WTO Constraints on U.S. and EU Domestic Support in Agriculture: Assessing the October 2005 Proposals

Proposals on domestic support were submitted in the WTO agriculture negotiations by the USA, the EU, and the G-20 in October 2005, based on the 2004 Framework agreement. This paper pays attention to the de minimis rules and the resulting de minimis allowances and projects future (2014) distorting support for the USA and the EU-15. It calculates the constraints resulting from projected values of production combined with the U.S., EU and G-20 proposals and compares their effectiveness in constraining components of distorting support and the projected future applied support. The de minimis rules make a difference in estimating how much distorting support can be provided in the future. Under the U.S. proposal the Overall commitment does not constrain either the USA or the EU. Under the EU and especially the G-20 proposals the Overall commitment constrains distorting support to be less than the sum of the cap on blue and the maximum usable components. This maximum is smaller than the sum of the commitment on Total Aggregate Measurement of Support (AMS) and the de minimis allowances. The U.S. proposal constrains only one component (Current Total AMS) and this only for the EU. The EU proposal does not constrain projected future applied support in either the USA or the EU. The G-20 proposal constrains the future Current Total AMS for both the USA and the EU. The G-20 proposal constrains projected future Overall distorting support for the EU but not for the USA.