Introduction- WTO and agreements Ministerial conference -Issues in agriculture Trends in Indian subsidies and its composition Trade distortions- effect of subsidies on other countries and vice versa Food subsidy Conclusion

1. Recent developments in WTO and
food subsides in India
SUNIL KUMAR B.R
20637

2. content
• Introduction- WTO and agreements
• Ministerial conference -Issues in agriculture
• Trends in Indian subsidies and its composition
• Trade distortions- effect of subsidies on other countries and
vice versa
• Food subsidy
• Conclusion
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3. World Trade Organization
• Established In 1995.
• 1986-94 Uruguay Round – led to WTO’s creation.
• WTO is the successor to the GATT.
• GATT is now the WTO’s principal rule-book for trade in
goods.
• Merchandise exports grew on average by 6% annually, Total
trade in 2000 was 22 times the level of 1950.
• More than 300 cases in ten years-DSB.
• The goal is to improve the welfare of the people of the member
countries.
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4. Functions of WTO
• It’s a negotiating forum
• It’s a set of rules
• It helps to settle disputes
• Assisting developing countries
• Cooperating with other
international organizations
• Reviewing national trade
policies
Principles of the trading system
• Non-discrimination.
• Reciprocity
• Binding and enforceable
commitments
• Transparency
• Safety valves
World Trade Organization
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5. MINISTERIAL CONFERENCES
Ministerial
conference
Host city
Outcome
1st
9–13 December 1996,
Singapore
Disagreements largely between developed and
developing economies ,over "Singapore issues“
Tradefacilitation,tradeinvestment,tradecompt.
2nd 18–20 May 1998, Geneva trade negoatation.
3rd
30 November – 3 December
1999, Seattle, United States
Ended in failure,
4th
9–14 November 2001,
Doha, Qatar
The Doha Development Round was launched at
the conference. The conference also approved
the joining of China, which became the 143rd
member of WTO.
5th
10–14 September
2003,Cancún, Mexico
Aiming at forging agreement on the Doha
round. An alliance of 22 southern states, resisted
demands from the North for agreements on the
so-called "Singapore issues" and called for an
end to agricultural subsidies within the EU and
the US. The talks broke down without progress.
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6. CONTD…
6th
13–18 December 2005
Hong Kong
In this meeting, countries agreed to phase out
all their agricultural export subsidies by the end
of 2013, and terminate any cotton export
subsidies by the end of 2006.
7th
30 November – 2 December
2009, Geneva
The general theme for discussion was "The
WTO, the Multilateral Trading System and the
Current Global Economic Environment".
8th
15–17 December 2011,
Geneva
Membership agreement where made
for Russia, Samoa, and Montenegro.
9th
3–6 December 2013
Bali, Indonesia
159 members of WTO agreed to the Bali
Package which eases barriers to international
trade.
10th
15–18 December 2015
Nairobi, Kenya
The completion of Afghanistan
and Liberia's accession to the WTO will be on
the agenda.IARI 6

