Decoupling EU Farm Support: Does the New Single Payment Scheme Fit within the Green Box?*

Centre for Agricultural Strategy, The University of Reading
Richard Tranter

Centre for Agricultural Strategy, The University of Reading

Recent reform of the EU's Common Agricultural Policy (CAP) has led to a further decoupling of farm support. The EU believes that the new Single Payment Scheme, which replaces the former system of area and headage payments to farmers, tied to production, will qualify for green-box status in the WTO. We examine this contention, particularly in light of the recent WTO panel report on upland cotton.

Keywords: decoupling, EU, green box, Single Payment Scheme, WTO

Introduction

Reference is frequently made to the three pillars of the Uruguay Round Agreement on Agriculture (URAA): domestic support, market access and export competition. Domestic support in developed countries falls into one of three categories, often referred to as "boxes": 1) the amber box of trade-distorting subsidies, comprising a de minimis element and an aggregate measurement of support (AMS) subject to reduction commitments; 2) the green box (Annex 2 of the URAA) of policies that have "no, or at most minimal, trade-distorting effects or effects on production"; and 3) the blue box (Article 6(5)) encompassing "[d]irect payments under production-limiting programmes". The WTO Secretariat has subsequently suggested that the blue box "covers payments linked directly to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land" (WTO, 2004a, The "Blue Box": Phase 1). The blue box was written into the URAA by the United States and the EU at Blair House in November 1992 and, as Blandford (2001, 37) points out, its provisions were specifically designed to embrace the deficiency payments then paid in the United States, and the arable area and livestock headage payments that became characteristic of the EU's Common Agricultural Policy (CAP) following the MacSharry reforms of 1992.

Table 1 EU's WTO Declarations of Domestic Support (ecu/euro million)

(Table omitted. See Article Image.)

The source WTO documents are given in the bottom row. The ecu (formerly the European Currency Unit) was a basket of EU currencies. It was replaced by the euro (euro) on 1 January 1999 at 1 ecu = euro1. The value of the ecu/euro against the U.S. dollar has varied significantly...