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World Trade Organization Glossary
Definitions of Terms Used in this Briefing Room
Aggregate measure of support (AMS): An index that measures the monetary value of the extent of government support to a sector. The AMS, as defined in the Agreement on Agriculture, includes both budgetary outlays as well as revenue transfers from consumers to producers as a result of policies that distort market prices. The AMS includes actual or calculated amounts of direct payments to producers (such as loan deficiency payments), input subsidies (on irrigation water, for example), the estimated value of revenue transferred from consumers to producers as a result of policies that distort market prices (market price supports), and interest subsidies on commodity loan programs. The AMS differs from the broader agricultural support measure, the Producer Subsidy Equivalent, by excluding estimated benefits (or costs) of certain noncommodity specific policies (e.g., research and environmental programs), and by using special WTO-defined measures of direct payments and market price supports.
Agreement on Agriculture: Part of the Uruguay Round Agreement covering issues related to agriculture (e.g., market access, export subsidies, and internal support).
Amber box policies: An expression that developed during the
General Agreement on Tariffs and Trade (GATT) trade negotiations using a traffic
light analogy to rank policies. The traffic light analogy was that an amber
policy be subject to careful review and reduction over time. Amber box policies
include policies such as market price support, payments related to current
production or prices, and input subsidies.
Applied tariff: The tariff actually levied on an imported good, generally lower than the bound tariff. May also refer to a means of administering a tariff-rate quota (TRQ) in which the importing country chooses not to charge the over-quota tariff on imports in excess of the quota volume. All imports are charged the lower in-quota tariff. Thus, the TRQ is administered as if it were a tariff at the lower, in-quota rate rather than as a two-part tariff-rate quota. However, the importing country maintains the right to apply the higher, over-quota rate at will.
Blue box policies: An expression that developed during the General Agreement on Tariffs and Trade (GATT) trade negotiations using a traffic light analogy to rank policies. The traffic light analogy was that an amber policy could be converted to a blue policy that could eventually become "green." Blue box policies were seen as acceptable, but temporary, or transition policies that would help pave the way for further reforms over time. Blue box policies represent the set of provisions in the Agreement on Agriculture that exempts from reduction commitments, those program payments received under production-limiting programs—if they are based on fixed area and yields, a fixed number of head of livestock, or if they are made on 85 percent or less of base level of production. Under the Doha Round, the United States has sought to redefine and broaden the blue box to include policies based on fixed area and yields, a fixed number of head of livestock, or made on 85 percent or less of base level of production, even if they do not include a production-limiting component.
Bound tariff rates: Tariff rates resulting from the General Agreement on Tariffs and Trade (GATT) or World Trade Organization (WTO) negotiations or accessions that are incorporated as part of a country's schedule of concessions. Bound rates are enforceable under Article II of GATT. If a WTO contracting party raises a tariff above the bound rate, the affected countries have the right to retaliate against an equivalent value of the offending country's exports or receive compensation, usually in the form of reduced tariffs on other products they export to the offending country.
Cairns Group: The Cairns Group is a coalition of 19 agricultural exporting countries (Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Peru, the Philippines, South Africa, Thailand, and Uruguay). A diverse coalition bringing together developed and developing countries from Latin America, Africa, and the Asia-Pacific region, the Cairns Group has been influential in the agricultural negotiations since its formation in 1986. The group has continued to play a key role in pressing WTO members to meet the far-reaching mandate set in the Doha Development Agenda.
Ceiling binding: In cases where an existing tariff was not already bound, developing countries were allowed to establish ceiling bindings. These ceiling bindings could result in tariffs that were higher than the existing applied rate. The ceiling bindings took effect on the first day of implementation of the WTO Agreement on Agriculture.
Country schedules: The official schedules of subsidy commitments and tariff bindings as agreed to under GATT for member countries.
Decoupled: Payments to farmers that are not linked to current levels of production, prices, or resource use. When payments are decoupled, farmers make production decisions based on expected market returns. Under the WTO Agreement on Agriculture, for policies to be considered decoupled no production shall be required in order for producers to receive the payment.
