Agriculture in the developed world has historically benefited from government support in the form of subsidies, price controls, trade protection, and other policies. These result from a political process that balances both domestic and international concerns. Since the creation of the World Trade Organization (WTO), agricultural policy in WTO-member countries has been subject to discipline by WTO regulation. Domestic agricultural policies can and do come into conflict with the WTO’s goal of open trade for the benefit of all. This conflict and the resulting interaction between WTO rules and domestic support in agriculture are the topic of Lars Brink and David Orden’s recent book, Agricultural Domestic Support Under the WTO.

Proponents of open trade have been on the back foot in recent years. The WTO has gained mistaken notoriety as either a US-directed interest or, alternatively, a supranational organization that undermines US sovereignty. Although Brink and Orden do not intend to address those beliefs directly, the book makes obvious that neither belief is accurate. Readers unfamiliar with the details of WTO regulation may find it surprising just how flexible are the WTO rules for agriculture and how limited it is in settling disputes or enforcing rulings. Equally remarkable is the lack of progress in making substantive changes to WTO regulations for agriculture over the past 20 years.

The authors suggest that “the changing landscape of applied domestic support … contributes to poor public understanding, even in specialized media and academia.” Public understanding of WTO regulation is not helped by the poorly defined legalese that pervades many regulatory documents. And while the book’s content is often of a technical nature, Brink and Orden precisely explain technical material and present it in a carefully considered way.

In their first chapter, they identify nine key questions that motivate the book. Readers willing to stick through the technical material are rewarded with a comprehensive assessment of the WTO with respect to domestic agricultural policy. But perhaps more importantly, Agricultural Domestic Support Under the WTO provides a better understanding of the functioning of the WTO in reality—an understanding that is sorely lacking in the current discourse.

Agreement on Agriculture / Brink and Orden begin by describing the rules and regulations of the WTO’s Agreement on Agriculture. This agreement, which came into force with the WTO’s creation in 1995, places limits on the types of agricultural policies that WTO members can use domestically. The agreement focuses on three broad classes of policies: export subsidies, market access, and domestic support. As the title suggests, the last category is the focus of the book. Domestic support refers to support for agricultural producers inside a country’s border; this contrasts with policies like tariffs or export subsidies that are applied at the border.

Any domestic support measure in favor of agricultural producers is classified under the Agreement on Agriculture as exempt or non-exempt. The term “measure” refers to a specific agricultural policy or program. Exempt measures can be used without limit; these include policies that do not distort trade or production, some types of payments for environmental policies, and a variety of measures used by developing countries. Non-exempt measures are counted and compared against limits defined in the Agreement on Agriculture. There are two types of limits on non-exempt support: limits for specific products (corn, wheat, etc.), and limits for the agricultural sector as a whole. WTO members are expected to comply with these limits and deliver notifications of their domestic support to the WTO at regular intervals.

Even within the clearly defined rules of the Agreement on Agriculture, there is considerable room for the application of different domestic agricultural policies. Limits on support differ from member to member, with developing countries having more favorable (higher) limits. However, many of the largest economies are allowed to exceed support limits for specific products so long as their total support for agriculture is within its overall limit. The overall limit differs by country; for some members it is zero and for others it is a positive number. For members with a positive overall limit, this provides flexibility in the policy space as countries can shift support between different products. Brink and Orden provide data that show that the given limits on domestic agricultural support are rarely breached in the largest economies. The ability to shift support among different products or exemption categories, coupled with the fact that many countries are well under support limits, indicates more flexibility for WTO members than might be assumed.

Ongoing trends / A significant portion of the book quantitatively evaluates changes in the types and amounts of domestic support that have prevailed over the past 30 years. The vast majority of reported domestic support for agriculture comes from just five countries or political entities: the European Union, the United States, Japan, China, and India. Support through trade-distorting policies has fallen globally and been replaced by exempt support. Brink and Orden take this as evidence that the Agreement on Agriculture has disciplined the policies that countries utilize and shaped the trajectory of global domestic support in agriculture. They argue:

Members thus need to keep their WTO obligations under consideration as they implement support measures. This suggests that without Agriculture Agreement limits on … support there would likely be more, not less, trade-distorting support.

Is decoupled support really decoupled? / The largest and fastest growing category of exempt support is commonly called “Green Box” support. These measures have “no, or at most minimal, trade-distorting effects or effects on production.” Basic criteria are that these measures must not involve transfers from consumers or provide price support to producers. (Hence, the “Green” moniker indicates the support is acceptable under the Agreement on Agriculture, not that it has some environmental justification.) For example, government support of agricultural research would be considered exempt under the Green Box, while government purchases to support prices would be non-exempt. The EU and United States continue to make extensive use of policies falling in the Green Box. Many of these policies are referred to as “decoupled” because they do not depend on current prices or production.

