WTO- Agreement on Agriculture

INTRODUCTION

Prior to 1995 there were no laws or enactments to regulate trade in agricultural goods and trade in textile goods. That means trade in agricultural was not included under GATT 1947. In the year 1995 when World trade Organization (WTO)  was formed, the trade in agricultural goods was included under the sphere of WTO. Consequently, the Agreement on Agriculture came into existence. Prior to this agreement the market access for agricultural products was limited as most markets were restricted by physical import barrier.

The Agreement on Agriculture ( AOA ) was made under GATT 1994 to attain greater Liberalization of trade in agriculture and with the objective to establish a basis of initiating a process of reform of trade in agriculture, to establish a fair and market oriented agriculture trading system, to provide for substantial progressive reduction in agricultural support and protection sustained over an agreed period of time, and further to achieve specific binding commitments in market access, domestic support and export competition.

The AOA has created a framework for negotiations on the issues such as important improvements in market access, reduction in import barriers an domestic support and discontinue all kinds of export subsidies. It further marks an improvement towards increased liberalization of the trade rules in the agricultural sector.

OBJECTIVES OF AOA

  • Agreement aims to remove or avoid all kinds of tariff and non-tariff barriers that comes in between the trade of agricultural goods and products.
  • Agreement Establishes a fair and transparent market agriculture trading system to strengthen more operationally effective GATT disciplines.
  • Agreement allows contracting parties to support their rural economies but it policies thus framed for such support shall cause very less distortion to trade.
  • Under the Agreement on Agriculture, special differential treatment is provided for developing countries. Developing countries may implement the agreement over a period of up to ten years and, in general, the reduction commitments for each area of the agreement are two-thirds of those for developed countries. The Least Developed Countries (LDCs) are not required to undertake reduction commitments[1].
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SALIENT FEATURES OF THE AGREEMENT

Market Access

Market access simply means the right which exporters have to access a foreign market. Market access means providing a market situation where agricultural goods of one country can be easily be put on sale in the foreign market. By reducing the tariff and tariff rate, the AOA can be implemented. The AOA has two fold aim: improve the transparency of existing protection measures and facilitate their reduction, and open domestic markets to more imports. On market access, the Agreement has two basic elements.

The first element provides for tariffication of all non-tariff barriers is one i.e. non-tariff barriers are to be replaced by tariffs yielding the same level of protection. The second element deals with the setting up of minimum levels for import share. The reason for these quantitative guarantees of minimum market access is that the prevalent level of tariffication may effectively impede imports. It was decided that current levels of market access by product must be maintained and tariff quotas are to be established when imports constitute less than three percent of domestic consumption[2]. The AOA required tariff reductions of –

  • 36 percent average reduction by developed countries, with a minimum per-tariff line reduction of 15 percent over six years.
  • 24 percent average reduction by developing countries with a minimum per-tariff line reduction of 10 percent over ten years.

However, the agreement provides exemption to the least developed country from reduction in tariff but they have to convert their non-tariff barriers to tariffs.

Art. 4.2 of the AOA restricts the use of non-tariff measures such as restriction on quantum of import, minimum import price, licensing procedures for import, minimum import price etc.

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Domestic Support Mechanism

The Domestic Support means the subsidies provided by government of a country to the their domestic traders of goods and services. The Domestic Support Mechanism works on two fold support which to direct or indirect nature.

The agreement on domestic support measures has two main aims. First, to identify measures that support farmers and at  the same time are acceptable. Secondly, to define support to farmers that is unacceptable and decided to reduce them. The Agreement on Agriculture distinguishes between different types of support, ranked in boxes: The blue box includes direct support in favour of producers under production-limiting programmes. It covers those measures that are linked to production but not to price or output volumes.

It covers payment directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land. The green box contains support measures that have no, or at most minimal, trade-distorting effects or effects on production. It therefore excludes price support to producers and support involving transfers from consumers.

Green box measures may be used freely and are not subject to cut[3]. The green box consists of- Government service programmes: Research, training and extension services, marketing and promotion services, infrastructural services, etc.  Public stockholding for food security purposes Domestic food aid. Direct payments to producers where these are not related to the volume of production or factors of  production. Environmental protection programmes.

Amber Box contains domestic support policies that distort market prices. These are mainly: price supports, direct payments and nonexempt subsidies. These types of support are calculated using the Aggregate Measurement of Support (AMS) and are subject to reduction. Developed countries must reduce this support by 20 Percent over six years and developing countries by 13.3 percent over 10 years. Least developed countries are exempt from making cuts.

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Export Subsidies

The Export Subsidies are those subsidies which is provided by a country to its farmers with the aim to increase export of agricultural goods. The AOA requires member states to set out their export subsidies in schedules subject to binding, that is they could not be increased. AOA provides that the developed countries to reduce Export subsidies by 36 percent over six years based on 1986-90 base period. On the other hand, developing countries to reduce Export subsidies by 24 percent over ten years based on 1986-90 base period.

CONCLUSION

From the above study it can be traced out that the Agreement on Agriculture was introduced with the major objective to introduce agriculture products of different countries in the global market. Until 1995, countries like India were  isolated from world market to protect its economy and to gain self-reliance of the domestic agricultural produce. In the year 1995, it was the first time, agriculture was fully introduced in the global market by reduction of tariff and non-tariff barriers to such trade. The objective of the Agreement on Agriculture was, first of all, to liberalize agricultural trade by restricting the measures of agricultural policies that interfered with the free market forces, in other words, protection at borders and support for production and exports. Secondly, it aimed at defining a framework of rules and disciplines for agricultural policies. The AOA had great impact on developing as well as developed countries.

[1] shodhganga.inflibnet.ac.in/bitstream/10603/112875/10/10_chapter%202.pdf

[2] Art. 4 AOA

[3] Art 6 AOA

Author: Lalit Mohan,
Delhi Metropolitan Education,GGSIPU ( 4th year )

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