Trade Policy Statement

7.0 Domestic Support

The domestic support priority should be to provide substantial further discipline on the use of domestic support. This must be done in a manner that removes the disparities in WTO obligations and respects the domestic interests of Canadian farmers. Key considerations include:

7.1 Green box

The clarity and equity of the definitions and rules governing domestic support programs should be improved by:

Clarifying the 'green box criteria' for weather and income related safety net programs (paragraphs 7 & 8, Annex 2) in order to provide more realistic options for these programs.
Tightening the definitions of green programs to reduce the possibility of trade distorting programs being provided within the green category.

The status and role of green programs should be improved by:

Permanently exempting green programs from countervail action.
Establishing a WTO system for the prior determination of the green status of a specific domestic program.

7.2 Amber box

a) Exemptions

The rules should apply equally to all types of trade distorting support
The blue box exemption from reduction commitments for specific types of amber programs (para.5, Article 6, WTO agreement on Agriculture) should be eliminated.

b) De minimis

Countries will, at times, find it necessary to provide targeted support to deal with extraordinary problems in agriculture. Small amounts of targeted assistance will not distort trade.
The de minimis exemption from amber support calculations (AMS) should be maintained.

c) Relationship of de minimis and Blue Box

CFA continues to believe that every possible effort should be made to eliminate the Blue Box and to maintain the current de minimis provisions.

If that proves to be impossible, CFA would support a provision which permitted Canada to continue to use the full current de minimis provisions in exchange for not using a revised blue spending option.

d) Policy on Product Specific Caps

CFA is opposed to capping product-specific support. However, if caps are established, it must be done in an equitable manner. They cannot be based on spending in an historical period. The caps must be a set percentage of the value of the product's production and be the same percentage for all products in all countries [subject to special and differential provisions for developing countries.]
Regardless of any caps that may be established, countries must retain the ability to provide product-specific support to assist a commodity in its recovery from an emergency situation (e.g. market failure due to BSE.) This right would be subject to the final Bound Total AMS limit.

e) Amber spending limits

There is an imperative need to curtail the high level of support provided by the United States and other high spenders. The effectiveness of amber support reduction is dependent on the degree to which other measures limit the ability of countries to provide excessive support in other guises (e.g. a cap on total domestic support spending and tighter green definitions.)

A key domestic consideration is ensuring that Canada has the ability to provide effective income and weather related safety net programs. Canadian NISA and crop insurance programs are currently notified as amber. The amount of amber support capacity required to accommodate these programs in the future will be dependent on the degree to which the green definitions are modified to provide realistic criteria for income and weather safety net programs.

We believe that the amber spending limit reductions should:

Be in the form of a percentage reduction of existing commitments
Be substantial enough to arrest the current high level of support provided by the U.S, the EU and other high spenders.
Provide sufficient latitude to insure that Canada can provide effective income and weather related safety nets.

8.0 Export Promotion

8.1 Export promotion programs

All market and promotion services, including export promotion, should be considered domestic support, be subject to the provisions of Article 6 of the Agreement on Agriculture, and be reported in the domestic support notifications.

To be exempt from reduction commitments6, an export promotion program:

Must relate to a generic commodity or product, and not be used for promotion of a particular brand.
Must be generally available; that is be provided to associations representing the marketers of a particular type of product. The assistance cannot be provided directly to an individual company or integrated marketer (such as a co-op.)
Cannot be used to reduce the selling price of the product, and cannot be used to provide free samples or reduce the cost of trial shipments.

8.2 Food Aid

Establishing clear and enforceable WTO rules to govern the use of export promotion programs and food aid to ensure that these programs are not disguised export subsidies. The rules on food aid should provide that:

All food aid shall be provided in fully grant form, including aid to least developed and net food importing developing countries.
Food aid shall not be tied to the purchase of other agricultural products or of other goods and services.

9.0 Overall cap

Amber support is the most trade distorting. However excessive spending on any form of domestic support can created an unequal and unfair trading environment.

In addition to the elimination of the blue box and reduction of amber spending limits, the effective discipline of domestic support requires an overall cap on domestic support spending.
This cap must designed in a manner that provides meaningful limits on the spending of all parties:
- The cap should be defined as a percentage of total value of production
- The cap should focus on actual government expenditures. It should apply to all amber spending, including programs currently in the blue box, but not market price support calculations; and apply to all green spending.
- The overall cap should be subject to progressive reduction as the amber spending limit is reduced..

10.0 Amber support definitions and calculation (AMS)

At the end of the Uruguay Round of negotiations, Canada's negotiators were confident that the other Parties had accepted that Canada had correctly calculated and reported its domestic support and export subsidies in the commitment schedules. After the initiation of the dispute over the calculation of dairy export subsidies, we learned that this was not necessarily true.

Clarifying and tightening the green definitions can, in general, resolve problems related to actual expenditures. The main uncertainties relate to whether the presence or near presence of government, without any expenditure, constitutes a subsidy.

We believe that our negotiators must be sensitive to the need to resolve any uncertainties regarding the application of domestic support commitment. Particular considerations include:

10.1 Market price support

Market price support is a calculation of the perceived benefits of 'administered prices'. When actual expenditures are used to maintain prices, this would fall within the normal concept of government support expenditures and the subsidy element of those expenditures should not be too difficult to identify. If the level of 'administered prices' is dependent on border protection, this really is a measure of the effects of border protection which can be dealt with more realistically by the market access provisions in the agreement We believe:

Where actual purchases or payments are used to maintain administered prices, the calculated subsidy should be the amount of subsidy provided to the volume that is purchased or the volume receiving an actual support payment.
The calculation of market price support be eliminated from the calculation of the AMS.

10.2 Market price structure

Despite the fact that the allegations are unsubstantiated, there is a risk that some countries might try to use the trade negotiations and WTO rules to attack the legitimacy of Canadian marketing boards (e.g. the current assertions that export central desk selling agencies such as the Canadian Wheat Board, are somehow subsidizing exports).

We believe that it is essential that the Government, while pursuing subsidy elimination and subsidy reduction goals, take whatever steps are necessary to insure that the domestic and export subsidy rules are not used to undermine the ability of producer supported agricultural marketing bodies to regulate the volume of domestic product marketed, to operate a central desk selling agency and to pool returns.

11.0 Non-trade concerns

The concept of 'multifunctionality' is being promoted by some WTO members. It is a way of saying that considerations, other than commercial issues, are factors in determining national agricultural policy. It is important that non-trade concerns are dealt with in a manner that does not undermine the disciplines on domestic support.

Measures intended to support the multifunctional character of agriculture must be provided in a way that does not distort trade.
There should be no special concession for expenditures related to the financing of these measure, either in extra spending rights or weakening of the green definitions. These programs should be subject to the overall cap on domestic support spending.

12.0 Domestic policy

One hand of government not knowing what the other hand of government is doing, is a recipe for potential disaster.

It is essential that domestic agricultural policy makers design policies that are compatible with Canada's negotiating goals for domestic support programs, and design policies that reflect an honest evaluation of the art of possible in the negotiations.
It is essential that Canada's negotiating bottom line is designed to insure that we have the capacity to provide the safety net programs required to maintain a stable Canadian agriculture sector.

Beyond safety nets, the Government of Canada must be prepared to match the level of green support given to our competitors in other countries; particularly in the areas of food safety, research, infrastructure, pesticide regulation, resolution of environmental problems, and maintenance of standards and inspection.