./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/W/35
22 June 1998
(98-2512)
Committee on Agriculture
ANNEX 4
OF THE AGREEMENT ON AGRICULTURE
EQUIVALENT MEASUREMENT OF SUPPORT
Discussion Paper by the United States
The United States would like to discuss the way in which the Equivalent Measurement of
Support is being used to calculate market price support, and the reasons why Annex 4 (and notAnnex 3) methodology is being used.  Consideration of the Equivalent Measurement of Support in the
Committee on Agriculture will help clarify under what circumstances Members should use Annex 4
methodology and to help ensure that it is used in an equitable and transparent manner.
While developing the AMS methodology during the Uruguay Round, Members recognized
that in some instances using the price gap calculation to measure market price support could prove
difficult, either due to insufficient data or because the price gap methodology might be difficult toapply to a certain type of price support measure.  The concept of the Equivalent Measurement of
Support was developed to address these concerns.
Annex 3 of the Agreement defines the basic methodology of calculating the AMS.  One
component of the product-specific AMS is market price support.  Annex 3 provides a price gap
methodology to quantify market price support provided to a specific product.
1  Annex 4 outlines the
procedure for quantifying support to specific products that receive price support, but for which
calculation of this component of the AMS is not practicable.  The Agreement does not define what ismeant by "not practicable".  As noted above, this presumably means that the necessary data or
information to calculate price support using the price gap methodology described in Annex 3 do not
exist or are not available.
The Equivalent Measurement of Support is nearly  identical to the AMS, insofar that Annex 4
stipulates that the equivalent measurements (1) include support at both the national and sub-national
level, (2) are calculated on a product-specific basis for all basic agricultural products as close as
                                                     
1Paragraph 8 contains the price gap calculation methodology:  "Market price support shall be calculated
using the gap between a fixed external reference price and the applied administered price multiplied by thequantity of production eligible to receive the applied admi nistered price.  Budgetary payments made to maintain
this gap, such as buying-in or storage costs, shall not be included in the AMS."
The fixed external reference price is defined in paragraph 9 as the average f.o.b. unit value for the
product concerned in a net-exporting country and the average c.i.f. unit value for the product in a net-importingcountry in the base period (1986-88).  The fixed external reference price may be adjusted for quality differences.G/AG/W/35
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practicable to the point of first sale, (3) include measures directed at agricultural processors to the
extent that such measures benefit the producers of the basic agricultural product, and (4) are reducedby specific agricultural levies or fees paid by producers.  Moreover, paragraph 3 of Annex 4 states
that if these products are also subject to non-exempt direct payments or other product-specific
support, then Annex 3, paragraphs 10-13, provide the basis for calculation.
Paragraph 2 of Annex 4 stipulates that equivalent measurements of market price support
should be made using the applied administered price and the quantity of production eligible to receive
that price, or where this is not practicable, on budgetary outlays used to maintain the producer price.
Paragraph 2 provides no further explanation of how market price support should be measured using
the variables listed above, thus leaving the methodology open to interpretation.
Eleven countries used equivalent measurements in their base AMS calculation.  The scope of
commodities and types of support policies for which equivalent measurements were used variesgreatly.  Of the 11, six Members continued to use equivalent measurements in their 1995 and/or 1996
domestic support notifications.  The other five either discontinued the policies for which equivalent
measurements were used, have not notified on domestic support yet, joined the EU, or used Annex 3
methodology to calculate market price support or price-related support.  One country did not use
equivalent measurements in its base AMS, but did use them in its 1995 notification (in 1996, pricesupport was calculated using Annex 3 methodology).
These remarks are made in the spirit of improving the way in which the Equivalent
Measurement of Support is used to calculate market price support, by clarifying under what
circumstances Members should use this method an d discussing ways in which Annex 4 could be
interpreted in a more uniform fashion.  We look forward to Members' comments on this important
issue.
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