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Trade-distorting domestic support would skyrocket: WTO

Trade-distorting domestic support would skyrocket in the coming years if left unchecked, warned the World Trade Organization (WTO).

Since 2001, the growth in authorized levels of trade-distorting domestic support, measured by AMS and de minimis – has increased from $322 billion to approximately $740 billion in 2016.

Then this indicator has continued to rise and, according to some sources, if left unchecked could reach approximately $2 trillion between now and 2030.

With that balance, Gloria Abraham Peralta, chair of the WTO Committee on Agriculture, said that the steady increase in authorized levels will remove incentives for reform or put pressure on governments to increase support, potentially creating a subsidy competition after which only those with large exchequers will prevail.

Domestic support

According to her, this would not be in anyone’s interest; it would not be in the interest of those who cannot win the subsidy competition, but neither would it be in the interest of those who can, since that money could be better spent in other ways.

In the WTO, reduction commitments are expressed in terms of a “Total Aggregate Measurement of Support” (Total AMS) that includes all product-specific and non-product-specific support in a single figure.

Although there is agreement that trade-distorting domestic support needs to be addressed, Members’ views differ widely on: how to achieve this objective; the trade-distorting capacity of different categories of support (and, consequently, which categories of support should be included and how they should be treated): a numerical target (e.g. a 50% reduction) and the associated timeframe (e.g. 2030); and the sequence of reform steps (e.g. whether AMS above de minimis should be addressed first, or whether all categories should be addressed in parallel).

In other words, added Abraham Peralta, it is not easy to find a solution to this issue, but it is necessary and feasible. The current rules authorize levels of trade-distorting domestic support that far exceed the actual support levels of most Members.

Scope for action

“Times of crisis and new challenges, such as the Covid-19 pandemic, conflict and climate change, highlight the importance of updating disciplines on domestic support.

“Disciplines need to be strengthened to limit the use of the most trade-distorting forms of aid, while providing adequate policy space to deal with unpredictable events, such as health crises, conflicts and their impact on food availability,” she said.

 

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