Agreement On Agriculture: WTO

AGREEMENT
ON
AGRICULTURE
( AOA )
Presented by:
Divya Boddu (07), Rohini Mukhopadhyay (19),

Dhaval Parmar (25),
Sachin Lakade (32), Raj Saxena (35), Teena Deuri
(43), Zahid Anwar (48)
A BRIEF JOURNEY
TOWARDS AOA
• GATT was a multilateral treaty to liberalize
world trade. It took effect on 1st
January,1948.
• Under GATT, total 8 rounds took place
• The 8th round began in September ,1986 at
part del Este, Uruguay and it was
concluded in December ,1994.
• The AoA was included in the final act of
Uruguay round 15th April,1994.
• This round gave birth to WTO in the
year1995,Jan 1st
WHY THE AGREEMENT ON
AGRICULTURE?
• Comparative advantage
• Instability in the world market
• Effects of protectionism
• Market Access difficult
– High Tariffs
– Non Tariff Barriers
– Grey Area Measures
LONG TERM OBJECTIVES
OF THE AOA
• To establish a fair and market-oriented
agricultural trading system. A reform
process should be initiated through the
negotiation of commitments on support
and protection and through the
establishment of strengthened and
more operationally effective GATT rules
and disciplines.
• To provide for substantial progressive

reductions in agricultural support and
protection sustained over an agreed
period of time, resulting in correcting
•The URAA represents a fundamental change
in the way agriculture is treated. Prior to
URAA rules applying to agriculture largely
ineffective.
•Under the URAA, countries agreed to reduce
agricultural support in three areas:

• Market access
• Domestic support
• Export subsidies
•
•
MARKET ACCESS
• TARIFFICATION
• TRQs
• TARIFF REDUCTION
& BINDING
• SPECIAL
SAFEGUARDS
•
TARIFFICATION
• Eliminate all non-tariff trade barriers

like ban, quota or quantitative
restrictions on import of
agricultural products, and convert
them into tariffs (“tariffication”).
•
• Tariff rates according to the base
period 1986-88 in the respective
countries.
TARIFF RATE QUOTAS
• A two leveled-tariff:
ü A lower (in-quota) tariff : charged on imports within the
quota volume.
ü A higher (over-quota) tariff : charged on imports in
excess of the quota volume.
• Minimum Access Opportunity Commitment:

ü Tariff quota equal to 3 % of domestic consumption
(‘86-’88)
ü Tariff quota equal to 5 % of domestic consumption by
TARIFF REDUCTION AND
BINDING
Particular\Count Developed Developing Least
ries Countries Countries developed
Average 36 % 24 % Countries
0 %
reduction
Minimum 15 % 10 % 0 %
reduction on
each tariff line
Time period 6 years 10 years -
SPECIAL SAFEGUARDS
(SSG)
1. When actual import volumes rise above a specified
trigger level.
2. When import prices denominated in domestic
currency fall below a certain trigger level.
3. It is an additional import duty.
4. Only for products in tarrification.
5. Can not apply to in quota imports.
SPECIAL SAFEGUARDS
(CONTD)
1.Special
• treatment for primary
products:
•
üVolume based SSG:

• Import surges – Volume triggers.
• Extra duty of about one third of applied rate.
• Trigger volume depends on
• a. Market penetration.
• b. Change in domestic consumption.
•
üPrice based SSG:

• Price falls – price trigger.
• Extra duty depends on price.
•
SPECIAL SAFEGUARDS
(CONTD)
2.Protection to staple food items:
•
• “ A primary agricultural product

which is the predominant staple in
the traditional diet of a developing
country member.”
•
• Retention of non-tariff restrictions

with minimum access set initially at
1% of domestic consumption, rising
to 4% in 10 years.
Implications of Market
Access
• Removal of QR’s would hit the
producers and impair the growth
prospects of the farm sector.
• Removal of QR’s leads to dumping
and transfer of excess productions
by exporting countries.
• But this might benefit the consumers
and safeguard food security in
event of domestic shortage.
DOMESTIC SUPPORT
• Objective: To identify acceptable and

