Green Box removal may reduce US, EU exports by 40-50% (2nd of 3 articles on the Green Box)

Green Box agricultural subsidies have boosted the agricultural exports and output of many developed countries (especially the United States and European Union states). They thus have major distorting effects on trade and production, even though they are designated as "non trade distorting" in the WTO and they are not subject to a cap or to reduction disciplines.

If Green Box (GB) subsidies were removed, it is estimated that the agricultural exports of the United States, European Union and Canada would decrease by 40-50%. Production would also fall in many developed countries while developing countries' output would rise by $42 billion.

These conclusions and estimates in a paper by the UNCTAD India team have major implications for the current Doha negotiations of the WTO. The talks were suspended last July when other countries rejected the offer of the United States to cap its "trade distorting" agricultural subsidies at $23 billion.

If a new commitment is made by the US to lower the cap to below $20 billion (which is the amount actually spent on the trade-distorting subsidies), it may spark a resumption of the Doha talks.

However, it can be seen from the findings of the UNCTAD paper that the expected new offers of the US will not be meaningful if it does not reduce its Green Box subsidies, or if it shifts even more subsidies to the supposedly "non trade-distorting" Green Box.

In order for positive effects for developing countries, it becomes important that new and effective disciplines are also put on Green Box subsidies.

The paper, "Green Box Subsidies: A Theoretical and Empirical Assessment" was prepared by the UNCTAD India Team under a research project jointly hosted by the Indian Commerce Ministry, UNCTAD and the United Kingdom's international aid department (DFID). The latest draft was prepared after a "critical appraisal" by several outside economists, including the Nobel Laureate former World Bank chief economist Joseph Stiglitz.

Among the paper's major findings are that: