RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/SPEC/UKR/6/Add.1
23 April 2004
(04-1831)
Working Party on the
Accession of UkraineOriginal:  English
ACCESSION OF UKRAINE
Questions and Replies on Domestic Support and
Export Subsidies in the Agricultural Sector
Addendum
The Governmental Commission on Ukraine's Accession to the World Trade Organization has
submitted the following replies to members additional questions on Domestic Support and Export
Subsidies in the Agricultural Sector.
_______________WT/ACC/SPEC/UKR/6/Add.1
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Question 1
We appreciate the information provided by Ukraine for 1994-96 in
WT/ACC/SPEC/UKR/1/Rev.8 (12 June 2003) and for 2000-2002 in WT/ACC/UKR/110/Add.2,
Annex 10 (20 June 2003).  This complement s the information provided for 1997-99 in
WT/ACC/SPEC/UKR/1/Rev.8 (17 April 2001).
We look forward to Ukraine's eventual acces sion to the WTO with zero export subsidy
commitments.
We remain concerned, however, about Ukraine's plans to develop its agriculture by relying on
large amounts of trade-distorting support, as expressed in WT/ACC/UKR/110/Add.1, Annex 11
(24 October 2003) and also expressed in the pluril ateral meeting on agriculture.  This estimated
future "need" appears to be the major factor in influencing Ukraine's preference concerning
base period.  As Ukraine's overall economy and in stitutional infrastructure become more stable,
the pressure on government to support agriculture in distorting ways should weaken.  Wewould seriously encourage Ukraine, in developing  its agriculture, to consider policy options that
meet the criteria of Annex 2 of the Agreement on Agriculture (green box).
Answer
Currently, reforms in agriculture of Ukraine have achieved significant positive results aimed at the
creation of multi-mode agricultural economy and development of market relations and competition.
Confirming its adherence to the WTO rules and principles, in particular – paragraph 1 (a-f) of
Article 9 of the Agreement on Agriculture Ukraine, at the negotiations on accession to the WTO, has
already made a statement on future non-application of export subsidies to agricultural products.
Ukraine is making significant concessions in market access.  From the moment of Ukraine's accession
to WTO our country will significantly reduce the currently applied import duties.  Thus, the tariffproposed by Ukraine at the current negotiations on common wheat and wheat flour is one half the
current applied rate (in ad valorem  equivalent), on sunflower seeds – it is one tenth the current applied
rate, on sunflower seed oil – one fifth of the current rate, on white sugar – one half, on butter – it is
two thirds of current rate, on meat and meat products – one half, and on potato – one third of the
current rate.
Ukraine does not also negotiate the issue of the right to apply safeguard measures according to
Article 5 of the Agreement on Agriculture.
Making a stress on the above listed significant concessions of Ukraine in agriculture, which were
already stated by Ukraine during the negotiations, Ukraine would like to remind that when signing the
Agreement on Agriculture, WTO member states decided that "commitments under the reformprogramme should be made in an equitable way among all Members" (see the Preamble to the
Agreement on Agriculture).
Ukraine does not consider the amount of "amber box" support, by means of which it plans to develop
agriculture, to be large, as stated by some Members. AMS for the base period of 1994-1996 equals
only 11 per cent of the value of the total agricultural production. When undertaking the commitments
on reduction of "amber box" support for the base period of 1986-1988, Canada's AMS amounted to
US$ 4.65 billion, which for that moment made up more than 30 per cent of the value of Canada's totalagricultural production.WT/ACC/SPEC/UKR/6/Add.1
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"Green box" measures do not solve all the problems in agriculture, that's why Ukraine uses the
"amber box" measures. International experience of recent years testifies to the need for such
measures.  This need is preconditioned by peculiarities of the functioning of agriculture which are
common to Ukraine and other developed countries; the gap in technical level of agricultural
production between Ukraine and developed countries, the need to solve specific problems of
Ukrainian agriculture, connected in particular with economic reforms.