unacceptable measures to support
the farmers.
• Any domestic subsidy that promoted
agricultural sector was subjected to
reduction commitments under AoA.
• Aggregate Measures of Support
(AMS)
DOMESTIC SUPPORT
( contd)
• Developed countries will cut by 20%
by 2000
•
• Developing countries will cut by
13.3% by 2005
•
• Many policies exempt [policies
categorized by degree of perceived
distortions --- called green box
(permitted), amber box (slow down),
DOMESTIC SUPPORT
( contd)
• Amber Box:
• Amber box measures are considered as trade
distorting elements, and are subjected to reduction.
Measures like price support, export subsidies, cheap
loans etc comes under this category .
•
• Green Box:
• Green Box measures are not considered as trade
distorting and are acceptable under AoA. Measures
like support for research, infrastructure services,
domestic food aid etc comes under this category.
•
• Blue Box:
• Blue Box measures are intended to limit production.
Measures like direct payment to farmers, cattle
limiting programs etc.
DOMESTIC SUPPORT
( contd) - AMS
• The amount of total subsidies subject to
reduction commitments made by
government to its agricultural sector.
• Exemptions in AMS calculations:
– Green box subsidies excluded
– Amber Box “de minimis” : < 5 % of value of
production of a product , for developed
countries and < 10 % for developing
countries
–
•
• An example:
•
EXPORT SUBSIDIES
• Export subsidies are special incentives
provided by governments on products
destined for foreign markets to
encourage increased foreign sales.
•
• Article 3.3 of the Agreement on Agriculture

(AoA) establishes a basic rule, which
places a limit on agricultural export
subsidies measured in terms of volume
of and expenditures on subsidized
exports i.e. value.
EXPORT SUBSIDIES
(CONTD)
• Developed countries agreed to reduce the
volume of export subsidies by 21
percent and the expenditure on export
subsidies by 36 percent by 2000.
•
• Developing countries agreed to reduce the
volume of export subsidies by 14
percent and the expenditure on export
subsidies by 24 percent by 2004.
•
• The base period used for export subsidies
commitments is 1986-1990.
EXPORT SUBSIDIES
(CONTD)
•Export subsidies play a significant role
in depressing and distorting world
market prices in agriculture.
• Reasons :-
• Choice of Base period
• Circumvention
•
• Choice of base year (1986-90): Due to the
extremely low world prices for agricultural
products, export subsidies during 1986-1990
were quite sizeable. The limited reduction
commitments taken in the AoA therefore left
large margins for continued subsidization
•
• Frontloading: The Agreement allowed for

reductions to be made from the 1991-
1992 levels if a country's export subsidies
were higher than the 1986-1990 levels. As
a result some countries practiced "front
loading" whereby they increased their
expenditure levels from 1986-1990 levels
thereby minimizing the impact of
Politics of Subsidies
• Subsides in food and agriculture sector is given to

protect poor.
•
• GATT agreement says that the subsides support to
agriculture inputs should continue for poor farmers
but should be stopped for rich farmers which is
Impossible.
•
• Subsides given to the US and European farmers are
beyond imagination.
•
• In US a farmer producing exportable wheat enjoys a
massive subsidy of US$ 29000 annually which is 25
times more than the average income of middle
Why US is asking for
removal of Subsidies?
•
“US agriculture is reeling from low

