By Tim Josling
The Uruguay Round was the first multilateral negotiation on domestic agricultural policy. The Uruguay Round Agreement on Agriculture (URAA) provided a negotiated framework into which domestic farm policies must fit if conflicts are to be avoided and penalties are not to be assessed. At first this framework appeared rather permissive, requiring few changes by individual countries. Over time the noose has tightened somewhat. The current agricultural trade negotiations, as they relate to domestic support, are to decide in essence whether to continue this process or to loosen the constraints to allow countries more flexibility to pursue domestic objectives.
Domestic policies toward other sectors are disciplined in a different way. Subsidies are constrained by the Agreement on Subsidies and Countervailing Measures (SCM Agreement) also negotiated in the Uruguay Round. Agricultural programs that grant subsidies are sheltered from this discipline by the Peace Clause (Article 13 of the URAA). Unless renewed, the protection afforded by the Peace Clause will lapse at the end of 2003. This opens up an interesting set of issues related to the compatibility of domestic farm policies with these different, and in many respects more strict disciplines. The reconciliation of any conflicts may end up being determined by decisions of the Dispute Settlement Body (DSB) as it considers and enforces the reports of dispute settlement panels.
The process of litigation (as opposed to legislation) has, however, already begun in advance of the expiration of the Peace Clause. The dispute between New Zealand and the United States and Canada over the impact of Canadian dairy policy was primarily over export subsidies. But the outcome of that case could have a profound effect on the way in which domestic support programs are treated in the WTO. The complaint by Brazil over subsidies to cotton farmers in the United States will also have a direct impact on the interpretation of WTO rules on domestic support, as will the case brought by Australia, Brazil and Thailand over the European Union’s sugar regime.
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