De minimis rule: Minimal amounts of domestic support are excluded from each country’s total Aggregate Measure of Support (AMS) ceilings. These include specific commodity support if it is less than 5 percent of the commodity’s value of production and nonspecific commodity support if the total is less than 5 percent of the value of total agricultural output.
Dispute settlement body: To resolve disputes among WTO members, the WTO established a dispute settlement body (DSB) to administer dispute settlement provisions and processes (based on rules and procedures contained in Annex 2 of the WTO legal text). The DSB is authorized to establish dispute settlement panels, adopt panel and appellate body reports, maintain surveillance of implementation of rules and recommendations, as well as authorize suspension of concessions and other obligations under WTO agreements.
Dispute settlement panel: If a WTO member brings a complaint to the WTO dispute settlement body (DSB), that member can submit a written request to establish a dispute settlement panel. The panel examines the matter referred to the DSB and makes recommendations in its report to the DSB. The WTO Secretariat maintains a list of qualified governmental and nongovernmental individuals who may be asked to serve on a panel.
Doha Development Agenda: The current series of multilateral trade negotiations begun in January 2002 as agreed at the WTO Ministerial in Doha, Qatar, in January 2001; also called the Doha Round.
Export subsidies: Special incentives provided by governments to encourage increased foreign sales. Subsidies, which are contingent on export performance, may take the form of cash payments, disposal of government stocks at below-market prices, subsidies financed by producers or processors as a result of government actions such as assessments, marketing subsidies, transportation and freight subsidies, and subsidies for commodities contingent on their incorporation in exported products.
Final Act: Formally called the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations," the Final Act is the legal document containing the texts of all provisions agreed upon during the Uruguay Round. The signing and adoption of the Final Act initiated the transition from the GATT to the WTO.
Formula-based tariff reductions: A method of negotiating tariff reductions using an agreed-upon formula applied to tariff rates (with limited exceptions being granted for very sensitive items) by all contracting parties.
G-20: Coalition of 21 developing countries pushing for a reduction of trade-distorting farm subsidies and for greater access to industrialized country markets. The G20, which emerged in August 2003, is currently made up of 21 countries: Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, the Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.
General Agreement on Tariffs and Trade (GATT): An international agreement originally negotiated in 1947 to increase international trade by reducing tariffs and other trade barriers. The agreement provides a code of conduct for international commerce and a framework for periodic multilateral negotiations on trade liberalization and expansion. The Uruguay Round Trade Agreement updated the General Agreement and established the World Trade Organization on January 1, 1995, to replace the institutions created by the GATT.
Green box policies: Domestic or trade policies that are deemed to be minimally trade distorting and that are excluded from domestic support reduction commitments in the Uruguay Round Agreement on Agriculture. Examples are domestic policies dealing with research, extension, inspection and grading, environmental and conservation programs, disaster relief, crop insurance, domestic food assistance, food security stocks, structural adjustment programs, and direct payments not linked to production. Trade measures or policies, such as export market promotion, are also exempt (but not export subsidies or foreign food aid).
In-quota tariff: The tariff applied on imports within a quota. The
in-quota tariff is less than the over-quota tariff.
Market failure: Market failure occurs when the market price of a good does not include the costs or benefits of the externality (a harmful or beneficial side effect that occurs in the production, consumption, or distribution of a particular good). Producers or consumers may have little incentive to alter activities that contribute to pollution, for example, because the external costs of pollution do not enter their private costs of production. Often, government policies in the form of regulations (such as standards, bans, and restrictions on input use) and incentive-based mechanisms (such as taxes, subsidies, and marketable permits) are implemented as corrective measures.
Megatariffs: Extremely high tariffs that effectively cut off all imports other than the minimum access amounts granted under the WTO Agreement on Agriculture agreement. Some well-known examples of megatariffs resulting from tariffication include the base tariffs calculated for European Union tariffs on grains, sugar, and dairy products; U.S. sugar, peanuts, and dairy products; Canadian tariffs on dairy products and poultry; and Japanese tariffs on wheat, peanuts, and dairy products.
Modalities: The Agreement on Agriculture was made up of three components, the text of the Agreement, the Country Schedules submitted to the WTO that included base year data and the commitments, and the "modality" documents of the Negotiating Group on Agriculture, which had no legally binding force but were agreed to by the negotiating parties as the suggested set of procedures to use to calculate various indicators and commitments. In WTO negotiations, modalities refer to the nuts and bolts—such as formulas or approaches for tariff reductions—that underpin each country’s final commitments.
