Agriculture, UK trade legislation

UK to sub-divide WTO agricultural spending ceiling between home nations

The United Kingdom may require its four component nations – England, Wales, Scotland and Northern Ireland – to comply with individual subceilings for Aggregate Measures of Support (AMS) under the WTO’s Agreement on Agriculture after leaving the EU.

This is one of the requirements set out in the new UK Agriculture Bill, which was presented to Parliament yesterday. The bill provides a legal framework for agricultural policy in the UK once the country is no longer covered by the EU’s Common Agricultural Policy.

The idea of national separate subceilings forms part of Section 26 of the new draft legislation, governing the UK’s future interaction with the WTO agriculture agreement. It is one of the few externally focused related elements in a legislative package that otherwise concentrates entirely on domestic agricultural policy issues.

These WTO subceilings would have domestic political force only, as the UK’s future schedule of commitments at the WTO – including the establishment of an AMS ceiling for trade-distorting subsidies – will all be established at the UK level.

Nevertheless, agricultural policy is a devolved responsibility within the UK, with Scotland, Wales and Northern Ireland all empowered to adopt policies different from those in force in England.

The Department for the Environment, Food and Rural Affairs, which coordinates agricultural policy for the UK, has thus clearly taken the view that the new agricultural legislation needs to set AMS subceilings for all of the UK’s component parts, to address the – admittedly quite remote – possibility of heavy agricultural subsidisation in one part of the UK pushing the country as a whole over its WTO-approved maximum level.

Total AMS of €5.914 billion

In draft schedules submitted to Geneva in July, the UK proposed to set itself an AMS ceiling of €5.914 billion. This figure represents 8.2% of the current EU AMS ceiling of €72.378bn, and was calculated on the basis of the same methodology – a base period of 1986-88 – as was used to create the EU’s own original figure. After Brexit, the EU is proposing to reduce its AMS accordingly to €66.464 billion.

The UK AMS ceiling is very unlikely to create any real challenges to British policymakers, given that it represents the equivalent of 83% of the entire AMS declared by the EU-28 for 2015-16.

However, the allocation of funding for agricultural support between the four UK nations has long been a source of internal contention within Britain, and the proposal to reinforce these divisions with the creation of AMS subceilings may likewise be controversial.

The UK AMS figure still has to be approved by the wider WTO membership. It is unlikely to attract much controversy in its own right, but as it has been submitted to the WTO as part of the proposed new UK schedules on agriculture – which also include the much more controversial provisions to split existing EU tariff rate quotas between the UK and the EU27 – there is a possibility that its formal ratification may be held up while the dispute over TRQs is resolved.

AMS declarations

Most of the other provisions in Section 26 of the bill, meanwhile, simply have the effect of bestowing upon the UK secretary of state for the environment, food and rural affairs powers which have hitherto been vested in the European Commission – above all, powers to “make regulations for the purpose of securing compliance by the United Kingdom with the Agreement on Agriculture.”

The government also has responsibility for “deciding how different types of domestic support should be classified”. This is a reference to the classification of agriculture subsidies within the WTO as either ‘Amber Box’ – trade-distorting-, ‘Green Box’ – non trade-distorting – or ‘Blue Box’, a category for trade-distorting subsidies which are linked to restrictive quotas on areas planted or livestock held.

A process is also to be set for “the resolution of disputes between the appropriate authorities regarding the classification of domestic support” – with the secretary of state being “the final arbiter”.

As well as proposing individual limits on the amount of domestic support that may be given in England, Wales, Scotland and Northern Ireland, the agriculture bill also empowers the government to set a limit on the amount of domestic support that may be given by all of the appropriate authorities combined, “which may be less than” the amount specified under the Agreement on Agriculture.

This clause gives the government the option of establishing an effective aggregate ceiling which is more in line with the relevant national budget for agricultural support. The latter is likely to be considerably lower than the headway offered by the officially notified AMS ceiling.

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