•
commodity price. Given a abundant

domestic supply and a stable US
population rate, expanding existing
market access and opening new export
markets for agriculture is more important
than ever. If we do not do this American
agriculture’s long standing history of early
trade surplus will not continue”
• De
a
n
Why US is asking for
removal of Subsidies?
(CONTD)
• US agricultural sector was founded on the pillars of subsidy
and export promotion which take the country to the
height of Zenith.
•
• Agro subsidies has virtually created an army of agricultural
bureaucrats and the department of agriculture is more
than the total income of all the farmers.
•
• By 1976 European product started giving tough competition
to the US product and gradually US product started
taking backseat while European set on their march of
domination.
•
• In this way the rich and powerful quarreled among
themselves virtually blocking the way of future
Effect on India from Export
Subsidies
• Agreement is virtually non existing in
India as the country is giving far
less subsidy than limited by WTO.
• This reduction in subsides and
increasing market centralization
result in shift from food to cash
crop.
– Recent Study of Central
India(Narmada Valley Belt) indicates
that pulses have been pushed out
by Soya bean which results in
expansion of land of Soya bean
CONTD……..
• Multinational Agro giants have patented the
varieties which are centuries were known to
Indian Farmers.
• Major countries like Australia, Argentina,
Canada and New Zealand are advocating for
liberalization of agriculture on the lines of the
liberalization that has occurred in other
sectors.
• The total liberalization of agriculture would
mean exposing the vast majority of small and
medium Indian farmers to face competition of
price.
• European Union(EU) also is not comfortable
with the idea of liberalizing its agriculture and
hopes to block the issue with India and the
other third world countries.
Consequences of
liberalising of agriculture
on India
• Cotton Growers are suffering due to
price depression.
• India faces difficulty to retain self
sufficiency in edible oils and the
import increases to 1.5 million tonnes
in 1996-97 which is five fold increase
in import of edible oil since 1993-94.
• Sugar industries also start feeling the
pinch of liberalization (India spent Rs
1500 crores on the import of sugar in
spite of having 6.5 million tonnes of
stock)
INDIAN EXPERIENCE - PRIOR
TO AND POST AOA
• Prior to AoA
•
• - Extreme import restriction clubbed with high levels of
tariff for agricultural products.
•
• - Import of mass consumption items like cereals and

edible oil were canalized through state trading
bodies.
•
• - Existence of cash compensatory support for select

exporters.
•
•
•
• Post AoA
•
• - India is almost out of Quantitative Restrictions and is

now fully in the tariff regime.
• - But India continues to maintain high tariff on several
commodities with a view to checking expected surge
of imports
•
• - Post 1991 Economic Reforms, cash incentives for

exports were abolished and so were Income Tax
exemptions for export profits.
•
• - AoA did not object to India's MSP(Minimum Support

Price) Programmes. Therefore MSP coverage was
increased to several other agricultural products.
•
• - There was a surge in non-product support because of

CRITICAL ANALYSIS OF AOA
• Agricultural Tariffs continue to be 6 times as high as

industrial tariff
• Provisions regarding SSM(Special Safeguard
Mechanism) were only available to developed &
Tariffied countries
• Developed countries continued with very high
domestic support that artificially increase
production and distort trade affecting developing
nations like India badly.
• Developed countries deny market access to the
developing countries.
The Sanitary
and
Phytosanitary
Agreement
IN T R O D U C T IO
N . . .
e s e n te re d in to fo rce w ith th e e sta b lish m e n t o f th e
w ith th e a g re e m e n t o n a g ricu ltu re .
KEY FEATURES OF AGREEMENT
ON SPS MEASURES
from risks arising from additives contaminants, toxins or disea
t- or animal carried diseases.
from pests, diseases or disease-causing organisms.

KEY FEATURES OF AGREEMENT
ON SPS MEASURES ( CONTD )
ablishment or spread of pests into the country
protect health of fish and wild fauna, as well as of

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AGREEMENT

Divya Boddu (07), Rohini Mukhopadhyay (19),

• To provide for substantial progressive

agricultural support in three areas:

• Eliminate all non-tariff trade barriers

• Minimum Access Opportunity Commitment:

üVolume based SSG:

üPrice based SSG:

• “ A primary agricultural product

• Retention of non-tariff restrictions

• Objective: To identify acceptable and

• Article 3.3 of the Agreement on Agriculture

• Frontloading: The Agreement allowed for

• Subsides in food and agriculture sector is given to

“US agriculture is reeling from low

commodity price. Given a abundant

• - Import of mass consumption items like cereals and

• - Existence of cash compensatory support for select

• - India is almost out of Quantitative Restrictions and is

• - Post 1991 Economic Reforms, cash incentives for

• - AoA did not object to India's MSP(Minimum Support

• - There was a surge in non-product support because of

• Agricultural Tariffs continue to be 6 times as high as

from risks arising from additives contaminants, toxins or disea

t- or animal carried diseases.

from pests, diseases or disease-causing organisms.

ablishment or spread of pests into the country

protect health of fish and wild fauna, as well as of

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