Most-favored-nation (MFN) status: An agreement between countries to extend the same trading privileges to each other that they extend to any other country. Under a most-favored-nation agreement, for example, a country will extend to another country the lowest tariff rates it applies to any third country. A country is under no obligation to extend MFN treatment to another country, unless they are both members of the WTO, or unless MFN is specified in an agreement between them.
Nonproduct-specific support: Government support to agriculture that is not linked to specific commodities or production activities. Examples include environmental programs, research, and irrigation subsidies. Also called noncommodity-specific support.
Nontariff barrier (NTB): The WTO Agreement on Agriculture defines prohibited NTBs to include quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, nontariff measures maintained through state-trading enterprises, voluntary export restraints, and similar border measures other than ordinary customs duties. Other NTBs, such as exchange controls, labeling and health standards, technical barriers to trade, and sanitary and phytosanitary measures are still allowed but are disciplined under the Agreement on Technical Barriers to Trade, the Agreement on the Application of Sanitary and Phytosanitary Measures, etc.
Notifications: The annual process by which member countries report to the WTO information on commitments, changes in policies, and other related matters as required by the various agreements.
Over-quota tariff: The tariff applied on imports in excess of the quota volume. The over-quota tariff is greater than the in-quota tariff.
Overall Trade-Distorting Domestic Support (OTDS): The sum of a country's Aggregate Measure of Support (AMS), 10 percent of the average total value of agricultural production in the 1995-2000 base period (5 percent product-specific de minimis and 5 percent non-product-specific de minimis), and the higher of average Blue Box payments as notified to the Committee on Agriculture, or 5 percent of the average total value of agricultural production, in the 1995-2000 base period.
Producer Subsidy Equivalent (PSE): A broadly defined aggregate measure of support to agriculture that combines into one total value aggregate, direct payments to producers financed by budgetary outlays (such as loan deficiency payments), budgetary outlays for certain other programs assumed to provide benefits to agriculture (such as research and inspection and environmental programs), and the estimated value of revenue transfers from consumers to producers as a result of policies that distort market prices.
Red box policies: The color coded terminology was originally applied only to domestic policies. There was no agreement to apply the "stop" red light to any domestic policies, so the "red box" has been empty. In the trade policy area, however, the red box might be considered to contain the quantitative limitations that were replaced by the tariff-rate-quota system.
Special and differential treatment: The provision allowing exports from developing countries to receive preferential access to developed markets without having to accord the same treatment in their domestic markets.
Tariff: A tax imposed on commodity imports by a government. A tariff may be either a fixed charge per unit of product imported (specific tariff) or a fixed percentage of value (ad valorem tariff).
Tariff-rate quota (TRQ): A two-tiered tariff where the tariff rate charged depends on the volume of imports. A lower (in-quota) tariff is charged on imports within the quota volume. A higher (over-quota) tariff is charged on imports in excess of the quota volume.
Tariff reduction schedule: Based on guidelines contained in the General Agreement on Tariffs and Trade (GATT) document "Modalities for the Establishment of Specific Binding Commitments Under the Reform Programme." Each country's bound tariff rates, reduction schedules for new and existing tariffs, and market access levels (TRQs) are contained in its Country Schedules, which are the legal and binding commitments entered into by each country and form part of the WTO Agreement on Agriculture.
Tariffication: The process of converting nontariff trade barriers to bound tariffs. This was done under the WTO Agreement on Agriculture in order to improve the transparency of existing agricultural trade barriers and facilitate their proposed reduction. In the future, countries will not be able to use nontariff measures to restrict trade.
Trade Promotion Authority: The legislation authorizing the President to negotiate a trade deal that can be submitted to Congress for a simple yes-or-no vote without amendments. Formerly called Fast Track Authority.
Uruguay Round: GATT/WTO negotiations launched at Punta del Este, Uruguay, in September 1986 and concluded in Geneva, Switzerland, in December 1993; signed by Ministers in Marrakech, Morocco, in April 1994.
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