A key question, which the authors address in Chapter Three, is whether some exempt measures under the Green Box are truly minimally distorting. In other words, are decoupled measures really decoupled? The issue of decoupled agricultural subsidies attracted the attention of economists in the late 1990s and 2000s when the United States implemented a system of decoupled direct payments to agricultural producers. Although the literature reviewed by Brink and Orden points to relatively small effects of decoupled policies on production, many exempted measures affect agriculture over longer periods of time. Productivity enhancements allow for more output to be produced with the same inputs, so government funding of agricultural research and development is likely to have long-term effects on world agricultural markets. Income support can prevent inefficient producers from leaving agriculture, again causing a deviation from long-term competitive equilibrium. In practice, what can be classified as decoupled support is determined largely by legal precedent in WTO negotiations and dispute settlement.

Which price support? / An interesting point raised by Brink and Orden is the divergence of what the Agreement on Agriculture defines as a market price support and an economist’s understanding of a price support. Price supports are government interventions that maintain prices above what would prevail at a competitive equilibrium. In the international context, price supports raise domestic prices above the so-called world price. Economists would measure market price support by taking the difference between the domestic price of a commodity and the price at the border and then multiplying by domestic production of the commodity. Instead of using observed prices, the Agreement on Agriculture directs WTO members to use a domestic price determined by the policy under consideration and a border price that is based on prices prevailing from 1986 to 1988. Given the outdated prices used in calculating market price support, the authors suggest that the WTO formula is not a good indicator of economic support for agriculture.

Enforcement and monitoring / A common misconception is that the WTO can enforce member compliance with its regulations. In fact, the WTO has no ability to enforce rules in the Agreement on Agriculture or any other WTO discipline. That the WTO only operates through members’ voluntary compliance becomes obvious in the fifth, sixth, and seventh chapters, which focus on transparency, negotiations, and disputes involving agricultural support. Transparency refers to member countries’ notifications of agricultural support. The issuance of these notifications—reports that calculate and specify the amount of agricultural domestic support applied by a country—is one of the basic requirements for signatories of the Agreement on Agriculture.

Many WTO members do not submit notifications in a timely manner. As the authors find, “Twenty-eight members had by 2019 never submitted a … notification.” Notifications are also routinely out of date. The lack of recent information (or any information at all) on domestic support is compounded by the wide latitude given to members in classifying domestic support. Although members frequently submit questions to the WTO on issues around transparency, routine noncompliance with basic regulations casts doubt on the ability of members to police one another.

Similarly, the book’s discussion of dispute negotiation and resolution highlights a contrast between written regulations and practice. The authors identify 16 WTO disputes involving domestic support for agriculture. Of those, a decision was reached by the Dispute Settlement Body in only nine cases. Even if a decision is made, the WTO can only recommend that a member bring its policies into compliance; it has no enforcement ability. It relies on members’ good faith efforts. Currently, the WTO’s dispute settlement mechanism no longer functions as intended; the United States has blocked nominations to its appellate body and effectively thrown a wrench in the dispute settlement process. Combined with problems of transparency, issues in dispute settlement highlight some of the very real challenges facing the WTO.

The path forward / The final two chapters of the book address 21st century policy priorities and lessons to be drawn from experience with the Agreement on Agriculture, respectively. The former deals with what the authors denote as evolving policy priorities: productivity growth, biosecurity, water management, biodiversity, and climate change. The main message is that contemporary priorities could be addressed with policies that conform to existing WTO discipline or with minimal tweaks. Perhaps easier said than done, given that negotiators cannot even bring the dispute settlement process back online.

The final chapter concludes with several suggestions for reform. Brink and Orden believe the Agreement on Agriculture should be retained, but there should be more consistency in rules among different members and the way in which rules are applied. Measurement of price support should be improved to bring the WTO in line with economic measures of support. Alternative formulas would be consistent with the way that price support is measured by other international organizations. While the suggested reforms may seem banal at first glance, the problems they could solve are pervasive. Achieving any reforms would be a significant effort, given that 164 members of the WTO would need to agree to such changes by consensus.

Conclusion / Agricultural Domestic Support Under the WTO is a well-timed explanation of the Agreement on Agriculture and review of its effects on domestic policies favoring agricultural producers. It is especially relevant because US politicians plan to debate farm legislation that will direct American agricultural policy for the next five years.

The authors identify several avenues for addressing some of the problems that have plagued the Agreement on Agriculture. Although the book focuses on a seemingly niche area of WTO regulation, many of the lessons extend beyond agriculture.

The authors close with a call for a new sense of purpose and motivation to revitalize WTO members in the negotiating process. It isn’t clear who will lead this charge, either in the United States or globally. A renewed sense of purpose will be needed given the apparent failure of the last 20 years of negotiations to produce substantial agreement.