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Agreement on Agriculture
The Agreement on Agriculture (AoA) is one of the important areas under World Trade Agreement (WTA). The growing importance of agriculture in world trade scenario was recognised during Uruguay round of negotiations resulting in Agreement on Agriculture. The main objectives of bringing agriculture into the ambit of trade is:
- To reform agricultural trade
- To bring agricultural products under the multilateral rule for liberalisation of agricultural trade
- To reduce agricultural tariff
- To reduce agricultural subsidies to avoid price adjustment and thereby to reduce domestic support to enhance price competition and market access
- To prevent tariff escalation on value added products
Reduction of subsidies
The developed countries are providing huge subsidies to their farmers. Members of Organisation for Economic Co-operation and Development (OECD) alone are providing approximately 1 billion US dollar (Rs. 4300 crore) a day. But the developing countries cannot afford to give such subsidies to their farmers, because they lack resources. This leads to unhealthy unequal competition in global trade. Hence, one of the main objectives of AoA is to eliminate trade-distorting subsidies for ensuring equality in agricultural trade which assumes great importance for the developing countries.
Reduction of Domestic Support
Domestic support has been classified into three groups depending on their trade-distorting impact and their effect on the quantity of production.
- The Amber Box subsidies are those subsidies provided mostly by the developed countries, which may benefit the trade and the quantity of production. These subsidies are under the reduction commitment of the WTO members, and can be challenged by any member if not complied with.
- The Blue Box subsidies allow direct payments to farmers under programmes to limit the quantity of production. These are exempted from the reduction obligations. Mainly European Union and United States pay such subsidies.
- The Green Box includes payments given to the farmers for environmental programmes, pest and disease control, infrastructure development and domestic food aid research and extension. It also includes direct payments to producers if those payments are not linked to current production. Green box subsidies are not subject to the reduction obligation.
'De Minimis' level
According to AoA, the maximum support that may be given to agriculture is currently pegged at 5 per cent of total agricultural production for the advanced market economies and 10 per cent for developing countries. This is called de minimis level. Amber box subsidies above the de minimis level comes under reduction commitments. According to AoA, tariffs are to be reduced by an average 36 per cent in the case of developed countries and 24 per cent in the case of developing countries. Reductions are to be carried out over six years in the case of developed countries and over ten years in the case of developing countries. Least-developed countries are not required to reduce their tariffs.Aggregate Measurement of Support (AMS)
This relates to quantification of aggregate value of domestic support provided by governments to specific products as well as on input services which are non-specific. It includes four main elements:
- Market price support which is based on the gap between the fixed external reference price and applied administered price
- Direct payments dependent on price gap
- Direct payments not dependent on price gap
- Other measures
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