Short Note on Agreement on Agriculture and India

The Agreement On Agriculture of the WTO, was the first multilateral agreement, meant to curb unfair practices in agricultural trade and set off the process of reforms in the agricultural sector. It contained the following broad areas :

1. Tariff Reduction: Previously trade in agriculture was restricted by quotas, import and export licensing and other non-tariff barriers. The AoA required that all non-tariff barriers be replaced by a single tariff rate called the bound tariff rate and that existing tariffs be reduced in a phased manner over a stipulated period of time. Developing countries including India were expected to reduce bound tariffs by 24 % , minimum of 10 % for each commodity over a period of 10 years.

2. Market Access: To avoid the adverse effect of tariffs on certain special products, importing countries have given a current access commitment by establishing a tariff quota, up to which imports are allowed at a lower rate and above which higher tariffs are charged.

Under minimum access commitment countries had to import a minimum quantity of their most restricted products. i.e. In case of products with marginally low or no imports, countries had to impose tariff quota imports equal to 3 % of domestic consumption, which would increase to 5 % by 2000.

3. Export Subsidies: They are special incentives given to the exporters to encourage sales of exports abroad, allowing them to charge competitive or lower price in the world market. However this crated distortions in international trade and hence AoA prohibits export subsidies. Member nations were expected to reduce them. While developed countries were supposed to cut the value of export subsidies by 36 % over 6 years, developing countries were to reduce them by 24 % over 10 years. LDCs were exempted.

4. Domestic Support Subsidies: Domestic support through subsidies and other measures were meant to push imports out of the market and also enable domestic exporters to compete in the world market. WTO measured this support as ‘(AMS) Aggregate Measurement of Support’. Domestic support is categorized in the form of red box, amber box, green box and blue box subsidies. Red box subsidies are banned whereas amber box subsidies are not banned but actionable. These subsidies were believed to be the most distortive in international trade having adverse effects on trade interests of others. Green box subsidies in the form of assistance to research activities, disadvantaged regions or non-discriminating subsidies and Blue box subsidies in the form of direct payments to farmers required to limit their production were permitted and non-actionable. The Blue box subsidies were not allowed to be not more than 5 % for developed countries and 10 % for developing countries.

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