Oman-WTO chair highlights : Trade policy and food security

Oman - 1 March 2021

Trade topics: Agricultural Trade

This policy brief provides a summary of key research findings of the WTO Chair in Oman at Sultan Qaboos University in order to enable policy making.
Since the creation of WTO, agricultural trade was subjected to multilateral trade rules that are stipulated in the “Agreement on Agriculture” (AoA) to which all member’ countries are committed. This has limited to some degrees the policy space of member countries to take their own measures to enhance food security, including domestic support to increase agricultural production. The AOA has categorized domestic support into what is “allowed” called Green box support ad what is not allowed designated by Amber box support policies. The green box includes all agricultural policies that have a minimum distorting effect on trade and therefore countries can provide this support to their farmers without limit whereas the Amber box includes policies that distorts trade and therefore cannot be used or should be gradually eliminated. The latter includes price support policies that many countries use in order to build public food storage (public stockholding) for food security purposes (wheat and rice). Under WTO regime, Public stockholding has specific rules (Annex 2, paragraph 3 of the AoA). Expenditure related to public stockholding is categorized as green box support provided that the government procures food stocks at market prices and sells these stocks at a price not below the current market price. However, in most developing countries, the government procures food stocks at administered prices and not the current market price. In such case The AoA stipulates that if stocks are acquired and released at administered prices, the difference between the acquisition price and the External Reference Price (ERP) should accounted for in the Amber box. By doing so, developing countries found themselves breaching their WTO commitments of not providing product specific support that exceeds the de minimus (5% of the production value). This issue is at the heart of the current negotiations/debate at WTO where developing countries are pushing the negotiations toward switching product specific support for food security purposes from the Amber to the Green box.