Chapter 10 be wto_agriculture


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Business Environment Lecture by Dr. Ho Cao Viet

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Chapter 10 be wto_agriculture

  2. 2. Members (152) Applied Countries (28) WTO Members
  4. 4. GENESIS • WTO Came into existence on 1-1-1995 with the conclusion of Uruguay Round Multilateral Trade Negotiations at Marrakesh on 15th April 1994, to : – Provide common institutional framework for conduct of trade relations among members – Facilitate the implementation, administration and operation of Multilateral Trade Agreements – Lay down Rules and Procedures Governing Dispute Settlement – Provide Trade Policy Review Mechanism
  5. 5. Agreement on Agriculture (AoA) • To establish a fair and market oriented agricultural trading system through substantial progressive reduction in agricultural support and protection resulting in correcting and preventing restrictions and distortions in world agricultural markets
  6. 6. AREAS OF COMMITMENTS • Domestic Support • Market Access • Export subsidies
  7. 7. Export Subsidies • Cut in value of subsidies – Developed countries - 36 % (1995 - 2000) – Developing countries - 24 % (1995 - 2004) • Cut in subsidized quantities Developed countries - 21 % (1995 - 2000) Developing countries - 14 % (1995 - 2004) (Base Period : (1986 - 1990) To develop internationally agreed disciplines to govern export credits, guarantees or insurance programmes
  8. 8. Domestic Support In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: Green (permitted), Blue (slow down - i.e. be reduced), Amber ( Forbidden) • Green Box - Research, Extension, PDS, Decoupled Payments etc; • Blue Box - Production Limiting Subsidies ; • Amber Box - subject to reduction commitments . – Product specific – Non product specific (input subsidies-fertilizer, power, irrigation)
  9. 9. Anomaly in WTO Provision • Developed countries still continue to heavily subsidize their agriculture. • As per the WTO provision these countries were required to reduce their subsidy considerably, so that the developing countries could get a chance to export their products to these countries.
  10. 10. RESULTS OF THESE ANOMALIES There were three problems 1. It ignored the realities of global agricultural markets, 2. It reinforced industrial agriculture at the expense of sustainable agriculture, and 3. It failed to acknowledge the widely differing needs of countries at different levels of development.
  11. 11. Agricultural Subsidies Source: OECD •Agricultural subsidies have affected developing country farmers both by denying access to rich markets and allowing farmers from advanced countries to sell to developing countries at suppressed prices. •This is particularly relevant to India because agricultural products account for nearly 20% of Indian exports. Agricultural Support in the US ($US million) 1998 1999 2000 2001 2002 Totalvalueofproduction(atfarmgate) 190,082 185,258 189,318 197,037 200,903 ProducerSupportEstimate(PSE) 48,272 55,932 49,673 51,683 39,559 Percentage ofgovernmentsupport 25.4 30.2 26.2 26.2 19.7
  12. 12. INDIAN’S LESSON • Protecting food and livelihood security by having sufficient flexibility for domestic policy measures. • Protecting domestic producers from the surge in imports or significant decline in import prices. • Substantial reduction in export subsidies and domestic support to agriculture in the developed countries for greater market access to products of developing countries. • Finally, a more equitable & fair trading framework for agricultural commodities MARKET ACCESS ISSUES CAN NOT BE SEEN IN ISOLATION TO SUBSIDY REGIME
  13. 13. Domestic support in India •The negotiations on domestic support should include the following elements: •Substantial reductions in all forms of domestic support should be undertaken by the developed countries. •Subsidies excluded from the discipline introduced by the AoA, i.e. those appearing in the “Blue Box” and the “Green Box”, need to be re-assessed, particularly from the point of view of their influence on production. • The Peace Clause “Article 13 (a) and 13 (b)” shall not be extended beyond implementation period.
  14. 14. Export Subsidies in India The negotiations on export subsidies should include the following issues: Countries using export subsides should phase out this form of farm support within two years of implementation of the revised disciplines to be followed by countries in the agricultural sector. Export subsidies discipline should include all forms of spending that enhances the capacities of exporters to increase trade, e.g. export credit, guarantees and insurance programmes. The Peace Clause “Article 13 (c)” shall not be extended beyond implementation period.
  15. 15. Present stage of negotiations • The Cancun Ministerial failed to arrive at any agreement on modality for agriculture. • There was no willingness on part of developed countries to recognize the genuine concerns of the developing countries, especially in agriculture • The US & EU attempted to drive their own agenda, at the expense of Doha Declaration • The concerns of the developing countries were expressed by a group viz. G-20 at Cancun.
  16. 16. Why much of the focus must be on agriculture… • Even though it provides less than 4% of global GDP and 9% of int’l merchandise trade • OECD manufacturing tariffs have fallen by 9/10ths over the past 60 years to <4%, while agricultural protection has risen, Agric. applied (bound) tariffs now average nearly 5 (10) times manufactures tariffs globally • Also, the vast majority of the world’s poor rely on farming for a living, and may be hurt by agricultural protection policies of rich countries
  17. 17. Why focus on agriculture • True, the harm to some DC farmers from rich country agricultural protection is reduced via non- reciprocal preference schemes • Those schemes contravene the core WTO rule of non-discrimination • In particular, they exclude numerous population developing countries (e.g. Brazil, China, India, Indonesia, Pakistan, Vietnam) • May harm more poor farmers (through trade diversion) than they help.
  18. 18. 0 5 10 15 20 25 30 Antal SPS/TBT Agriculture Textiles TRIMS TRIPS GATS Which agreements are subject to disputes?