WORLD TRADE
ORGANIZATIONG/AG/W/44
12 March 1999
(99-1048)
Committee on Agriculture Original:  English
IMPLEMENTATION ISSUES REGARDING DOMESTIC SUPPORT
Treatment of Negative Components in AMS and Total AMS
Discussion Paper by Canada
Introduction
1. Negative components may arise in the calculation of Aggregate Measurements of Support
(AMS) and Total AMS.  This paper outlines procedures for handling such situations based on theprovisions of the Agreement on Agriculture.  It builds on the discussion provided by New Zealand in
"Implementation Issues Regarding Dome stic Support" (G/AG/W/34, 11 June 1998).
Background (Agreement on Agriculture)
2. The Agreement on Agriculture (Article 1.(a)) defines AMS.  It is the annual level of support
provided in favour of the producers of an agricultural product (product-specific AMS) or in favour of
agricultural producers in general (non-product-specifi c AMS), other than support that is exempt from
reduction commitments.
3. Article 1.(h) defines Total AMS.  It is the sum of all domestic support in favour of
agricultural producers, calculated as the sum of all product-specific AMS and all non-product-specific
AMS.
1 During and after the implementation period, the yearly Total AMS is called Current Total
AMS.
4. A Member shall not provide support in favour of domestic producers in excess of its
commitments (Art.  3.2).  Members are committed to maintaining domestic support in favour of
agricultural producers (Current Total AMS) at a level that does not exceed the Member's annual or
final bound commitment (Article 6.3).  Members w ho do not have a Total AMS commitment shall not
provide support to agricultural producers in excess of de minimis  levels (Article 7.2.(b)).  Support
meeting the criteria of Annex 2 is excluded from Current Total AMS, as is "blue box" support (Art.
6.5) and certain support in developing countries (Art.  6.2) .
5. During and after the implementation period, AMS is calculated in accordance with the
provisions of Annex 3 of the Agreement on Agricu lture.  A product-specific AMS shall be calculated
for each product receiving market price support, non-exempt direct payments or other subsidies,including budgetary outlays and revenue forgone by governments.  Both national and sub-national
support shall be included.  Specific agricultural levies or fees paid by producers shall be deducted
from the AMS.  Similarly, support that is non-product-specific shall be totalled into a non-product-
specific AMS.
                                                     
1 Total AMS also includes all equivalent measurements of support.G/AG/W/44
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Calculation of AMS and Total AMS
6. The document "Notification Requirements and Fo rmats" (G/AG/2, 30 June 1995) sets out the
calculation procedure for Current Total AMS and its components (such as AMS).  A Member shows
in a number of Supporting Tables (ST) the information needed to calculate the amounts of eachproduct-specific AMS and the non-product-specific AMS.
2  These amounts are summed to form the
Member's Current Total AMS.
7. In the calculation of each product-specific AMS and the non-product-specific AMS, negative
components may arise.  This happens when the applied administered price is less than the fixed
external reference price in the calculation of the market price support component of a product-specific
AMS.  It may happen in other situations where a price gap is used to measure the value of support,
such as certain inputs being provided at low, polic y-dependent prices.  It may also happen when the
fees/levies associated with product-specific AM S components (such as market price support, non-
exempt direct payments, or other product-specific support) are greater than the product-specific AMS
component with which the fees/levies are associated.  In these situations, a negative amount is carried
into columns 7, 8 or 9 of ST DS:7.
8. Negative AMS components do not represent support in favour of producers - they represent
the opposite.  Product-specific AMS measures only support in favour of producers and can only be a
positive amount (or set to nil).  The summation of the AMS components (one or more of them being
negative) in columns 7, 8 and 9 of ST DS:7 into the AMS for a specific product in column 10 must
therefore not generate a negative amount.  A negative sum in column 10 would represent a kind of
product-specific tax on producers of the product and not support in favour of producers.  If the AMS
components for a specific product actually do sum to a negative amount, a nil product-specific AMS
must thus be reported in column 10 of Supporting Table DS:7.3;4
9. Several policy measures may simultaneously provide support (some positive, some negative)
to one product.  This allows positive and negative amounts to partially offset one another at the level
of product-specific (and non-product-specific) AMS.5  In the case of several simultaneous policy
measures applying, it is of course essential to report the amount of support estimated for each
individual policy measure for a product within a Supporting Table.  Such reporting is necessary in
order to show how the net amount is derived.
10. Applying the provisions of the Agreement on Agriculture as outlined above results in each
product-specific AMS and the non-product-specific AMS being either measured as a positive amount
or set to nil.  Some positive AMS amounts may be excluded from Current Total AMS on de minimis
grounds.  De minimis  can be invoked at the level of product-specific AMS and non-product-specific
AMS, not at the level of individual policies or categories of  policies.  Summing6 all remaining AMS
amounts generates a Current Total AMS that is either positive or nil.
                                                     
