Order Code RS22927
July 24, 2008
WTO Doha Round:
Implications for U.S. Agriculture
Randy Schnepf and Charles Hanrahan
Specialist and Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
The World Trade Organization (WTO) is holding a Ministerial conference in
Geneva the week of July 21, 2008, in an attempt to resolve the remaining outstanding
issues in the Doha Round negotiations. On July 10, 2008, in advance of the Ministerial,
the chairperson of the Doha Round’s agricultural negotiations, Crawford Falconer,
circulated the latest draft of “modalities” — specific formulas for reducing trade-
distorting farm support and tariffs — as a basis for final proposals. The current
modalities framework would significantly lower allowable spending limits for certain
types of U.S. domestic support, while allowing U.S. agricultural products wider access
in particular foreign markets. Current market conditions and long-term market
projections suggest that U.S. farm program outlays should fit within the tighter spending
limits without substantial modification. However, U.S. trade officials have expressed
concern that the pending modalities draft still includes too many market access
exceptions for foreign importers to ensure an adequate balance between U.S. domestic
policy concessions and potential export gains.
This report reviews the current status of agricultural negotiations for domestic
support, market access, and export subsidies, and their potential implications for U.S.
agriculture. It will be updated as events warrant.
Introduction
WTO multilateral trade negotiations have been ongoing since November 2001.1 The
negotiations — referred to as the Doha Development Agenda (DDA) or simply the Doha
Round — encompass four broad areas of trade reform: agriculture, non-agriculture market
access (NAMA), rules, and services. This report focuses exclusively on agricultural
negotiations, where new disciplines are being negotiated in three broad areas — domestic
agricultural support programs, export competition, and market access — often referred
to as the three pillars of the Agreement on Agriculture. Doha Round negotiations have
1 For more information, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda
, by Ian Fergusson.

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attempted to maintain a balance across the three pillars by simultaneously achieving
concessions from exporters and importers alike in the form of tighter spending limits on
trade-distorting domestic support; elimination of export subsidies and new disciplines on
other forms of export competition; and expansion of market access by lowering tariffs,
increasing quota commitments, and limiting the use of import safeguards and other trade
barriers.
Domestic Support
Domestic support broadly refers to those agricultural policies that operate within a
country so as to influence internal farm and rural incomes, resource use, production, and
consumption of agricultural products, or the environmental impacts of farming. The
WTO categorizes domestic support programs by the degree to which they distort price
formation in agricultural markets. The most distortive programs — referred to as
“coupled” programs because of their direct link to market behavior — are categorized as
amber box programs and are subject to an aggregate annual spending limit.2 In contrast,
those policies that are minimally trade distorting are categorized as green box programs
and are exempted from reduction commitments. Certain market-distorting programs are
exempted from spending disciplines under special circumstances — the blue box contains
market-distorting but production-limiting programs, while the de minimis exclusions (one
at the individual product level, the other at the aggregate level) comprise market-distorting
policies that are deemed benign because spending outlays are small relative to a country’s
overall agricultural sector.
WTO trade negotiations have emphasized tightening spending limits on the most
highly market-distorting domestic programs — amber box programs — while allowing
member countries the ability to intervene in national agricultural policy by shifting their
support to AMS-exempt categories such as the green box. Amber box programs are
measured by an index referred to as the aggregate measure of support (AMS), which
combines the monetary value of all non-exempt agricultural support into one overall
measure. The AMS includes both budgetary outlays in the form of actual or calculated
amounts of direct payments to producers under various commodity marketing loan
provisions, input subsidies, and interest subsidies on commodity loan programs, as well
as revenue transfers from consumers to producers as a result of policies that distort market
prices.
Tighter Spending Limits in Aggregate, and for Specific Products. The
current draft modalities propose cutting trade distorting domestic support simultaneously
across three levels (see Table 1 for details).
! First, spending limits for each category — amber box, blue box, and the
two de minimis exclusions — would be reduced substantially.
! Second, within each of these categories additional constraints would
apply to support for any individual product (i.e., product-specific limits).
! Third, a global spending limit — referred to as the overall trade-
distorting domestic support (OTDS) — encompassing the four categories
2 For more information see CRS Report RL32916, Agriculture in the WTO: Policy Commitments
Made Under the Agreement on Agriculture,
by Randy Schnepf.

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of amber box, blue box, and the two de minimis exclusions would be
established at a level substantially smaller than their sum.
! In addition, the qualifications needed for exemption status in the green
box have been tightened.
Table 1. U.S. Domestic Support: Average Outlays Compared with
WTO Commitments — Current and Proposed
Ave.
Doha Modalities Proposal
Category
1995-2005
Current WTO Limits
Specific to United Statesa
$US
$US
$US
Billion
Status
Billion
Status
Billion
Unbound
Bound, with tiered cuts
$13 or
OTDS
$16.1
(due to blue box)
$48.2b
totaling 66% or 73%
$16.4
Amber box
Separate Bound
(Bound AMS)
$10.7
for each country
$19.1
Tiered cuts totaling 60%
$7.6
Amber box (per
No per product
Capped at average
product bound)
variesc
limit

support of 1995-2000
variesc
Blue box
$0.6
Unbound

Bound at 2.5% of TVPb
$4.9
Blue box
Bound at 110% or 120%
(product specific)

None

of 2002-07 ave.