Currently, Ukraine is using those strategies in developing agriculture, which are implemented with the
use of budget funds and financing of the "green box" programs, in particular:
− Reforms of the system of agrarian science and education in order to improve the level of
training of experts and effectiveness of scientific research and introduction of the resultsthereof into production practice;
− Development of programs of rural development in the direction of promotion of
infrastructure of non-production designation in villages, adoption of programs for creating
new working places, giving jobs and changing qualification; development of programs for
improvement of the overall level of comprehensive and special education in rural areas;
− Promoting ecologically sound production of agricultural produce, facilitation of
ecological safety in land utilization, and protection of the environment;
− Payments under the regional programs of support; and
− Provision of all participants in the market with the conjunctural information.
Question 2
We would note that, contrary to some reference s appearing in documents relating to Ukraine's
accession (e.g. answer 162 in WT/ACC/UKR/110/Add.2), there is no stipulation in WT/ACC/4
that the base period need to start before the commencement of negotiations.  Consequently,
when the accession process extends over several years, an updating of the base period can be
appropriate.
Answer
In choosing the base period Ukraine was guided by the recommendations provided in Technical Note
by the Secretariat, document WT/ACC/4, where it is  said that information on the program of support
is provided "normally for each of the last three years".  For the beginning of negotiations on
agriculture within the Working Party on Ukraine's Accession to WTO in 1997, when four years
passed since the country applied for WTO membership, the years of 1994-1996 were the last three
years, on the basis of which Ukraine prepared the information for the WTO Secretariat referring the
level of state support in agriculture.
Referring the comments on updating of the base period when the accession process extends over
several years:  the Uruguay Round of negotiations continued from August 1986 till April 1994, but
the period agreed for commitments on elimination of the support to agriculture wasn't reviewed for
countries, which signed the Marrakech Agreement – 1986-1988, however, the negotiations lasted for
eight long years. Moreover, the WTO Agreement on Agriculture does not indicate directly which time
period should be taken as "the base period".
Question 3
On the specifics of WT/ACC/SPEC/UKR/1/Rev.8, we have three questions relating to the green
box classification of certain measures in Supporting Table DS:1:WT/ACC/SPEC/UKR/6/Add.1
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(1) Regarding a) General Services, item 2 (Rur al infrastructure development):  it appears
this measure includes payments from the gove rnment to agricultural producers for the
construction of social and cultural facilities.  In other countries, the cost of constructing
such facilities is also borne by the gov ernment, but payments are made to the local
government or the firms that actually do the construction.  In Ukraine the cost of
constructing such facilities is imposed on agricultural producers, who are compensatedfor this cost.  It is therefore doubtful whether these payments from the government to
agricultural producers constitute support in favour of agricultural producers as per
Article 6 of the Agreement on Agriculture.  However, to the extent the payments to
agricultural producers are larger than the cost s they have incurred for the construction,
there would appear to be support in favour of agricultural producers.  This support
would not comply with the requirement of paragraph 2 of Annex 2 that general services
not involve payments to producers. Indeed, it is not obvious that this support could evenbe labelled "general services".  There may be  a case for including any such support (i.e.,
any over-compensation for the cost of construc ting social and cultural facilities) as non-
product-specific support in Supporting Table DS:9.  If it were to be claimed under any
particular paragraph of Annex 2, Ukraine would need to demonstrate that the payments
meet all the criteria applying to that paragraph.  Ukraine's clarification of this issuewould be appreciated.  This could also apply to other construction claimed by Ukraine
under 2(g), such as health care institutions, and beautification of territories.
(2) Regarding a) General Services, item 7 (Land reform):  Ukraine indicates that the cost of
"determination of land quality" is included under this heading. In many other
countries, farmers themselves bear the cost of  soil testing.  The provision in Ukraine of
this service to farmers might therefore more properly be classified as an input subsidy,
to be reported as non-product-specific support in Supporting Table DS:9.
(3) Regarding j) Environmental programs:  It was not clear how Ukraine determines
compliance of the forestry-related measures with paragraph 12 of Annex 2.  However,
the verbal explanation in the meeting of 30 October 2003 was helpful in this regard.  We
would appreciate this explanation in writing.
Answer
(1) General services "Rural infrastructure development":
A detailed reply to the request regarding the compliance of payments from the government to
agricultural producers for the construction of social and cultural facilities with the requirements ofparagraph 2 of Annex 2 of the Agreement on Agriculture is contained in Annex to the document
WT/ACC/SPEC/UKR/1/Rev.8.
