Agriculture Agreement: Objective & Domestic Support

Introduction

The original GATT did apply to agricultural trade, but it contained loopholes. The Uruguay Round produced the first multilateral agreement dedicated to the sector. It was a significant first step towards order, fair competition and a less distorted sector. The Uruguay Round agreement included a commitment to continue the reform through new negotiations. These were launched in 2000, as required by the Agriculture Agreement.

The Objective of the Agriculture Agreement 

• It aims to reform trade in the sector and to make policies more market-oriented. 
  • This would improve predictability and security for importing and exporting countries alike.
• New rules and commitments apply to:
  • Market Access: Various trade restrictions confronting imports
  • Domestic Support: Subsidies and other programs, including those that raise or guarantee farmgate prices and farmers’ income
  • Export Subsidies: and other methods are used to make exports artificially competitive.
• Flexibility and Support Measures: The agreement allows governments to support their rural economies, but preferably through policies that cause less distortion to trade. 
  • It also allows some flexibility in the way commitments are implemented. 
• Developing Countries: Do not have to cut their subsidies or lower their tariffs as much as developed countries, and they are given extra time to complete their obligations. 
• Least-developed Countries: Don’t have to do this at all. 
• Special Provisions: It deals with the interests of countries that rely on imports for their food supplies, and the concerns of least-developed economies.
• Peace Provisions: Aim to reduce the likelihood of disputes or challenges on agricultural subsidies over nine years, until the end of 2003.

Domestic Support in Agriculture: The Boxes

• It aims to remove trade barriers and to promote transparent market access and integration of global markets. AOA classifies subsidies in different boxes to regulate the agricultural subsidies.[UPSC 2016]
• In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (need to be reduced), red (forbidden). There are also exemptions for developing countries 
• Green Box 
  • Subsidies which are not or least market distorting. 
  • Income Support: not product specific and uniformly available to farmers and crop doesn’t matter. 
  • Subsidies must not distort trade, or at most cause minimal distortion.
  • They have to be government-funded.
  • Example: Public services programmes ( research, training, marketing, promotion, infrastructure, domestic food aid or public food security stocks)
  • Direct payments to producers mainly involve income guarantee and security programs, Adjusting structures and environmental protection programs, regional development programs.
• Amber Box 
  • Aggregate Measure of Support (AMS).
  • Those subsidies which are trade distorting and need to be curbed, Domestic support exceeding the reduction commitment levels is prohibited; 
  • Examples: Fertilisers, seeds, electricity, irrigation, and Minimum Support Price (MSP)
• Blue Box 
  • This is the “amber box with conditions.” 
  • Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production.
  • Example: Paid to livestock or land not linked to prices
• No Red Box: The Agriculture Agreement has no red box.
• Development Box:
  • Allows developing countries additional flexibility in providing domestic support. It include;
    • Direct or indirect, designed to encourage agricultural and rural development and that are an integral part of the development programmes of developing countries. 
    • Domestic support to encourage diversification from growing illicit narcotic crops.
    • Investment subsidies which are generally available to agriculture in developing country members
    • Agricultural input subsidies
• De-Minimis Support
  • Developed countries are allowed to maintain trade distorting subsidies or ‘Amber box’ subsidies to a level of 5% of total value of agricultural output. 
  • For developing countries this figure was 10%.
• Special and Differential Treatment Box 
  • Special concessions to the developing economies for their agricultural development → subsidies for tractors, ploughing machines, pump sets, winnowing machines etc.
• Sanitary and PhytoSanitary Measures 
  • Measures for food safety and animal and plant health based on scientific terms; Should not be arbitrary and discriminatory in nature.

Conclusion

• WTO’s Agriculture Agreement represents a crucial milestone in international trade, aiming to foster fair competition, reduce distortions, and promote sustainable development in the agricultural sector. 
• Through its provisions for flexibility and support measures, it strikes a balance between addressing the needs of rural economies and minimizing trade disruptions. 
• As nations continue to implement and negotiate within the framework of this agreement, it serves as a vital instrument for creating a more orderly and equitable global agricultural trading system.