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September 19, 2018
WTO Disciplines on U.S. Domestic Support for Agriculture
Trade is critical to the U.S. agricultural sector: Exports
Most U.S. commodity support outlays are notified as amber
account for about 20% of total U.S. agricultural production.
box: either product- or non-product-specific (Figure 2).
Some commodities—such as cotton, wheat, and soybeans—
However, direct payments (DPs) were notified as
have export shares of nearly 50% or greater. As a member
decoupled, green box income support and were excluded
of the World Trade Organization (WTO), the United States
from the amber box limit. DPs were repealed by the 2014
has committed to abide by WTO rules and disciplines,
farm bill (P.L. 113-79).
including those that govern domestic farm policy.
Figure 1. U.S. Annual WTO Notifications by Category
WTO Disciplines of Domestic Support
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 Agreement on Agriculture (AoA)
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
The WTO uses a traffic light analogy to group programs.
Green box programs are minimally or non-trade

distorting and are not subject to any spending limits.
Source: U.S. annual notifications to the WTO through 2015.

Note: PS = product specific; NPS = non-product specific.
Blue box programs are described as market-distorting but
production-limiting. Payments are based on either a fixed
Since 1995, the United States has stayed within its AMS
area or yield or a fixed number of livestock and are made
limits (Figure 2). However, U.S. compliance has hinged on
on less than 85% of base production. As such, blue box
judicious use of the de minimis exemptions in a number of
programs are not subject to spending limits.
years (e.g., 1999-2001 and 2005) to exclude substantial
Amber box programs are the most market-distorting
amber box spending (including crop insurance subsidies)
programs and are subject to strict aggregate annual
from counting against the AMS limit.
spending limits. They are cumulatively measured by the
aggregate measure of support (AMS).
Figure 2. U.S. Amber Box Outlays, De Minimis
Prohibited programs include certain types of export
Exemptions, and the Amber Box Spending Limit
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 legal 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 benign.
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.
Under the AoA, U.S. amber box outlays are limited to

$19.1 billion annually, subject to de minimis exemptions.
Source: U.S. annual notifications to the WTO through 2015.
https://crsreports.congress.gov
WTO Disciplines on U.S. Domestic Support for Agriculture
Notes: PS = product specific; NPS = non-product specific.
panel, then the WTO member bringing the challenge may
take appropriate countermeasures.
The Agreement on Subsidies and Countervailing
Measures (SCM)
U.S. Policy Choices Under Scrutiny
In addition to payment limits, a market-distorting program
Because U.S. farm commodities play such important roles
may be challenged under the WTO’s SCM rules when the
in so many markets, U.S. farm policy is often subject to
program’s effects spill over into international markets—that
intense scrutiny both for compliance with WTO rules and
is, if it can be established that a subsidy causes significant
for its potential to diminish or impede the success of future
adverse market effects.
multilateral negotiations—in part because a farm bill locks
in U.S. policy for several years, during which it would be
SCM Rules on Adverse Market Effects
difficult to accept new restrictions on U.S. farm programs.
Based on past WTO decisions, several criteria are used to
establish whether a subsidy for a particular commodity could
WTO Cotton Case: The Ultimate Example
result in significant market distortions with resultant adverse
The importance of SCM rules was made salient by the
effects. First, the subsidy must meet the following criteria:
“WTO cotton case,” in which a WTO dispute settlement
panel ruled against both U.S. cotton support programs and

The subsidy constitutes a substantial share of farmer
GSM-102 export-credit guarantees. As a result of the ruling
returns or of production costs for a commodity.
and the potential for WTO-sanctioned retaliation, the

The subsidized commodity is important to world markets
United States made substantial policy changes to bring the
as either a significant share of production or trade.
related programs into WTO compliance.

A causal relationship exists between the subsidy and
adverse effects in the relevant commodity market.
Evaluating WTO Compliance
Then the “market distortion” of a policy must have
Based on AoA and SCM rules, a farm program can be
measurable market effects on trade and/or market price for
evaluated against five successive questions to determine
the commodity:
how it is classified, whether spending is within the AMS

limit, and whether it is vulnerable to WTO challenge:

Did the subsidy displace or impede the import of a like
product into the domestic market?
1. Do outlays qualify for the green box?

Did the subsidy displace or impede the export of a like
2. Do outlays qualify for the blue box?
product by another WTO member country?

3. If amber, do outlays qualify for de minimis

Did the subsidy (via overproduction and resultant export
of the surplus or displacement of previous imports)
exclusion?
result in significant price suppression, price undercutting,
4. Are remaining amber box outlays less than the $19.1
or lost sales in the international market?
billion amber box limit?

Did the subsidy result in an increase in the world market
5. Even if within AoA limits, does the program result
share of the subsidizing member?
in adverse effects in the international market?
For an SCM violation to be meaningful, another WTO
2014 Farm Bill Changes U.S. Farm Policy Direction
member country must successfully challenge the violation
Current U.S. farm policy is authorized by the 2014 farm bill
under the WTO dispute settlement process.
through FY2018. The 2014 farm bill made substantial
changes to the farm safety net, including repeal of
Dispute Settlement Understanding
decoupled (and green box) DPs and the creation of new
The WTO Dispute Settlement Understanding provides a
revenue-support programs—Agriculture Risk Coverage
means for members to resolve trade disputes. For a farm
(ARC) and Price Loss Coverage (PLC). Because of their
program that is challenged under the SCM, members must
decoupled design, the U.S. Department of Agriculture has
first attempt to settle their dispute through consultations, but
notified spending of $5.3 billion in 2014 and $7.9 billion in
if these fail, the challenging member may request a WTO
2015 under ARC and PLC as non-product specific. As a
dispute settlement panel to review the matter. The panel will
result, these rather substantial outlays were exempted from
review relevant trade and market data and make a
counting against the U.S. amber box limit under the de
determination of whether the program resulted in a significant
minimis non-product-specific exemption.
market distortion. Following the SCM guidelines cited above, a
subsidy may be found to be actionable or prohibited.
More Information
WTO actionable subsidies (i.e., policies that incentivize
For more analysis, see CRS Report R45305, Agriculture in
overproduction and result in lower market prices or altered
the WTO: Rules and Limits on U.S. Domestic Support; CRS
trade patterns) must be withdrawn or altered to minimize or
Report R43817, 2014 Farm Bill Provisions and WTO
eliminate the subsidy’s distorting aspect.
Compliance; CRS Report RS22522, Potential Challenges
to U.S. Farm Subsidies in the WTO: A Brief Overview; and
WTO prohibited subsidies (i.e., certain export- and
CRS Report R43336, The WTO Brazil-U.S. Cotton Case.
import-substitution subsidies) must be stopped or withdrawn
“without delay” in accordance with an abbreviated timetable.
Randy Schnepf, Specialist in Agricultural Policy
If the violating policies are not withdrawn or altered
IF10983
according to the timetable announced by the WTO ruling
https://crsreports.congress.gov
WTO Disciplines on U.S. Domestic Support for Agriculture


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https://crsreports.congress.gov | IF10983 · VERSION 2 · NEW