7. MINISTERIAL CONFERENCES RELATED TO
AGRICULTURE
Uruguay Round (1986)
 Extending the trading system into many new areas, notably,
service sector and intellectual property.
 Uruguay Round Agreement aimed at discouraging trade-distorting
domestic support, non-tariff barriers, and reducing direct export
subsides,
 Reform trade in sensitive sectors of Agriculture and textiles.
 It was proposed that Public procurement of Agro-products must
not exceed 10% of its total production value.
 considered as an anti-farmer proposal and hurts agrarian
economies.
Uruguay Round mostly benefits the developed countries.
(Participation gap).
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8. Doha Development Round(2001)
• Including negotiations, wide range of issues concerning
developing countries.
• One focus of the Doha Round was the easing of agricultural
product access into the WTO market by reaching agreement
regarding three controversial agricultural themes: the reduction
of tariffs on imported agricultural goods, the reduction of
subsidies for exported agricultural goods, and the reduction of
subsidies for domestic agricultural goods.
• The negotiations reached a deadlock, and continues to do so
till date, between Developed countries and Developing
countries, on the precise terms of a 'special safeguard measure'
to protect farmers from imports of cheaper and better quality
agro products from the developed countries.
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9. Bali Round (2013)
• Includes provisions for lowering import tariffs and agricultural
subsidies, with the intention of making it easier for developing
countries to trade with the developed. 1st agreement by all.
• Covers food security in developing countries, Public Stockholding
for Food Security Purposes.
• Measures for Least developed countries (LDCs) and developing
countries, including preferential treatment and market access.
• Duty-Free and Quota-Free (DFQF) Market Access for Least-
Developed Countries.
• The Bali and the General Council's November 2014 decision
on public stockholding which gives protection to farmers has
been reaffirmed.
Source: WTO
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10. Nairobi Round (2015)
• Developed countries immediately eliminate their remaining scheduled
export subsidy entitlements. Developing countries shall eliminate their
export subsidy entitlements by the end of 2018.
• The members of the global trade body agreed on a commitment for giving
the developing nations a right to take recourse to Special Safeguard
Mechanism to protect their farmers, which was a long-standing demand of
India.
• Phase out export subsidies on cotton; for developed nations immediately,
while it has been marked for developing countries not later January 1, 2017.
Source: WTO
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11. Clash between developed and developing Countries
in Nairobi.
Contention of the Developing
Countries
• India has expressed
disappointment on removal of
cotton subsidy altogether by 01
January 2017, and a few other
provisions related to phasing
out of export subsidies.
Contention of Developed
Countries
• The biggest demand of the
developed countries is to
abolish agricultural export
subsidies.
• The US and EU wants to
launch new negotiations but a
majority of WTO members
want to continue with the Doha
negotiations.
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12. India and WTO
• India enjoys the most favoured nation (MFN) status with all the other
members of the WTO.
• The GATT secretariat estimated that largest increase in the level of
merchandise trade in goods(clothing ,ag, fishery), India's competitive
advantage lies in these fields, obtain large gains.
• India's textile and clothing exports will increase due to Multi-fibre
Arrangement (MFA) .
• The multilateral rules and disciplines, favourable environment for India's
international business .
• The reduction in barriers to export of agricultural products, agricultural exports
from India will increase.
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13. Agreements Importance
Anti-Dumping charging extra import duty in order to bring its
price closer to the “normal value” in the importing
country.
Sanitary and Phytosanitary
Measures Agreement(SPS)
It allows countries to set their own standards.
Technical Barriers to Trade(TBT) Aims to ensure that technical regulations,
standards, and conformity assessment procedures
are non-discriminatory and do not create
unnecessary obstacles to trade.
Trade-Related Aspects of
Intellectual Property Rights(TRIPS)
Sets down minimum standards for many forms
of intellectual property (IP) regulation as applied
to nationals of other WTO Members.
Trade-Related Investment
Measures (TRIM)
Rules that apply to the domestic regulations a
country applies to foreign investors.
Agreement on Agriculture(AOA) 1.market access 2.domestic support 3.export
subsidy
AGREEMENTS IN WTO
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14. History of AOA
• 1950- The idea of replacing agricultural price support with direct payments
to farmers .
• 1958- Haberler Report stressed the importance of minimizing the effect of
agriculture subsidies on competitiveness and recommended replacing price
support with direct supplementary payments
• 1980- government payments to agricultural producers in industrialized
countries had caused large crop surpluses .
• 1986 GATT Ministerial Conference in Uruguay, farm lobbies in developed
countries strongly resisted compromises on agriculture.
• The idea of exempting production and "trade-neutral" subsidies from WTO
commitments was first proposed by the United States and EU.
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15. Agreement on Agriculture (1995)
• The Uruguay Round marked a significant turning point in world trade in agriculture.
• The products-normally considered as part of agriculture except that it excludes
fishery and forestry products.
• Aims:
• Fair and market oriented trading system .
• Commitments on support and protection reduction.
• Operationally effective GATT Rules & Disciplines.
• Commitment to Equitable Trade Reform process.
• Greater opportunities and Terms of Access to Developing countries.
• Concern for LDCs.
• Concern on Non-trade issues such as Food Security, environment, health, etc.
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16. Pillars of AOA
Market Access Domestic Support Export Subsidies
Converting NTBs into tariff
barriers
subject to reduction
commitments.
Subsidies promoting foreign
trade.
36% average reduction
by developed countries, with a
minimum per-tariff line
reduction of 15% over six
years.
Europe and the United
States to spend billion $ a
year on agricultural subsidies.
Reduced by:
20% in developed countries
13.3% in developing
countries.
Value of subsidy
By 36% over 6 years for
developed countries.
By 24% over 10 years for
developing countries.
No reductions for least
developed countries
24% average reduction
by developing countries with
a minimum per-tariff line
reduction of 10% over ten
years.
Green box ,
Blue box,
Amber box
Causes dumping in poor
countries.
Quantity of export
By 21% over 6 years for
developed countries.
By 14% over 10 years for
developing countries.
No reduction for least
developed countries
SOURCE: WTO
IARI 16