Ukraine can indicate the measure "compensation for the cost of constructing the social and cultural
facilities" under the section "Direct payments to the producers" according to paragraph 5 of Annex 2
of the Agreement on Agriculture.  The cost of compensation to agricultural producers for the costs
they have incurred for the construction of objects of non-production infrastructure in rural area may
be excluded from section "general services, rural infrastructure development" and notified as "Directpayments to the producers exempt from the re duction commitment" in the Supporting table DS:3,
which should supplement the tables on domestic support to agriculture.  According to paragraph 5 of
Annex 2 of the Agreement on Agriculture, in case if "support provided through direct payments (or
revenue foregone, including payments in kind) to producers for which exemption from reduction
commitments is claimed shall meet the basic criteria set out in paragraph 1 above, plus specificcriteria applying to individual types of direct payment as set out in paragraphs 6 through 13 below.
Where exemption from reduction is claimed for any existing or new type of direct payment other thanWT/ACC/SPEC/UKR/6/Add.1
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those specified in paragraphs 6 through 13, it shall conform to criteria (b) through (e) in paragraph 6,
in addition to the general criteria set out in paragraph 1".  The measure "compensation of own
expenses on construction of non-production–related assets in rural area" in Ukraine meets criteria
(b)-(e) of paragraph 6, Annex 2 of the Agreement on Agriculture, as well as the general criteria
specified in paragraph 1.
(2) Regarding a) General Services, item 7 (Land reform):The Program "Land Reform" (section "General Serv ices", DS:1 table) did not provide for direct
payments to the agricultural producers.  Thus, for instance, a measure on agrochemical certification of
agricultural lands is conducted by the State Project-Technological Centres on Protection of Land
Fertility and Quality of the Autonomous Republic of the Crimea and oblasts.  That's why Ukraine did
not classify the provision of these services to Ukrainian farmers as a input subsidy and showed them
in DS:1 table (Green Box measures).
(3) Environmental Programs:Payments under the Program titled "Creation of Field Shelter-Belts" are used for creating field
protection belts to prevent from erosion processes, to ensure mitigation of effects of droughts, hot
winds, wind and water erosion of soils at agricultural lands.  These forest plantations are not
cultivated for the industrial use and are not commercially exploited.
These issues are covered in the Forest Code of Ukraine No. 3852 of 21 January 1994, in the Law of
Ukraine On Environmental Protection No. 1264 of 25 June 1991, i.e. the right to make payments on
the Program "Creation of Field Shelter-Belts" is granted in the framework of clearly defined
governmental environmental protection programs.  That is why Ukraine claims compatibility with
requirements of Paragraph 12 of Annex 2 of the WTO Agreement on Agriculture.
Question 4
Supporting Table DS:4:  We note with satisfaction that Ukraine, in entering three-year average
product-specific AMS amounts  in column 5 fo r summing into the three-year average Total
AMS, sets to zero any three-year average product-specific AMS having been calculated to be
negative.
Supporting Table DS:5:  We accept that Ukraine, with regard to several crops, calculates the
three-year average of each year's entry in, respectively, columns 4a, 5, and 6.  We note with
satisfaction that Ukraine, with regard to each  of these crops, calculates the three-year average
market price support from the three-year averages in cols. 4a, 5 and 6 according to the formula
in column 8. (Alternatively, a three-year average in column 8 could have been calculated as the
average of each year's entry in col.8).  We note  that Ukraine, with regard to other crops and to
livestock, calculates each year's market price support from each year's entry in columns 4a, 5
and 6 according to the formula in column 8, from which Ukraine calculates a three-year
average in column 8 as the average of each year's entry in col. 8.
Supporting Table DS:7:  We note with satisfaction that Ukraine, with regard to the three-year
average elements being numerically summed to form the three-year average product-specific
AMS in column 10, follows the requirements of the Agreement on Agriculture, including its
Annex 3, and of WTACC/4 (which latter format follows that of G/AG/2).  (However, in thecalculations for 2000-02 in WT/ACC/UKR/110/Add.2, it appears that some erroneous data have
been entered in Supporting Table DS:7, col. 9, for Sugar beets for 2000, 2001 and 2002. These
entries are also repeated in column 12).WT/ACC/SPEC/UKR/6/Add.1
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Answer
Concerning average values in Supporting Tables DS:4, DS:5 and DS:7
We are pleased with Members acceptance of the methodological approach chosen by Ukraine at
calculating averages in Supporting Tables DS:4, DS:5 and DS:7.
