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Image: International Markets & Trade

Agreement on Agriculture and Beyond

The Final Act of the Uruguay Round and the Marrakesh Agreement establishing the World Trade Organization were signed on April 15, 1994. The World Trade Organization (WTO) was subsequently established on January 1, 1995, as the multilateral institution charged with administering agreed-upon rules for trade among member countries. The WTO supersedes the General Agreement on Tariffs and Trade (GATT), which was established in 1947 as the umbrella organization for international trade. The United States and other countries participating in the Uruguay Round of Multilateral Trade Negotiations (1986-94) formed the WTO to embody the new trade disciplines adopted during those negotiations. The basic aim of the WTO is to liberalize world trade and place it on a secure basis, thereby contributing to economic growth and development.

At the heart of the WTO are the numerous agreements negotiated and signed by members during the Uruguay Round. These agreements cover trade in goods and services, as well as trade-related aspects of intellectual property rights. All have some relevance to agricultural trade, and supporting material on a number of them is available in this briefing room.

Major WTO Agreements

There are also four plurilateral agreements (not binding on all WTO members):

  • Agreement on Trade in Civil Aircraft
  • Agreement on Government Procurement
  • International Dairy Agreement
  • International Bovine Meat Agreement

Agreement on Agriculture (AoA)

The WTO Agreement on Agriculture (AoA) represents a fundamental change in the way agriculture is treated under the rules governing trade among WTO member countries. Prior to the Uruguay Round, rules on trade in agricultural products in the General Agreement on Tariffs and Trade (GATT) were largely ineffective due to a number of loopholes and exceptions that, in effect, excluded much of this trade from most of the disciplines applied to trade in manufactured goods. The AoA introduced important new disciplines on the trade of agricultural products and required countries to reduce agricultural support and protection in the areas of market access, domestic support, and export subsidies-sometimes referred to as the "three pillars" of the agreement.

Under market access, countries agreed to open markets by prohibiting nontariff barriers, converting nontariff barriers to tariffs (known as "tarrification"), and reducing tariffs. Countries also agreed to reduce expenditures on export subsidies and on the quantity of agricultural products exported with subsidies. Domestic support reductions were achieved through commitments to reduce a country's aggregate measurement of support (AMS)-a numerical measure of the value of most trade-distorting domestic policies.

The AoA recognized that the long-term objective of substantial progressive reductions in support and protection is an ongoing process. As a result, it committed members to initiate negotiations by the end of 1999. Agriculture and services were the only areas where negotiations on further trade liberalization were mandated in the Uruguay Round Agreements that established the WTO. Agricultural negotiations began in January 2000, in advance of the official launching of the Doha Round.

See the AoA General Issues section of the recommended readings page for more information regarding general issues related to the WTO Agreement on Agriculture.

Tariffication and Market Access

Tariffication, the conversion of nontariff barriers to equivalent bound tariffs, was one of the most important outcomes of the Uruguay Round Agreement on Agriculture (AoA). The adoption of a tariffs-only approach for agriculture was a sweeping reform that went a long way toward subjecting agricultural trade to the same disciplines applied to other traded goods.

The Uruguay Round tariff reductions, along with the establishment of tariff-rate quotas (TRQs), increased market access for agricultural exports, but also left many high tariffs in place (see AoA Issues Series: Market Access: Tariffication and Tariff Reduction). Agricultural trade would benefit from further reducing high tariffs, expanding and reforming TRQs, and improving the predictability of tariff protection.

See the AoA Tariffs and Market Access section of the recommended readings page for more information regarding tariff and market-access issues related to the WTO Agreement on Agriculture.

Domestic Support

Domestic support policies were recognized as one source of market and trade distortions in negotiating the Uruguay Round Agreement on Agriculture (AoA). Countries, therefore, agreed to limit domestic policies presumed to be the most trade distorting and to exempt non- or minimally trade-distorting policies from any limitations (see AoA Issues Series: Domestic Support Policies).

Policies were categorized by color according to whether and how they were disciplined. Policies that directly influence production decisions, such as price support policies ( amber box policies), were capped and subject to cuts. Support levels from amber box policies are quantified, according to the AoA, by calculation of an aggregate measure of support (AMS), which combines estimated support levels for all commodities into one overall measure.

The AoA exempted three types of domestic programs from reduction commitments. The first type of exempt support is amber box policies deemed to be de minimis-defined as support that is less than 5 percent of the value of production. The second type of domestic program exempt from reduction commitments is expenditures that are entirely government funded and do not vary with prices. This type of support ( green box policies)-deemed to have little or no effect on production or trade-includes research programs, domestic food aid, environmental programs, and certain crop insurance and income-support programs. The third type of exemption ( blue box policies) includes payments that are related to production-limiting programs (e.g., subsidies paid as a result of production quotas or those that require producers to set aside land in order to qualify for subsidies).

See the AoA Domestic Support section of the recommended readings page for more information regarding domestic-support issues related to the WTO Agreement on Agriculture.

Export Subsidies

The Uruguay Round Agreement on Agriculture (AoA) imposed meaningful disciplines on agricultural export subsidies for the first time (see AoA Issues Series: Export Subsidies). Prior to AoA implementation, export subsidies significantly distorted agricultural trade.

Under the AoA, countries that employed export subsidies for agricultural commodities agreed to lower the volume and value of their subsidies during a multiyear phase-in period. New subsidies cannot be introduced. Bona fide food aid and export market promotion and advisory services are exempt.

See the AoA Export Subsidies section of the recommended readings page for more information regarding export-subsidy issues related to the WTO Agreement on Agriculture.

Dispute Settlement

The WTO Agreement also created a Dispute Settlement Body within the WTO to resolve disputes among WTO members, and it established a system for regular review of national trade policies and international trade trends.

WTO Accession

Any state or customs territory having full autonomy in the conduct of its trade policies may become a WTO member subject to negotiations guided by a working party of WTO members. At the conclusion of the Uruguay Round, there were 124 WTO members. China completed accession negotiations and became a WTO member in December 2001, Taiwan in January 2002, and Viet Nam in January 2007. Tonga is the WTO's 151st member, joining in July 2007. Russia and Ukraine are among over two dozen countries currently negotiating to join the WTO (see WTO's web page on accessions). The lengthy accession process involves extensive review of the applicant's trade policies and laws to ensure conformity with WTO rules. WTO membership should facilitate more transparent and rules-based trade regimes in these countries.

Last updated: Monday, June 04, 2012

For more information contact: John Wainio