Page 191 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 15: WTO and Agriculture

The Uruguay Round produced the first multilateral agreement dedicated to the agriculture sector. Notes
The objective of the Agreement on Agriculture (AoA) was to reform trade in agriculture and to make
policies more market oriented. This is likely to improve predictability and security for both importing
and exporting countries.

Elimination of non-tariff measures through the ‘tariffication’ process
Subsequent to the Uruguay Round, quotas and other types of trade restrictive measures were to be
replaced by tariffs that provide more or less equivalent levels of protection. This process of converting
quotas and other types of non-tariff measures to tariffs that represent about the same level of protection,
is termed as ‘tariffication’. Under the Uruguay Round, member countries agreed that developed
countries would cut the tariffs by an average of 36 per cent in equal steps over six years while
developing countries would make 24 per cent cuts over 10 years. Several developing countries also
used the option of offering ceiling tariff rates in cases where duties were not ‘bound’ before the
Uruguay Round. Least developed countries do not have to cut their tariffs.
For products whose non-tariff restrictions have been converted to tariffs, governments are allowed to
take special emergency actions or ‘special safeguards’ in order to prevent swiftly falling prices or
surges in imports from hurting their farmers.
Binding against further increase of tariffs : In addition to elimination of all non-tariff measures by
tariffication, all countries have bound all their tariffs applicable to agricultural products. In most cases,
developing countries have given binding at rates that are higher than their current applied or reduced
rates.
Tariffs on all agricultural products are now bound. Almost all import restrictions that did not take
the form of tariffs, such as quotas, have been converted to tariffs. This has resulted into substantial
market predictability in agriculture. The tariffs have also been reduced substantially. Besides, market-
access commitments on agriculture also eliminate previous import bans on certain products.
Domestic support : National policies that support domestic prices or subsidized production often
encourage over-production. This squeezes out imports or leads to export subsidies and low-price
dumping in international markets. Under the agreement on agriculture, domestic policies that have
a direct effect on production and trade have to be cut back. The domestic support in the agriculture
sector is categorized under Green, Amber, and Blue boxes as shown in Exhibit.
Member countries quantified the support provided per year for the agriculture sector which is termed
as ‘total aggregate measurement of support’ (total AMS) in the base years of 1986-88. Developed
countries agreed to reduce total AMS by 20 per cent over six years starting in 1995 while the developed
countries agreed to make a 30 per cent cut over 10 years. Least developed countries were not required
to make any cut in AMS. The AMS is calculated on a product-by-product basis by using the difference
between the average external reference price for a product and its applied administered price
multiplied by the quantity of production. To arrive at AMS, non–product-specific domestic subsidies
are added to the total subsidies calculated on a product-by-product basis.
Export subsidies : The agreement on agriculture prohibits export subsidies on agricultural products
unless the subsidies are specified in a member’s lists of commitments. Where they are listed, the

Exhibit : 15.1 Categories of domestic support in agriculture sector
Green Box : All subsidies that have little or at most minimal trade distorting effects
and that do not have the ‘effect of providing price support to producers’, are exempt
from commitments towards reduction. The subsidies under the Green Box include
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• Government expenditure on agricultural research, pest control, inspection
and grading of particular products, marketing, and promotion services
• Financial participation by government in income insurance and income
safety-net programmes
• Payments for natural disaster

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