inflation inLithuania andabout itseffect ontheparity between theLitas andthe
unitchosen, andmight notadequately meet Lithuania 'sneedforcertainty astothepermitted level
ofagricultural support overtheperiod covered bythecommitments. TheAMS commitments inthe
attached schedules havetherefore beenexpressed inLitasatconstant 1996prices, which moreaccurately
permits comparison ofsuchcommitments withthecurrent levels ofexpenditure. Intheevent ofa
future change intheparity ofthenational currency itmight benecessary toconsider atthetimewhether
thenominal levelofthese initial commitments needtoberevised.WT/ACC/SPEC/LTU/2
Page6Table DS.1
Domestic support: Lithuania
Reporting period: 1995 and1996
Measures exempt from thereduction commitments -"Green Box"
Measure type Name anddescription ofmeasure withreference tocriteria inAnnex 2ofthe
Agreement onAgricultureMonetary value ofmeasure inyear
inquestion, million Lt
1995
(actual
expenditure)1996
(budget
expenditure)
a)General services 1.Agricultural education (Article 2c) 61.1 76.1
2.Financing construction ofagricultural schools andcolleges (Article 2c) 3.9 5.6
3.Financing offacilities foreducation andtraining andresearch institutions
(Article 2aand2c)- 15.5
4.Research, training services, extension andadvisory services (Article 2cand2d) 8.2 12.5
5.Trade agency andmarket information (Article 2f) - 1.0
6.Farmers ’market facilities andcooperation inagricultural sector (Article 2f) 3.1 4.0
7.Design andconduct oflandsurveys (Article 2g) 3.5
8.Infrastructure services forthenewly established private farms (Article 2g) 14.7 30.1
c)Domestic foodaid Baby foodproduction (Article 4) - 1.0
f)Payments forrelief
from natural disastersNatural disasters andfires(Article 8) 4.7 8.0
I)Structural
adjustment assistance
provided through
investment aids1.Structural adjustment ofhorticulture (Article 11) - 5.0
2.Livestock andcropbreeding programs (Article 11) 11.0 16.0
3.Payments tofarmers forthepurchase ofpedigree livestock andseeds
(Article 11)7.9 14.3
4.Reconstruction ofgreenhouses (Article 11) - 11.0
5.Land improvement: landreclamation andliming (Article 11) 147.3 157.8
j)Environmental
programsOrganic farming (Article 12) 1.8 4.0
k)Regional assistance Payments through localauthorities fortheimprovement oflandinmarginal areas
(Article 13)13.8 24.0
Total 277.5 389.4WT/ACC/SPEC/LTU/2
Page7
Table DS.4
Domestic support: Lithuania
Reporting period: 1995 and1996
Calculation oftheTotal Aggregate Measurement ofSupport
Description ofbasic
products (including
non-product specific
AMS)Product-specific AMS, mln. Lt AMS commitments,
mln.Lt
atconstant 1996
prices
1995 1996 2000
Product -specific AMS
-DS.525.0 50.0 61.0
Product -specific AMS
-DS.6122.96 174.4 286.0
Non-product -specific
AMS -DS.9388.0 412.3 501.0
Current totalAMS 535.96 636.7 848.0WT/ACC/SPEC/LTU/2
Page8Table DS.5
Domestic support: Lithuania
Reporting period: 1995 and1996
Product -Specific Aggregate Measurements ofSupport: Market Price Support
Description ofbasic
productMeasure type Eligible
production,
thousand tActual
expenditure, mln.
LtBudget
expenditure, mln.
LtAMS commitments,
mln. Lt,
atconstant 1996
prices
Costofpurchases intointervention stock
forpurposes ofdomestic price
stabilization1995 1995 1996 2000
Butter 1.6 13.5
Beef 1.8 10.8
Pork 0.1 0.7
Total 25.0 50.0 61.0WT/ACC/SPEC/LTU/2
Page9Table DS.6
Domestic support: Lithuania
Reporting period: 1995 and1996
Product-Specific Aggregate Measurements ofSupport: Non-Exempt Direct Payments
Measure type Minimum
purchasing
price,
Lt/tEligible
production,
thousand tDirect payments, million Lt Data source AMS
commitments, mln.
Lt,
atconstant 1996
prices
Direct subsidy paidto
processors tomaintain
minimum prices paidto
primary producers. Subsidy is
paidonlywhere theprocessor
paystheappropriate minimum
price totheproducer, andis
subject toamaximum quota
anddoesnotapply toall
production1996 1995 1996 1995
(actual
expenditure)1996
(budgeted
expenditure)Ministry of
Agriculture2000
Cattle 2700-4500 89.6 72.0 62.74 78.0
Pigs 5100-5700 - 50 - 6.2
Milk 570-620 936.4 1300 33.41 53.6
Rye 580 77.6 120 3.89 6
Buckwheat 1500 0.4 3 0.17 2.0
Leguminous crops 800-1000 - 25 - 6.0
Flax 530-2000 19.6 35.0 20.84 19.2
Rape seeds 950-1100 9.6 20.0 1.91 3.4
Total 122.96 174.4 286.0WT/ACC/SPEC/LTU/2
Page10Table DS.9
Domestic support: Lithuania
Reporting period: 1995 and1996
Non-Product -Specific AMS
Measure typesNonproduct specific cost, mln. Lt
Data sourcesAMS commitments,
1995
(actual
expenditure)1996
(budget
expenditure)2000
mln. Lt,
atconstant 1996
prices
1.Exemption from profit taxofagricultural enterprises (29%.) 42.4 43.5 Ministry of
Finance
2.9%concession onrateofVAT charged topublic for
purchases ofagricultural produce200.0 200.0 Ministry of
Finance
3.Exemption from landtax(administered atlocallevel) 5.0 5.0 Ministry of
Finance
4.Exemption from landrenttax(administered atlocallevel) 10.0 10.0 Ministry of
Finance
5.Concession forelectricity applied toagricultural producers 68.3 68.3 Ministry of
Agriculture,
Ministry of
Energy
6.Concession fornatural gasapplied togreenhouses 5.8 5.8 Ministry of
Agriculture,
Ministry of
Energy
7.Interest ratecompensation (10%)paidtopurchasers of
agricultural production1.5 17.7 Ministry of
Agriculture
8.Softcredits allocated toprimary producers forpurchase of
equipment andmachinery andtoprocessors forthepurchase of
agricultural production;55.0 62.0 Ministry of
Agriculture
Total AMS 388.0 412.3 501.0WT/ACC/SPEC/LTU/2
Page11Table ES.1
Export subsidies: Lithuania
Reporting year: 1995
Export subsidies :outlay andquantity
Description ofproduct Sales ofstocks overseas from intervention
stocks in1995Sales ofstocks
overseas from
intervention stocks
in1996Data source Commitments
2000
million Lt,atconstant
1996 prices
Direct payments to
exportersQuantity of
subsidized export,
thousand tActual expenditures,
million LtBudget expenditure,
mln. LtMinistry of
Agriculture
Butter 6.0 8.96
Condensed milk 6.9 17.26
Cheese 1.2 1.88
Pork 0.4 0.62
Pigs 0.03 0.03
Total 28.75 36.0 36.0