Background

Agricultural trade reform is based on the principle that further agricultural trade liberalization, together with progressive reductions in domestic support, will benefit both developing and developed countries. Pressures in favour of reform come not only from multilateral commitments, but relate also to the domestic setting, where agricultural policies need to take into account economic, political and social considerations.

Domestic pressures in favour of reform differ widely between countries. Developing countries' main concerns focus on the need to design policies aimed at facilitating structural adjustment, providing public goods and correcting market failures. Domestic pressures in developed countries are related to: (i) inconsistencies in traditional agricultural policies, with a huge proportion of subsidies historically being devoted to the same few products without taking into account major changes in their agricultural sectors; (ii) the need to address better issues related to environmental and conservation concerns; and (iii) the need to improve targeting of transfers, in order to keep supporting producers, but in a less production- and trade-distorting way.

As a result of such a wide range of requirements, there are legitimate reasons for ensuring that developing and developed countries are able to provide agricultural support in a way that facilitates reform processes.

The Uruguay Round and the Agreement on Agriculture (AoA) recognized this through the green box, allowing countries to support their producers as long as budgetary expenditures generate no or minimal distortions in production and trade.