Results and Assessments
Internal Support
There will be a phased reduction of 20% in most internal support subsidies paid to farmers from a 1986-88 base. Reductions are to be made over a six-year period beginning in 1995. Developing countries have ten years in which to adjust.
The support calculation uses the Aggregate Measure of Support (AMS) which is expressed in monetary terms. Policies deemed to "have no, or at most minimal, trade distortion effects" are exempted from the internal support disciplines. Payments under these policies are assumed to stimulate little, or no, production. Under this provision there are many exempted policies including: structural adjustment assistance, regional assistance programmes, environmental programmes, research, pest and disease control, extension, inspection and infrastructural services.
Other exempted policies are "direct payments under production-limiting programmes": this provision exempts, for example, US deficiency payments and EU compensatory measures.
Also exempted is support that amounts to less than 5% of the value of production.
The practical benefits of this part of the agreement are limited, since
- the exempted policies are significant sources of support to farmers;
- subsidies in most countries have already fallen sufficiently below their base period levels; and
- the AMS is aggregated over all a country’s farm products. Reductions in support for individual products in excess of 20% can therefore be used to allow smaller reductions for other, politically sensitive, products. Indeed, under the domestic support disciplines, support for some products can even be increased.
The domestic subsidy disciplines are the least binding of those in the GATT Agriculture agreement. Nevertheless they will make it difficult, in future, for countries to subsidise production of surpluses that then have to be disposed of on world markets.
Reductions in Subsidised Exports (000 tonnnes)
Export Subsidies
Subsidised agricultural exports, particularly from the EU and the US, have depressed world markets, and New Zealand farmer returns, for a number of years.
The GATT agreement requires developed countries to:
- cut the volume of their subsidised exports by 21% from 1986-1990 levels. This cut is to be made over a six-year period beginning in 1995; and
- cut the value of their export subsidy expenditure by 36% from 1986-90 levels over the same period.
These commitments will generally be based on reductions starting from the 1986-90 reference period levels. However, where current export volumes (defined as the average of 1991-92 levels, or in the case of EU beef, the average of 1986-92) exceed the average exports of the reference period, the former may be used as the starting point for the export reductions. In all cases, though, the end result must be the same, namely a 21% cut in the volume of subsidised exports from the average annual 1986-90 level by year six of the agreement.
Genuine food aid is excluded from these volume and expenditure reduction commitments.
The export subsidy reduction commitments apply to all agricultural products, including butter, cheese, skim milk powder, and beef. New Zealand’s returns from some of these products are expected to improve significantly over the next few years.
Market Access
Under the market access provisions of the GATT agreement, countries will replace all their import quotas, "voluntary" restraint agreements and other restrictive trade practices with tariffs, a process known as "tariffication". These tariffs must then be reduced by a simple average of 36%, with a minimum of 15% for any one product. Reductions will take place over six years beginning in 1995.
The new tariffs are calculated as the difference between each product’s support price and a representative external reference price, thus providing substantially the same level of protection as the existing measures. Unfortunately many important countries have manipulated this process so as to obtain the highest possible initial level of tariff protection.
In order to ensure at least some degree of market opening in all sectors, the GATT agreement also requires each country, after tariffication, to make "minimum access" provisions for cases where there has been little or no trade because of high import barriers. Under the minimum access arrangements, a special tariff quota or access quantity must be derived in order to ensure that import opportunities exist equivalent to 3% of domestic consumption (rising to 5% by the year 2000). The tariff quotas are intended to be import entitlements with low tariffs. Higher tariffs, which will be subject to the phased reductions, will apply to any product imported above the minimum access tariff quota.
In cases where market access is currently managed through an import quota or voluntary restraint agreement, these existing access opportunities must not be reduced beneath the average 1986-88 level. Current access provisions can, however, be credited towards the minimum access provisions.
The implications of the market access provisions for New Zealand are that existing access is assured, while additional access has been gained for beef, sheepmeat, butter and other dairy products in certain markets. In addition, all developed countries’ agricultural tariffs are to be bound and cannot be increased above their bound levels without further negotiations and compensation. Developing countries, however, are permitted ceiling bindings at levels above the applied tariff rate.
Some of the results for New Zealand’s principal agricultural exports are discussed in the next section.
Sanitary and Phytosanitary Measures (SPS)
The rules in this part of the agreement aim, amongst other things, for:
- greater transparency of national policies;
- objectivity in the process of risk assessment; and
- the establishment of improved consultation and dispute settlement procedures.
The intention is that SPS measures that restrict trade should be applied only to the extent necessary to protect human, animal and plant life or health. The SPS agreement also aims to encourage the use of international standards. Any measures stricter than international standards must be scientifically justifiable.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
Contact this person
