The Uruguay Round Agreement on Agriculture was the first time developed and developing nations addressed the issue of agricultural subsidies. The removal of agricultural subsidies depends largely in the involvement and steps taken by OECD countries (as the 23 members represent 50% of global trade and 60% of the world economy). The Convention on the Organisation for Economic Co-operation and Development (OECD) was originally signed by twenty countries in 1960 – a further ten countries have become members.
A recent report by OECD member countries indicates 30% of farmers receipts come from a combination of government interventions in markets and budgetary payments. On the other hand, China (not a OECD member country) provides its farmers with around 8 % subsidy, a far lower proportion than in most OECD countries. This is significant considering the importance of agriculture to the Chinese economy; accounting for almost 15% of GDP and providing more than 40% of all jobs. The graph below issued by the OECD provides an overview of the Average Bound MFN Tariffs by select countries on select goods.
After entering the World Trade Organization in 2001, China began exploring ways to directly subsidize farmers, who were believed to be vulnerable to foreign competition (Liu, Ouyang, and Zhang). Furthermore, as part of its entry to the World Trade Organisation in 2001, China it agreed to cap its support for its farmers at 8.5% of production.
Without a doubt, OECD member countries including the United States, Canada and France (which is the largest recipient -22% in 2004 - of the controversial part of the European Union’s Common Agricultural Policy which began operating in 1962) could learn something from China in respects to agricultural subsidies.