Under WTO domestic support norms, blue box measures include:

Direct payments under production limiting programmes (often referred to as “Blue Box” measures) are exempt from commitments if such payments are made on fixed areas and yield or a fixed number of livestock. 

These are also referred to as production limiting subsidies? Why would governments want to limit production? And isn't subsidy usually aimed at increasing production?

Reference: https://www.wto.org/english/tratop_e/agric_e/ag_intro03_domestic_e.htm


Subsidies are often primarily aimed at increasing the income of the agricultural sector

When subsidies lead to increases in production, this can cause the market price to fall with negative effects on agricultural incomes, with much of the benefit flowing through to consumers rather than farmers. This then leads to calls for further subsidies

To avoid a spiral of increasing subsidies, governments will often move to a stage which restricts production, and one possibility is to tie the subsidies to given levels of production (often based on previous levels of production or on fixed assumptions about areas and yields), either not paying subsidies on production above some stated level or, in more extreme cases, withdrawing subsidies if production exceeds a quota

The aim of such production-limiting subsidies is to maintain subsidies at a level which is sustainable both in terms of market prices and government expenditure. It is in fact a double distortion of the domestic market, both through the subsidies and through the production-limiting elements, but was deemed to be less distorting of international trade than unlimited production-based subsidies

  • $\begingroup$ "It's the opinion of some that crops could be grown on the moon. Which raises the fear that it may not be long before we're paying somebody not to." --Franklin P Jones $\endgroup$ – Dan Mar 25 '18 at 22:14
  • $\begingroup$ @Dan I'm unable to grasp what Fanklin meant by this witty quote $\endgroup$ – yathish Apr 7 '18 at 5:33
  • $\begingroup$ @yathish To start with, subsidies are usually reserved for encouraging companies to do particularly important things, so the idea of a production limiting subsidy, which pays people to do nothing (or les than they otherwise would), can appear absurd at first sight. But it also leads to the odd result that if an economy suddenly discovered new land (on the moon, say), then instead of the extra resources being useful, there would be a danger that the government would have to extend its subsidies even further to keep production at the same level. $\endgroup$ – Dan Apr 7 '18 at 13:59

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