De Minimis:
Bound at 5.0% of
non-product specific
$4.8
TVPb
$9.7
Bound at 2.5% of TVPb
$4.9
De Minimis:
Bound at 5.0% of
commodity specific
$0.3
SCVPb
$9.7
Bound at 2.5% of TVPb
$4.9
Unbound but tighter
Green Box
$55.6
Unbound

qualifying criteria

Source: “Revised Draft Modalities for Agriculture, TN/AG/W/4/Rev.3, WTO, July 10, 2008.
Definitions:
AMS — Aggregate Measure of (trade-distorting domestic) Support defined in Agreement on Agriculture.
OTDS — Overall Trade-Distorting Domestic Support = Amber box + Blue box + de minimis exclusions.
SCVP — Total Value of Agricultural Production for a Specific Commodity.
a. The level and timing of proposed reductions in domestic support commitments vary across both category
and WTO Member status, e.g., developed versus developing country. See source for more information.
b. Based on the average annual total value of agricultural production (TVP) for the 1995-2000 period.
c. Per-product outlays and bounds vary by product, but sum to TVP. U.S. calculations apply the proportionate
average product-specific AMS from the 1995-2004 period to the total AMS for 1995-2000.
Additional Changes to Domestic Support. Two other potential changes could
have implications for U.S. farm policy. First, blue box criteria would be expanded to
include U.S. counter-cyclical payments (CCP) previously categorized as amber box.
Second, trade-distorting domestic support for cotton would be subject to greater cuts
(82%) than for the rest of the agricultural sector, and the product-specific blue box cap for
cotton would be one-third of the normal limit.
What the Draft Modalities Might Mean for U.S. Agriculture. Under a
successful Doha Round Agreement, the United States would have to address any
inconsistencies between its WTO commitments and current U.S. farm policy authorized
by the 2008 farm bill (P.L. 110-246). The degree of changes to U.S. farm policy needed

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to comply will likely hinge on market conditions.3 If a relatively high price environment
continues (as projected by USDA and most market analysts), then U.S. amber box outlays
could easily fall within the new limits with only modest changes. However, if market
prices were to return to levels substantially below support levels, then amber and blue box
outlays could escalate rapidly and threaten to exceed spending limits. Many market
analysts have also expressed concern that high revenue guarantees set by formula under
a new revenue support program — Average Crop Revenue Option (ACRE) — could lead
to larger-than-expected outlays if market prices were to weaken substantially in the future,
but such an outcome would depend on the participation rate in ACRE, which is still
unknown.
Revisions to the U.S. dairy program under the 2008 farm bill appear likely to
dramatically reduce annual dairy price support as notified to the WTO. Dairy program
changes coupled with a reclassification of the CCP as blue box could provide additional
flexibility in accommodating the tighter amber box limits. However, two commodities
— sugar and cotton — could pose problems in meeting product-specific AMS bounds.
Sugar was given higher loan rates in the 2008 farm bill, while for cotton the draft
modalities would impose larger, more immediate cuts to allowable domestic support. In
addition, cotton would confront a much tighter blue box support limit.
Market Access
Formula Tariff Cuts. The main approach to cutting tariffs in the modalities
agreement is a tiered approach based on the principle that higher tariffs have higher cuts.
Developed country tariff cuts would range from 50% to 66% or 73%, but subject to an
overall 54% minimum average cut. The cuts are made from legally bound rates which
could be substantially higher than rates actually applied. The range for developing
countries would be two-thirds of the equivalent tier for developed countries, subject to a
maximum average cut of 36%. Least-developed countries and so-called small and
vulnerable economies would be exempt from any tariff cuts. Very recent new members
of the WTO also would be exempt from new market access commitments.
Table 2. Tiered Formula Tariff Cuts
Developed Countries
Developing Countries
Tier
Current tariff
Reduction
Current tariff
Reduction
Bottom
0% to # 20%
50%
0% to < 30%
33.3%
Lower Middle
> 20% to # 50%
57%
> 30% to < 80%
38%
Upper Middle
> 50% to # 75%
64%
> 80% to < 130%
42.7%
Top
> 75%
66% or 73%a
> 130%
44% or 48.7%a
Average cut
Minimum
54%
Maximum
36%
a. To be determined (TBD).
3 For more information see, Implications for the United States of the May 2008 Draft Agricultural
Modalities
, by David Blandford, David Laborde, and Will Martin, International Center for Trade
and Sustainable Development (ICTSD), June 2008.

