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Updated April 17, 2015
WTO Disciplines of Domestic Support for Agriculture
Trade is critical to the U.S. agricultural sector-exports
account for about 20% of total U.S. agricultural production.
Some commodities, such as cotton, wheat, and soybeans,
have export shares of nearly 50% or greater. As a member
of the World Trade Organization (WTO), the United States
has committed to abide by WTO rules and disciplines,
including those that govern domestic farm policy.
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A farm support program can violate WTO commitments in
two principal ways-first, by exceeding spending limits of
certain market-distorting programs, and second, by
generating distortions that spill over into the international
marketplace and cause significant adverse effects.
The WTO's AoA spells out the rules for countries to
determine whether their policies for any given year are
potentially trade-distorting, how to calculate the costs of
any distortion, and how to report those costs to the WTO in
a public and transparent manner.
WTO Classification of Domestic Support
Programs
The WTO uses a traffic ight analogy to group programs.
* Green Box programs are minimally or non-trade distorting
and are not subject to any spending limits.
* Blue Box programs are described as market-distorting but
production-limiting. Payments are based on either a fixed
area or yield, or a fixed number of livestock, and are made
on less than 85% of base production. As such, blue box
programs are not subject to spending limits.
* Amber Box programs are the most market-distorting
programs and are subject to strict aggregate annual
spending limits. They are cumulatively measured by the
aggregate measure of support (AMS).
* Prohibited (i.e., Red Box) programs include certain types
of export and import subsidies and non-tariff trade barriers
that are not explicitly included in a country's WTO
schedule or identified and accepted in the WTO lepl texts.
* De minimis exemptions are spending that is sufficiently
small (less than 5% of the value of production)-relative to
either the value of a specific product or total production-
to be deemed benig.
By leaving no constraint on spending in the green box while
imposing limits on AMS spending, the WTO encourages
countries to design their domestic farm support programs to
be more green box compliant and less market distorting.
The majority of U.S. domestic agricultural support outlays
have been categorized as green box (Figure 1) and thus not
subject to the amber box limit.
Figure I. U.S. Domestic Spending by WTO Category
[ $ 1 4 0 ] s... I.i. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .
$120-
Source: U.S. annual notifications to the WTO.
Notes: U.S. notifications are complete through 2012.
Under the AoA, U.S. amber box (AMS) outlays are limited
to no more than $19.1 billion annually, but are subject to de
minimis exemptions. Most U.S. price and income support
outlays have been notified as amber box: either product- or
non-product-specific (Figure 2). An exception was direct
payments (DPs), which were notified as decoupled green
box, and thus excluded from the AMS limit. However, DPs
were repealed by the 2014 farm bill (P.L. 113-79).
Figure 2. U.S. Amber Box Outlays, De Minimis
Exclusions, and the WTO Spending Limit
Source: U.S. annual notifications to the WTO through 2012.
Notes: The current U.S. amber box limit is $19.1 billion.
Since 1995, the United States has stayed within its AMS
limits (Figure 2). However, U.S. compliance has hinged on
judicious use of the de minimis exemptions in a number of
years (e.g., 1999-2001 and 2005) to exclude substantial
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