17. 12%
31%
51%
66%
114%
62%
0%
20%
40%
60%
80%
100%
120%
Current
US EU Japan Korea India Global
Market Access current status
Average Agriculture Tariff
us
EU
japan
Korea
India
global
SOURCE: WTOIARI 17

18. Agriculture: Proposals for market access
Market Access: Average Ag Tariff
12%
3% 5% 6%
31%
6%
9%
13%
51%
7%
12% 15%
66%
14%
29% 29%
114%
28%
70% 70%
0%
20%
40%
60%
80%
100%
120%
Current U.S. Proposal G-20 Proposal EU Proposal
US EU Japan Korea India
SOURCE: WTO Hong Kong ministerial conference

19. Post WTO trade scenario for major commodities and future strategy for India
products Trade scene Main factor Future strategy
Rice Export adversely
affected; Import
threat
Increased competition
from developing countries
like Vietnam, Thailand
Low prices and subsidies
Improved competitiveness
domestic production
Wheat Export adversely
affected; Import
Threat
Low prices and subsidies
and support in EU and US
Seek elimination of export
subsidies and domestic
support in OECD
Oilcake Export adversely
affected
East Asia crisis and GM
varieties in USA, Argentina
and Brazil; Subsidies in
USA
Improved varieties of oilseeds
particularly soybean; Seek
reduction in subsidies in USA
Sugar Export adversely
affected
Subsidies in EU and USA Seek elimination of export
subsidies and domestic
support in EU and USA
Cotton Export adversely
affected; Imports
increased
Decline in domestic
production and subsidies
in USA
Seek elimination of domestic
support in USA; Technologies
to compete with Bt cotton
Source: www.wto.org
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20. GREENBOX • minimum trade distortion
• subsidies allowed
Public funded government programmes
• research
• extension
• food security
• disaster management
• control of pests & diseases
• structural adjustments Etc.
BLUE BOX • minimum trade distortion
• subsidies allowed
• such payments are made on
85 percent or less of the base
level of production
Public funded government programmes
• Production limiting programmes
• Participation in insurance
• Income safety net programmes
AMBER BOX • trade distortion
• subsidies NOT allowed
beyond specific level.
• Given up to-Developed
countries less than 5% of
total value of agricultural
production, developing
countries 10% and L D C no
bar
subsidies a country can give to its farm
sector.
Product Specific: Seeds, fertilizers,
irrigation, pesticides, electricity, credit.
Non-Product Specific: Minimum
support price
Domestic support
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21. 0
10
20
30
40
50
60
70
80
90
100
U.S. EU - 25 Japan
Domestic Support – amber box:
Billion $ at current rates
SOURCE: WTO HONG KONG MENISTERIAL CONFERANCE
IARI 21

