Policy Space in Agriculture Under the WTO Rules on Domestic Support

A concept of policy space is formulated under the domestic support rules of the WTO Agreement on Agriculture. This policy space is dyadic, comprising two kinds of space: exemption space and limited space. The two kinds are available differently for different countries. Exemption space derives from the entitlement to exempt policies that meet given criteria from those policies under which support counts against the country’s limit(s), i.e., exemption space allows limitless support. The criteria are those of Annex 2, Article 6.2 and Article 6.5 of the Agreement (green, development and blue boxes). Limited space derives from the entitlement to provide support under non-exempt policies up to the country’s limit(s). For most countries the limits are the de minimis levels calculated from the value of production of each product and of agriculture as whole, using the country’s de minimis percentage. For 32 countries (15 developed and 17 developing) the limit is the Bound Total Aggregate Measurement of Support (BTAMS) and the de minimis levels are thresholds above which support counts against the limit. Some acquisition of foodstuffs at administered prices is subject to special rules, now subject to negotiations with implications for both exemption space and limited space and the interaction between these two kinds of space. The Agreement’s criteria are reviewed to interpret the factors determining a country’s exemption space. In determining limited space, the centrality of a country’s values of production is illustrated by tracking limited space from 1995 to 2012 for the EU, the US, India and China under assumptions of perfect management of maximum support. China’s rapidly rising values of production have generated limited space that now greatly exceeds that of the EU. The US limited space has been rising but India’s limited space is growing faster and approaches the US level. In recent years these four countries have used only a small part of their limited space. As values of production rise in individual countries and in the world, the relative importance of BTAMS as a component of limited space declines since it stays fixed in nominal terms. The amount and the share of non-exempt support that can be accommodated within the de minimis provisions are thus increasing for individual countries and in total for the world. Some countries with declining values of production in agriculture are the exceptions, e.g., Japan. The different entitlement of different countries to limitless exemption space, in combination with limited space growing faster in some countries than in others, means that the picture of countries’ policy space for domestic support to agricultural producers is rapidly changing from the picture when the Doha negotiations started.