Indeed, Ukraine calculates the three-year average market price support for each of the grain crops
from the three-year averages in columns 4a, 5 and 6 according with the formula given in column 8.With respect to other crops (sunflower seeds and sugar beets) and livestock, the approach is different
because the market price support was only calculated for one (1994) of the three years.  In 1995 –
1996, administrative prices were not set for the products in question where why they are presented as
zeros.  A zero is not a designation of the zero meaning but rather stands for the absence of an
administrative price and amounts of state procurements in 1995-96 with respect to these products.
The external reference price for these years was not determined either.  In this case, it does not
essentially matters how to calculate market prices support averages for all three years, for whichreason Ukraine calculated them as an average value of indicators across three years indicated in
column 8.
With regard to erroneous data presented in column 9 for sugar beets for 2000, 2001 and 2002 in DS:7
of document WT/ACC/UKR/110/Add.2, we appreciate the reference to this error which crept in while
preparing the English version of the Tables.  Ukraine will enter necessary minor corrections whichwill not affect the entirety of AMS and the level of AMS with respect to sugar beets, as the
consolidated table DS:4 features the correct three-years average indicator of AMS.
Question 5
Supporting Table DS:9: Regarding items 7 and 8 (Benefits from returnable financial assistance
non-reimbursed, and Benefits from budgetary loan for purchases of agricultural produce, non-reimbursed), it would be useful to have a more thorough explanation of these measures.  In
what way do they relate to the measures represented in column 5 of Supporting Table DS:7 for
1994-1996 (Benefits from interest-free advance payments to farms for state procurement, and
Benefits from using advances that are not reimbu rsed by agricultural producers on time)?  Does
the term "non-reimbursed" refer to some sort of writing-off or prolongation of the outstandingdebt?  How do these measures relate to the various credit-related measures accounted for in
Supporting Table DS:9 for 2000-02? Are they in any way similar to the somewhat similar-
sounding measures described in Supporting Table DS:9 for 1997-99
(WT/ACC/SPEC/UKR/1/Rev.6) and in answers 210 and 237 of that document?
Answer
In regard to Items 7 and 8 of Table DS:9:
In the Table DS 9 for the base period 1994-96 year s, in items "Benefits from Budgetary Loan for
Purchases of Agricultural Produce, non-reimbursed" and "Benefits from returnable financial
assistance non-reimbursed" there were indicated the value of benefits from the outstanding budget
loans (Item 8 DS:8) and the outstanding of budget financial assistance (Item 7 of DS: 9).  At
calculating the amount of benefit from the budget loan unrepaid in due time (as well as returnable
financial support) was construed as provision of an interest-free credit to agricultural producers.  Themethodology of the benefit calculation is similar to that with respect to benefits from measures
presented in Table DS:7 and Working Tables 3–4 of document WT/ACC/SPEC/UKR/1/Rev.8.  The
following formula was used:WT/ACC/SPEC/UKR/6/Add.1
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Benefit from budget loan (Item 8 of Table DS:9) = amount of budget loan unrepaid to the government
in due time x (commercial interest rate on credits extended in the national currency /12) х 12/100)
Recalculation into US dollars followed the benefit calculation in the national currency based in the
official year's average exchange rate of Ukra inian Karbovanets (1995-96) and Ukrainian hryvnias to
US dollars, as set by the National Bank of Ukraine.
Responses 210 and 237 to document WT/ACC/SPEC/UKR/1/Rev.6 offer clarification with respect to
benefits applying to state procurements the calculation of which is presented in Working Tables 3 and
4, namely:  benefits from interest-free advance payments to farm for state procurement (Working
Table 3) and benefit from using advances not repaid to the state in due time (Working Table 4).
There is no double count here because the amounts of the budget loan (Item 8, DS:9) and returnable
financial support (Item 7, DS:9) and advances not repaid by agricultural producers to the state on time
(DS:7 and Working Tables 3 and 4) are presented in each year in separate report rows of annual
accounting reports of agricultural producers.
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