22. Subsidies offered as % in total value of agricultural
products by various countries (2012-13)
Country % share of subsidy in total value of
agricultural products
Japan 72.5
Columbia 54.0
S.Korea 61.0
Europe 37.0
China 34.0
Pakistan 26.0
USA 28.8
INDIA 03.0
Source: www.wto.org
IARI 22

23. Export prices of primary agricultural commodities in post
WTO period (1995=100)
Source: WTO International Trade Statistics 2006
0
20
40
60
80
100
120
140
1995 1996 2000 2005
CEREALS
FISH
SHRIM
BEVERAGES
SUGAR
COTTON
IARI 23

24. Export Subsidies
EU
(over $2 billion
a year)
Other
3.0%U.S.
1.8%
Switzerland
6.4%
Norway
3%
EU
87.8%
Source: www.wto.org
IARI 24

25. Impact on Indian Agriculture
• India gains when?-As reduction in domestic support and export
subsidies in the developed countries leading to substantial gains to the
producers in developing countries.
• Apart from direct price effect there is lagged effect through
agricultural wages and employment (Winters, 2002).
• In rice where the level of input subsidy is high, free trade would not
be sufficient to counter the adverse impact on income due to
withdrawal of subsidies.(Chand1999).
• The total Product Specific AMS continues to be negative and the Non-
Product specific AMS is also well within the de minimis level i.e. 4.85% in
the base year 1986-88.
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26. • India is one of the six countries who has been maintaining quantitative
restrictions (QRs).Items including 147 agricultural products have been
removed on 1st April, 2001. While the removal of QRs has not changed
the overall rate of growth of imports or even their composition.
• The experience of the implementation of AoA reveals that the world
prices of food products have been steadily declining threatening the
livelihood of producers in many developing countries.
Conti…
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27. Special Products in the WTO
• Developing countries are permitted untargeted subsidised food
distribution to meet requirements of the urban and rural poor.
Safeguarding domestic food production capacity an essential
component of food security strategies .
• Special products are self-designated agricultural products that have
flexibility in reduction commitments based on the criteria of food
security, livelihood security and rural development needs.
• As a result designation some of the agricultural products as Special
products .
IARI 27

28. • Allowing self-designation of SPs, the developing countries would gain the
legitimate right to safeguard their agrarian interest.
• Special safeguard mechanism: Right of certain developing countries to impose
additional duties on imported agricultural products to make them more expensive in
the local market.
• In 2004 Special Products the new devices for developing countries, adopted in the
framework of AoA.
• the developing countries would accrue Benefits by designating an appropriate
number of special products based on,
1.Food Security,
2.Livelihood Security and
3.Rural Development needs.
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29. Benefits from SP
• As contribution of agriculture to GDP and employment in
developing countries provision of SPs would protect the agriculture.
• Special Products would support domestic production.
• The designation of SP product is one of the crucial development
instruments in trade for the developing countries.
• Designation of the special products should be based on the particular
country’s strategy of development
• A pilot study is necessary before the designation of SPs.
IARI 29

30. Food subsidy
• Food prices play an important role in the well-being of the poor and poverty
reduction in developing countries.
• Therefore, government interventions in food grains markets have existed in
one form or another for several decades
• small food price increases may adversely affect the ability of poor
consumers to meet their basic needs.
• food subsidies are needed to protect the welfare and nutritional status of the
economically disadvantaged people.
IARI 30

31. Food subsidy as percentage of agricultural GDP
SOURCE: Economic survey,
2015-16 IARI 31

32. Cost of Food Subsidy
0
20,000
40,000
60,000
80,000
100,000
120,000
Amount
Amount
Source: economic survey, 2015-16
IARI 32