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Deviations from Formula Cuts. Some products would have smaller tariff cuts
because of flexibilities that are provided for in the draft text. These include the
designation (available to all countries) of some products as sensitive (i.e., subject to
import competition). Developed countries could designate 4% or 6% (to be negotiated)
of products as sensitive and would apply tariff cuts that are one-third, one-half, or two-
thirds of the formula tariff cut. Developing countries could designate 5.3% or 8% with
the same deviations from formula cuts. Countries that choose to designate products as
sensitive would have to “pay” for the designation with market access under a tariff quota
(where quantities inside the quota are charged a lower or no duty and the above quota
tariff is determined according to the reduction formula.) The larger the deviation from
the formula cut, the greater would be the amount of in-quota market access (e.g., the
maximum amount of in-quota access would be 4% or 6% of domestic consumption if the
full two-thirds deviation is applied). Developing countries could exempt some products
from full formula tariff cuts by designating some products as special (i.e., products
deemed essential for food or livelihood security, or rural development).
Safeguards. The draft modalities identify two options for the Special Agricultural
Safeguard (SSG) whereby countries can reimpose tariffs if, because of an import surge,
certain price or quantity triggers are met. For developed countries the SSG would either
be eliminated or the number of products eligible would be reduced. Developing countries
could continue to use the SSG. In addition, the text provides for a new Special Safeguard
Mechanism (SSM) that developing countries could apply under certain circumstances to
protect their producers temporarily.
Implications for the United States. In general, U.S. agricultural exports would
gain greater market access primarily in other developed countries. A recent study
suggests that application of the tiered formula would reduce the average applied
agricultural tariff faced by U.S. agricultural exporters from 18.7% to 9.1% in the absence
of sensitive and special product flexibilities, and from 18.7% to 13.2% when such
flexibilities are in effect.4 Although the sensitive product designation would limit the
market access opportunities somewhat, the number of such products would be limited.
Also, the higher tariff protection afforded by sensitive product status is partially offset by
new or expanded quotas access.
Export Competition
Export Subsidies. The draft modalities on export competition would require
developed countries to eliminate export subsidies by 2013; developing countries would
have until 2016. All existing commitments concerning allowable food aid levels,
provision of food aid by donors, technical and financial assistance in aid programs to
improve agricultural productivity and infrastructure, and financing of commercial imports
of basic foods would be unaffected by the elimination of export subsidies.
Export Financing. Government-supported export financing would be limited by
a maximum repayment period of 180 days and would have to be self-financing — that is,
returns must cover all costs. Export financing includes direct financing support (direct
credits, refinancing, or interest rate support); export credit insurance or reinsurance and
4 Ibid.

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export credit guarantees; government-to-government credit agreements; and other forms
of government support such as deferred invoicing and foreign exchange risk hedging.
International Food Aid. All food aid transactions would be needs-driven; fully
in grant form; not tied directly or indirectly to commercial exports of agricultural or other
products; and not linked to market development objectives. Countries would refrain from
providing in-kind food aid which could have an adverse impact on local production or
could potentially displace commercial sales. Local procurement of food aid is encouraged
and WTO member countries will make best efforts to move to untied cash-based food aid.
A recipient government would have the primary role for coordinating and implementing
food aid activities in its territory. Food aid (cash or in-kind) provided during an
emergency would be put in a Safe Box(with more lenient disciplines), provided that the
country or the U.N. Secretary-General has declared an emergency and there has been an
appeal for emergency aid from a country or a recognized entity (e.g., the U.N. World Food
Program). Monetization (sale for cash) of emergency in-kind food aid would be
prohibited, except for least-developed countries where there is a need to finance transport
and delivery of the aid. Stricter disciplines would apply to monetization of non-
emergency food aid.
Implications for the United States. Elimination of agricultural export subsidies
has been a long-standing objective of U.S. trade policy. The 2008 farm bill repealed
legislative authority for the Export Enhancement Program (EEP), historically the largest
U.S. agricultural export subsidy program. The draft modalities would require the
elimination of the Dairy Export Incentive Program (DEIP), a much smaller export subsidy
program that was re-authorized in the 2008 farm bill. The United States has already made
changes in its export credit guarantee programs in response to an adverse decision in a
WTO cotton case. The intermediate guarantee program (GSM-103) has been eliminated;
risk-based interest rate determination has been established; and the 1% cap on origination
fees has been lifted. To meet requirements laid out in the draft modalities, the term for
GSM-102 short-term guarantees (six months to two years) would have to be limited to six
months. To meet the self-financing criterion, in the draft modalities additional interest
charges or fees could be required.
The modalities text emphasizes provision of cash rather than in-kind food aid and
would impose new limits on monetization. Both of these new directions would pose
difficulties for U.S. organizations that rely on monetization to finance non-emergency
(development) projects, although some U.S. groups would welcome infusions of more
cash to fund their development activities. Congress, however, rejected an Administration
farm bill proposal to shift up to one-quarter of U.S. food aid funding to a cash-based food
aid program opting, instead to establish a modest pilot program for purchasing food in
developing countries.
Agriculture and the Broader WTO Negotiations
While agricultural negotiations seek a balance of new disciplines spread across the
three pillars of domestic support, export competition, and market access, the overall Doha
Round negotiations are seeking a similar balance across the broader sectors of agriculture,
non-agriculture market access (NAMA), and services. This quest for cross-topic balance
is referred to as “Horizontal Negotiations.” Completion of the Doha Round thus depends
on progress in NAMA and services as well as agriculture.