RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/NG/W/16
23 June 2000
(00-2591)
Committee on Agriculture
Special SessionOriginal:  English
NOTE ON DOMESTIC SUPPORT REFORM
NEGOTIATIONS ON AGRICULTURE
SUBMISSION FROM THE UNITED STATES
The Uruguay Round Agreement on Agriculture (URAA) brought agricultural domestic
support programs under discipline for the first time in the history of the GATT, by capping and
reducing the level of trade-distorting support Members could provide.  As we near the end of theimplementation of the URAA and the expiration of the peace clause, and embark upon new
negotiations to continue and strengthen the reform process, the United States proposes that further
rules should substantially reduce trade-distorting support in a manner that addresses disparities in
support levels while simplifying the way in which all forms of domestic support are disciplined.
At the same time, the United States recognizes the importance of domestic programs that
promote sustainable agriculture and rural communities in a manner that minimizes distortions, and
proposes that there be a provision, building upon current rules, for exempt programs deemed to
promote these objectives in ways that minimize trade distortions.  Additionally, developing and least
developed countries should be given additional flexibility to provide criteria-based support that is an
integral part of their individual development programs.
REDUCING TRADE -DISTORTING SUPPORT TO PROPORTIONATE LEVELS .
The United States proposes a formula-based approach that will result in levels of support that
are more proportionate among WTO members at the end of implementation than they are now.  Each
member with a final bound AMS in its schedule will commit to reduce the level of non-exempt
support, starting from the final bound AMS, to a new final bound level that is equal to a fixed
percentage of the member’s value of total agricultural production in a fixed base period (see example
at the end of the paper).  Each member is obligated to reduce its non-exempt support in equal annual
installments during the implementation period.  At the end of the implementation period, eachmember would be permitted to provide non-exempt support no greater than the fixed percentage ofthe value of its total agricultural production in a fixed base period.
Reducing the level of disparity in members’ non-exempt domestic support commitments is
the most effective way to substantially reduce the level of trade-distorting support and ensure that all
forms of production-linked support are disciplined.  Expressing the final bound domestic support
commitment as a fixed percentage of the total value of agricultural production is the best approach,
since 1) it ensures that all Members provide equivalent levels of support relative to the size of theiragricultural sector, 2) it avoids penalizing countries based on their relative factor endowments (land,
population, etc.), and 3) data on the value of agricultural production are readily available and have
already been used during the implementation period to perform the de minimis  calculation.G/AG/NG/W/16
Page 2
It is vital that disparities be addressed, since they allow countries with disproportionately high
support ceilings to subsidize their farmers to overproduce, thus displacing trade and encouraging
producers to engage in environmentally-harmful practices (such as higher input use, cultivating
environmentally fragile lands, etc.).  These trade-distorting subsidies can have particularly harmful
effects on developing countries, which may not have the means to provide the high levels of supportto their producers as developed countries.
SIMPLIFYING DOMESTIC SUPPORT DISCIPLINES .
During the implementation period, some members have observed that the current
classification system for domestic support is too complicated and difficult to apply to certain supportmeasures.  The United States proposes that the domestic support disciplines be simplified into two
categories: exempt support, as defined by a criteria-b ased list of measures that have, at most, minimal
distortions, and non-exempt support, which would be subject to the reduction commitment described
above.  The de minimis  provision contained in Article 6.4 of the Agreement on Agriculture would be
maintained in its current form.  Other methodological provisions of the support calculation could bereviewed by a technical working group on domestic support.
SUPPORTING SUSTAINABLE AGRICULTURAL AND RURAL DEVELOPMENT WITH MINIMAL DISTORTIONS .
Taking into account the need of the reform process to address non-trade concerns and
development objectives unique to developing and least developed countries, the United States
proposes that criteria-based support measures, building on current provisions of the URAA, be
exempt from reduction in order to promote sustainable, vibrant agricultural and rural communities in amanner that is at most, minimally trade-distorting.  In addition to current provisions, these criteria-
based exempt measures could address new policy directions, such as:
• Farm Income Safety-Net and Risk Management Tools: It is clear that as support
levels are reduced and producers are increasingly exposed to market signals,
members need to be able to provide farm safety-net and risk management tools to
help their farmers and ranchers adjust to new market conditions.
• Environmental and Natural Resource Protection: Environmental protection has
already been identified as a non-trade concern that members want to be able to
address through the reform process.  Using targeted policies, members should be able
to help farmers and ranchers adopt environmentally-sound production practices that
conserve and protect natural resources, which will benefit producers and consumers
alike and is crucial to agricultural sustainability and food security.
• Rural Development: Equally vital to agriculture sustainability are vibrant,
economically-viable rural communities.  Programs that invest in rural infrastructures,
promote economic development, and provide technical assistance and information to
empower local communities can be highly beneficial in enhancing rural development.
• New Technologies: Supporting alternative technologies and biobased products that
work in concert with the environment while providing significant and far-reaching
economic benefits should also be considered.  For example, research and pilot
projects to facilitate the development of biomass practices to help capture carbon
dioxide is just one example of how new technologies could be used to benefit the
environment and improve soil quality and productivity.G/AG/NG/W/16
Page 3
• Structural Adjustment: To address the effects of trade liberalization, members should
be able to facilitate structural adjustment in agriculture, for example, through
decoupled income support and other market-oriented measures that assist farmers and
ranchers adaptation to new economic conditions.  Structural adjustment programs
should also address the unique challenges facing countries engaged in privatization
efforts and the transition to a market economy.
In all cases, exempt measures must be targeted, transparent, and designed to minimize
impacts on other WTO Members, particularly developing countries.
The United States recognizes the unique development challenges facing developing and least
developed countries, and supports the exemption of additional criteria-based  support measures
deemed essential to the development objectives of these countries, as presented on page 6 of the U.S.
proposal.__________G/AG/NG/W/16
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U.S. Proposal on Domestic Support:
The Proportionate Commitment
• For example, if a country’s value of
production equaled 300 Local Currency
Units (LCUs) in the base period, and the
commitment was set at 10 percent, then
the country’s new final bound support
level would be 30 LCUs.
• The country would be required to make
equal annual cuts from the final bound
AMS in their current schedule (50
LCUs) to the new final bound support
level (30 LCUs) over the
implementation period (designated as
years a through e).05101520253035404550LCUs
Base 200a 200b 200c 200d 200e