33. • food subsidies are under increasing criticism because of
their large impact on government budget deficits.
• benefits often do not reach the poor.
• Food subsidies an increase of over 25 times in 21 years
• As a percentage of agricultural GDP, the food subsidy
increased from 1.8 per cent to 5.8 percent during 1991-92
and 2010-11.
• The difference between the Economic Cost and the Central
Issue Price is reimbursed by the Government of India as
consumer subsidy to the Food Corporation of India (FCI).
CONTD…
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34. Source: GoI (2012c)
• Source: GoI (2012c)
Source: GoI (2012)
CONSUMER SUBSIDY IN WHEAT
IARI 34

35. PERCENT SHARE OF SUBSIDY IN TOTAL BUDGET
SOURCE: http://www.thehindu.com/business/budget/budget-2016
IARI 35

36. Source: http://www.thehindu.com/business/budget/budget-2016
IARI 36

37. Source: http://www.thehindu.com/business/budget/budget-2016
IARI 37

38. Reasons for increase in food subsidy
• steep rise in minimum support/procurement prices,
• Accumulation of large stocks of grains
• rising economic costs of food grains,
• high off take of food grains under targeted public
distribution system and other welfare schemes.
• inefficient functioning of Food Corporation of India.
IARI 38

39. Policy Options for reducing Food
Subsidies
• Decentralized Procurement: Promote Public-Public
and Public-Private Partnership.
• Stop Open-ended Procurement of Food grains
• Periodic Increase in Central Issue Price.
• Reduction in Procurement Incidentals and
Distribution and Carrying Costs.
IARI 39

40. Complainant Respondent Problem Remarks
India Turkey Restrictions on Imports of Textile
and Clothing Products
Turkey agreed to:
remove the quantitative
restrictions it applies on
textile categories
of imports from India.
India European
Communities
Restrictions on Certain Import
Duites on
Rice.
EC Regulation establishing
a so called cumulative
recovery system (CRS), for
determining certain import
duties on rice
India European
Communities
Anti‐Dumping Duties on Imports
of Cotton type
Bed Linen from India
Panel investigating EU for
limiting its examination in
this investigation
Some agricultural disputes
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41. Complainant Respondent Problem Remarks
India Brazil Anti‐Dumping Duties on
Jute Bags from India
the determination to continue the
anti‐dumping duties allegedly
nullifies and impairs benefits
accruing to India under, or
otherwise impedes the attainment
of objectives of, the cited
agreements.
United States India Patent Protection for
Pharmaceutical and
Agricultural
Chemical Products
DSB meeting of 22 April 1998,
the parties announced that they
had agreed on an implementation
period of 15 months from the
date of the adoption of the
reports.
United States India Measures Concerning
the Importation of
Certain Agricultural
Products-United States
concerns related to Avian
Influenza
India to implement the DSB
recommendations and rulings
shall be 12 months from the date
of adoption of the Appellate
Body and panel reports. cause
they are not “based on” the
relevant international standard
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42. Conclusion
• Agriculture should be subjected to world competition, but domestic
policy support must continue.
• Implementation of WTO would have a mixed impact on net social
welfare of India.
• In conclusion, let us remember the quote from our eminent
agricultural scientist, Dr M S Swaminathan, “India should ensure
that all boxes in the WTO must be abolished, and trade distortion,
and unfair practices must be spelt out clearly and factors governing
sustainable livelihood should be recognised so that resource- poor,
developing countries should be able to place restrictions on
imports.”
IARI 42

43. Cont..
• India does not provide any export subsidy except the
permissible internal and international transport subsidies and
handling and processing charges to reduce marketing costs of
exports of agricultural produce.
• The removal of QRs has not changed the overall rate of
growth of imports or even their composition.
• It was also done to catch up with the rising global prices and to
compensate the farmers with increasing cost of production.
• Raising the level of productivity and quality standards to
internationally competitive levels is one of the major
challenges following the dismantling of quantitative
restrictions on imports, as per the WTO Agreement on
Agriculture.
IARI 43

44. IARI 44