21 - Subsidy reform in the US context: deviating from decoupling  pp. 604-617

Subsidy reform in the US context: deviating from decoupling

By Ann Tutwiler

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In 1983, a US senator and several aides were discussing ideas to reform US farm policy. At the time, high government support prices were interfering with the market and the government was accumulating stocks. The aides proposed deeply cutting support prices and substituting direct payments that were “decoupled” from prices and production. Around the same time, agricultural economists began to recognize that domestic agricultural policies had significant impacts on world markets. They started to distinguish between different types of agricultural policies and to measure the impact that these policies had on world markets. Payments that were decoupled from prices and production had smaller negative effects on world markets and on third country exporters.

These ideas were taken up by Uruguay Round negotiators when they classified different agricultural policies into amber, blue and green boxes. Negotiators were explicitly recognizing the work of these policy makers and economists: that some policies (which came to be known as amber and blue box) had a bigger impact on global trade than others, and that these policies should rightly be disciplined by the World Trade Organization (WTO). They also recognized that some policies (now known as green box measures) had less impact on world trade and should be exempt from WTO disciplines. They were implicitly hoping to drive US and EU policies away from amber and blue box subsidies into green box subsidies.

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