2 See Technical Appendix to this paper.
3 Similarly, non-product-specific budgetary outlays and other non-product-specific support in ST DS:9
may be more than offset by associated fees/levies.  This is a situation where support is not provided in favour ofagricultural producers in general but, rather, agricultural producers in general are effectively taxed.  Again, thissituation must be represented as a nil amount in column 6 of ST DS:9.
4 A Member setting a negative sum equal to n il in Supporting Table DS:7 can ensure necessary
transparency by entering a foot note in the table, explaining what is being done and why.
5 See Technical Appendix to this paper.
6 And including any equivalent measurement of support.G/AG/W/44
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Interpretation
11. A Member's Current Total AMS consists only of product-specific and non-product-specific
AMS amounts that have been measured as positive and thus provide support in favour of agricultural
producers greater than de minimis .  Amounts having been measured as negative have been set to nil.
There is no opportunity for negative support to producers of one product to offset the positive support
provided to producers of another product.  Neither is there any opportunity for negative support to
agricultural producers in general to offset support provided in favour of producers of a specific
product, or vice versa.
12. At the level of specific products (and at the non-product-specific level), negative support
effectively offsets some or all of the support provid ed in favour of producers of that product.  To the
extent that such negative support exceeds the support provided in favour of producers of the product,the excess amount (which is negative) is not allowed to offset support provided in favour of producers
of other products.
13. Applying the provisions of the Agreement on Agriculture ensures that discipline is imposed
on positive trade-distorting domestic support at the level of specific products (and on positive trade-
distorting non-product-specific domestic support).  This is not to deny that negative support issometimes imposed on producers of specific agricultural products (or on agricultural producers in
general).  The Agreement on Agriculture does not, however, discipline negative support.  Neither
does it allow for tradeoffs between product sectors in terms of negative support for one product sector
offsetting positive support provided to another product sector, effectively raising the Total AMS
ceiling on support in favour of producers.
Implications
14. If negative support is reported for a product, and the product-specific AMS consequently is
set to nil, the Member may choose to reduce or eliminate the causative policies.  This effectively
allows support in favour of producers of that product to increase, albeit by means of reducing thenegative support imposed on them.
7  The Agreement on Agriculture does not lessen Members'  ability
to take such steps.
15. Some Members report negative amounts at the level of product-specific AMS or non-product-
specific AMS.  The Current Total AMS resulting from  this practice is lower than it would have been
if the above procedures had been followed.  This practice could be used effectively to avoid domestic
support discipline in the form of annual and final bound commitments and go counter to the objective
of providing for substantial progressive reductions in trade-distorting agricultural support.Notifications by Members who do not follow the pr ocedures for calculating the Current Total AMS as
specified in the Agreement on Agriculture therefore need particular scrutiny.  This scrutiny is needed
in order to ascertain that, with Current Total AMS calculated correctly, domestic support
commitments have not been breached.
                                                     
7 On the other hand, if a Member had chosen (incorrectly) to use negative support to one product to
offset positive support to another product, there would be less incentive to reduce the "taxes" extracted from the
first sector.  This would be the case particularly if such (incorrect) offsetting between products was necessary to
avoid a breach of domestic support commitments.G/AG/W/44
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Technical Appendix
Specifically, the procedure for calculating AMS and Total AMS consists of the following
steps.  Supporting Table (ST) DS:5 shows the calc ulation of market price support component of each
product-specific AMS, and ST DS:6 shows the non-ex empt direct payments for each product-specific
AMS.  ST DS:7 has two functions.  It shows othe r product-specific support for each product-specific
AMS, and it carries out the summation, for each product, of the three AMS components shown in ST
DS:5, ST DS:6, and ST DS:7.
ST DS:8 shows the calculation of equivalent measurements of support, and ST DS:9 shows
the components of the non-product-specific AMS.  ST DS:4 sums the product-specific AMS amounts
(from ST DS:7), the non-product-specific AMS amount (from ST DS:9), and any equivalentmeasurements of support (from ST DS:8) into the Current Total AMS.  Exemption of some support
from inclusion in the Current Total AMS (on grounds of, for example, de minimis)  can be shown in
ST DS:4 or, as some Members do, in the underlying supporting tables.
The calculation of product-specific AMS allo ws, for each of market price support, non-
exempt direct payments and other product-specific support, the subtraction of "associated fees/levies".
Similarly, the calculation of non-product-specifi c AMS allows the subtraction of "associated
fees/levies".  Each product-specific AMS and the non-product-specific AMS is therefore a net
measurement of the support provided in favour of  producers of that product or agricultural producers
in general.
One product may benefit simultaneously from several policy measures, all being reported in
one Supporting Table (such as several non-exempt direct payments being reported for one product in
ST DS:6).  In such a case the individual support amounts deriving from the several individual policy
measures in favour of the producers of that product in that particular Supporting Table are added toform one single amount.  A negative individual product-specific amount of support deriving from an
individual policy measure can in this case be offset by positive individual product-specific amounts
for that product in the same Supporting Table.  The net amount estimated for that product is then
reported as the bottom line total for that product in the Supporting Table, and this amount is entered in
column 7, 8 or 9 of ST DS:7.
Similarly, negative amounts of support arising from individual non-product-specific policy
measures can be offset by positive individual non-product-specific policy measures, with  the net
positive amount being reported as the bottom line total in ST DS:9.
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