The WTO’s decision to end agricultural export subsidies is good news for farmers and consumers

Brookings - Heinz Strubenhoff

Type: Article
Knowledge level: Intermediate

Farm Table says:

Interesting commentary particularly regarding the EU's Common Agricultural Policy.

This article was written in response to the World Trade Organisation’s 10th Ministerial Conference in Nairobi in 2015. At the meeting, members agreed that export subsidies for agriculture should be abolished.

The agreement from December 19, 2015 states that “developed country members shall immediately eliminate their remaining scheduled export subsidy entitlements as of the date of adoption of this decision” and “developing country members shall eliminate their export subsidy entitlements by the end of 2018.” WTO members also “undertake not to provide export credit, export credit guarantees, or insurance programs” for agricultural products. This is the final step in a long journey to end an absurd and harmful system of economic policymaking.

Export subsidies – including direct payments, export loans, and tax benefits – distort market prices. They lead to “higher than market prices and surplus production in exporting countries and lower prices and less production in importing countries.

 In the long-term, this system undermines competitiveness of food production in both exporting and importing countries.

The EU

  • Agreed to abolish export subsidies

Export subsidies allowed EU exporters to gain market share in developing countries, put downward pressure on the level of world market prices, and to compete unfairly with local producers in many developing countries.

  • Prices were far beyond market prices for many commodities, resulting in huge stocks and budget needs
  • EU Common Agricultural Policy – has been reformed over past 20 years. Was a central planning system with “administratively fixed intervention prices for major commodities, huge stocks of cereals and milk products, and high import tariffs.”

Paradoxically, despite a sharp increase in subsidies, farmers kept complaining. The main reason being that the EU intervention agencies largely deprived farmers of their rights to work as real entrepreneurs in free markets.

  • Agreed to phase out export subsidies in Doha in 2011, and not to fully eliminate in 2015.

The US

  • Agreed to abolish export credits
2016 - United States - Brookings - Heinz Strubenhoff
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