Consequences following the expiry of the 'peace clause'
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CTA. 2003. Consequences following the expiry of the 'peace clause'. Agritrade, September 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52639
In an article by R.H. Steinberg and T.E Josling in...
In an article by R.H. Steinberg and T.E Josling in the Journal of International Economic Law the vulnerability of EU and US agricultural subsidies to legal challenge in the WTO once the current 'peace clause' lapses is assessed. The paper concludes that 'when the 'peace clause' expires, many commodity specific EC and US agricultural subsidies will be vulnerable to legal challenge under Article 6.3(a)-(c) and 6.4 of the WTO Agreement on Subsidies and Countervailing Measures'. This would require such subsidies to be withdrawn or for steps to be taken to remove their adverse effects. The paper argues that non-subsidising countries can be expected to bargain in the shadow of this threat to secure a reduction in EU and US agricultural subsidies and a shift over to genuinely non-trade distorting forms of support. The paper notes that 'green box' measures have been except from challenge under the 'peace clause' and that the extent to which 'blue and amber box' measures can be challenged has also been restricted. It notes that export subsidies are the most 'actionable'. The paper expresses the belief that the ending of the 'peace clause' will not open up the flood gates of challenges to 'green box' measures. Nevertheless the article explores in detail the various legal bases for challenging all forms of EU and US agricultural subsidies. It shows that the major problem faced is demonstrating 'causation', that is proving that the specific subsidies under attack cause the economic losses claimed by the challenging party. The article explores various models for demonstrating causation. It concludes, however, that in the case of challenges following the expiry of the 'peace clause' 'large subsidising members might simply ignore adverse dispute settlement decisions'. It cites the EU position in response to the issue of hormones in beef as a case in point, noting how the larger offenders can prefer to accept the sanctions following an unsuccessful defence rather than to change their policy. Against this background the paper argues that 'if … the expiry of the peace clause is seen as a significant threat to the subsidy policies of major countries, then there will be more incentive for competing exporting countries… to bargain in the shadow of its expiry'. However it needs to be borne in mind that the 'peace clause' could be renewed, since both the EU and Japan are arguing strongly for this. Some renewal of the 'peace clause' would appear possible if the major offenders were seen to be making significant concessions in areas of interest to potential complainants. Comment: It should be noted that the EU has dramatically reduced its reliance on the most actionable forms of agricultural support (export subsidies), although the variable pace of reform and currency movements is increasing the EU's need for such measures in certain sectors. ACP countries will need to identify what interests they want to bargain around in the shadow of the potential challenges which could arise with the expiry of the 'peace clause'.