Agricultural Subsidies Rules in GATT/WTO, Rules without Roots

Abstract

The World Trade Organization (WTO) has treated agricultural subsidies as exceptional. This paper delves into the historical origin of the agricultural subsidies rules of the GATT/WTO. During the era of the GATT 1947, agricultural subsidies had been exempted from rules on general subsidies on a product basis. On the other hand, under the Uruguay Round Agreement (URA), subsidies in general began to be regulated under the Agreement on Subsidies and Countervailing Measures (SCM Agreement) while agricultural subsidies began to be regulated under the Agreement on Agriculture (AA) through the dual-track approach.

This paper pinpoints that the institutionalization of the dual-track approach withinthe URA enabled greater preferential treatment of agricultural products in comparison to manufacturing products. I argue that theincorporation of the GATT 1947 into the URA led the agricultural subsidies rules to be ambiguously attached to the SCM Agreement. Limited applicability of the Peace Clause, treatment of agricultural import substitution subsidies, and treatment of the wrongly categorized domestic support are the three structural problems emerging from the current framework in regulating agricultural subsidies. Based on the implications of the structural inconsistencies, this paper concludes that the long-termconvergence of the SCM Agreement and the AA is required for strengthening the legal consistency of the GATT/WTO subsidies regime.