RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/W/34
11 June 1998
(98-2398)
Committee on Agriculture Original:  English
IMPLEMENTATION ISSUES REGARDING DOMESTIC SUPPORT
Discussion Paper by New Zealand
The following issues concerning the implementation of domestic support commitments have
repeatedly been raised in the Committee on Agriculture.  New Zealand has put forward this paper for
background information and to prompt a discussion among interested Members about how these
issues might be resolved.  Other Members may have other topics which can be added to the list anddiscussed.
1. Modification of external reference prices
In determining the market price support component of the current AMS, Members are
required to calculate the gap between a fixed external reference price and the applied administered
price.  This price gap is then multiplied by the quantity of product eligible to receive the appliedadministered price to determine the market price support for that product.  In the document
Notification Requirements and Formats (G/AG/2), it is noted in Supporting Tables DS:5 and DS:6
that the external reference prices are to be sourced generally from Agricultural Supporting Tables
(AGST).
Several Members' market price support calculations have used modified external reference
prices instead of the fixed reference prices originally made available in the AGST documents.
Modifying external reference prices can substantially influence the value of market price support and
therefore the value of current AMS.  External reference prices have been modified in the following
ways:
(a) Adjustments made for inflation;(b) adjustments made for exchange rate movements/use of an external reference price in
a different currency;  and
(c) use of a reference period different than 1986 to 1988.
The Agriculture Agreement does not provide for such modifications.  Paragraph 9 of Annex 3
makes it clear the external reference prices are fixed and shall be based on the years 1986 to 1988
.
Members, when calculating market price support, are required to use the figures supplied in theirAGST documents.  It is acknowledged that inflation can have a bearing on the size of a price gap.However, New Zealand believes the original AGST ex ternal reference prices should still be used in
every case.  If current AMS is subsequently found to be over AMS commitments due to excessive
inflation, then Article 18.4 of the Agreement comes into play.  Members would be free to make a case
for inflation adjustment by submitting adjusted figu res, with accompanying technical explanations,
alongside their unadjusted notification figures.  Sim ilarly, with new market price support measures, an
external reference price period of 1986 to 1988 should still be used.G/AG/W/34
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2. Use of negative figures when calculating current AMS
In calculating the market price support component  of AMS, an applied administered price that
is lower than the external reference price will result in a negative figure.  Similarly, other components
of the AMS can also be negative as a result of taxes or levies on agriculture.  A negative AMS figure
implies that a country is, in effect, taxing that product.
How negative numbers are treated in the calculation of the Total (sector-wide) AMS is
important. The disciplines on domestic support were developed to reduce trade distorting forms of
support (i.e. positive numbers), not to reduce taxes on agriculture.  Therefore there are no explicit
rules on how to treat negative numbers, although paragraph 4 of Article 6 implies that negative
numbers (by definition being de minimis ) should not be included in the total AMS.  Members should
not be able to use negative figures to offset positive AMS support.  This could enable Members to
effectively increase support to levels higher than their scheduled commitment levels.
3. Quantity of eligible production
In calculation of market price support, the administered price/external price difference is to be
multiplied by the quantity of production eligible to receive the applied administered price.  In most
instances where administered prices are used, price support is not limited to a specific quantity, butgenerally available to all production which is, for example, offered to the Government for purchase.In these cases, the applied administered price is supporting the whole market and not simply the
quantity actually purchased by government. Thus the quantity figure used in Supporting Table DS:5
should be total production.  Nevertheless, in a number of cases it appears that Members are only
showing actual government purchases as eligible  production rather than total production.  Sometimes
a zero eligible production level is indicated which cannot represent the actual effect of the policies inplace (which continue to influence prices and production even if no purchases are actually made by
governments).
4. Provision of information to support de minimis  claims
Under paragraph 4 of Article 6, Members are not required to include in AMS calculations:
(a) Product-specific support which does not exceed 5 per cent (or 10 per cent for
developing countries) of the total value of production for that product;
(b) non-product-specific support which does not exceed 5 per cent (or 10 per cent for
developing countries) of the total value of production for all products.
A recurring problem that has arisen in this Committee is that Members, in their notifications,
are claiming that support provided is de minimis  but are not providing total value of production
figures to back up those claims.  For reasons of transparency and ease of review, New Zealand
believes that, in all cases, where de minimis  claims are made, total value of production figures should
also be provided.
5. Provision of adequate information in notifications
A common problem that has arisen during this Committee’s review of notifications is  that the
information supplied in Supporting Tables DS:1 (green box measures), DS:2 (special and differential
treatment) and DS:3 (blue box), has been insufficie nt for other Members to reasonably determine theG/AG/W/34
Page 3
nature of a particular measure. There are examples where "descriptions" have been as short as one
word.  The notification formats for Supporting Tables DS:1-DS:3 are quite clear:  Members are asked
to identify the measure type, the name of the measure , and a description of the measure  with reference
to the criteria in the relevant Annex or Article.  Again, for reasons of transparency and ease of review,
New Zealand believes that, in all cases, Member s should provide Supporting Tables DS:1-DS:3 that
contain these four elements for each identified measure.
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