WTO’s Agreement on Agriculture Issues and Concerns for India


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The Agreement on Agriculture, entered into by WTO Member Countries in 1995, would be coming up for review at the end of this year. The full text of the Agreement is available on website address www.wto.org/ wto/legal/finalact.htm. Article 20 of the Agreement on Agriculture (AoA) points the way to further negotiations on agriculture. As a run up to the same, the WTO Committee on Agriculture has instituted a process of analysis and information exchange wherein informal papers are presented by various member countries highlighting implementation problems as well as areas of the agreement which need amendment, modification and further clarity.
While Article 20 mandates further negotiations, there is neither a fixed agenda nor a timetable for the same, which could probably mean that this process would simply be the beginning which could last for some years. These negotiations may cover several issues depending upon the position of different groups of countries.
The Agreement on Agriculture contains provisions in following three broad areas of agriculture and trade policy:
a) Market access envisages tariffication of all non-tariff barriers (that is removal of quantitative restrictions and export and import licensing).
b) Domestic support measures or subsidies are disciplined through reduction in the total Aggregate Measurement of Support (AMS) and area of export subsidies is also a trade concern for India as these measures affect the export of developing countries, rendering them uncompetitive when compared to subsidised exports of the developed countries. Further, they also result in distorting the world prices of agricultural commodities and thereby adversely affecting those developing countries which are net importers of foodgrains.
The Uruguay Round and the subsequent negotiations in services had not yielded significant returns to the developing countries, particularly in regard to market access in terms of movement of natural persons and hence, there was need to remove the existing imbalances in the General Agreement on Trade in Services (GATS) taking into account the interests of developing countries.

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WTO’s Agreement on Agriculture Issues and Concerns for India

  1. 1. WTO’s Agreement on Agriculture Issues and Concerns for India Yogesh Bandhu Workshop on WTO U.P. Academy of Administration & Management, Lucknow August 28th , 2012
  2. 2. AoA : From GATT to WTO The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO). The Charter was intended to provide world trade disciplines and also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services. Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of "plurilateral" - voluntary membership - agreements and continual efforts to reduce tariffs. The GATT was established on a provisional basis in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the "Bretton Woods" institutions now known as the World Bank and the International Monetary Fund.
  3. 3. The Tokyo Round – A First Try at Reforming the Trading System  Subsidies and countervailing measures  Technical barriers to trade  Import licensing procedures  Customs valuation  Government procurement  Anti-dumping  Bovine Meat Arrangement  International Dairy Arrangement  Trade in Civil Aircraft Conducted between 1973 and 1979 with 102 participating countries
  4. 4. 4 The WTO and Agreement on Agriculture • GATT - Inefficiency of Policies, Trade Tensions and Disputes • Punta del Este Declaration (1986) • Uruguay Round Negotiations (7.5 years) • Agreement on Agriculture Agriculture in GATT… Exemptions on Import Restrictions, Domestic Support, Export Subsidies Market Access Difficult WTO covers areas well beyond GATT Textile and Agriculture Services Intellectual Property Rights Investment
  5. 5. Basic Principles of WTO  Protection to domestic industry through tariffs.  Binding of tariffs.  Most Favoured Nation (MFN) Treatment.  National Treatment Three Pillars of the AoA Market Access Domestic Support Export Competition S&D, Peace Clause, Commitment to Reform, NFIDC Decision
  6. 6. Domestic Support: Three Categories of Domestic Support “Green Box” “Blue Box” “Amber Box” Product Specific Non-Product Specific De Minimis Provisions (AMS) Aggregate Measurement of Support
  7. 7. Green Box Art. 6.2 Blue Box Amber Box Categories of Domestic Support Subject to Reduction Commitments No/Minimal Effects on Trade or Production Development Programmes All other support Production Limiting Programmes De minimis
  8. 8. 8 Green Box No, or at most minimal, trade-distorting effects or effects on production Assistance Provided through publicly funded government programme Not involving transfers from consumers Not resulting in price support to producers measures freely used as long as they meet Annex 2 criteria can be introduced new, and/or modify old, programmes continuous obligation to ensure that all programmes are, and remain, Green
  9. 9. 9 Green Box – Scope General services research pest and disease control training extension/advisory services inspection marketing and promotion infrastructural services Public stockholding for food security Domestic food aid Direct payments decoupled income support income insurance and income safety-net relief from natural disasters structural adjustment assistance producer retirement resource retirement investment aids environmental programmes Regional assistance programme s
  10. 10. 10 Policy-Specific “Decoupling” Amount of payments not linked to: In any year after the base period Type of production Volume of production Domestic prices International prices Factors of production
  11. 11. 11 Blue Box Exempt from Reduction of Direct Payments Under Production Limiting Programmes if: based on fixed area and yields; or made on 85% of base level of production; or livestock payments are made on a fixed number of head
  12. 12. 12 Article 6.2 (Development Programmes Exempt from Reduction) Examples of notified Article 6.2 programmes e.g: • Bangladesh – 2% interest rebate for repayment of loan on schedule • Thailand – Farming input assistance programme • Brazil – Production credit; Investment credit; Debt rescheduling investment subsidies generally available to agriculture input subsidies generally available to low-income or resource poor producers support to encourage diversification from growing illicit narcotic crops
  13. 13. 13 Amber Box – Current Total AMS Non-product-specific support For example  Market price support  Non-exempt direct payments (e.g. loan deficiency payments, grants, compensatory payments)  Other non-exempt measures  All product-specific EMS For example  Water subsidies  Fertilizer subsidies  Crop insurance  Subsidized credits Product-specific support + Current Total AMS Any form of domestic support not included in either the Green or Blue Boxes or under Article 6.2 De minimis
  14. 14. Export Subsidy:  Prohibited  Otherwise subject to reduction commitments  Value of Subsidy  By 36% over 6 years for developed countries  By 24% over 10 years for developing countries  No reduction for least developed 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
  15. 15. 15 Export Subsidies Article 1(e): Subsidies contingent upon export performance, including the export subsidies listed in Article 9 Legal Framework  General prohibition under Article 3.3 of the AoA, except: • If listed in a Member’s Schedule – subject to reduction commitments (volume and budgetary outlays) • Roll-over provisions (now expired) • S&D: Article 9.4 - subsidies for marketing and internal transport (during the implementation period – now expired)  Anti-circumvention provisions
  16. 16. 16 Subsidy Coverage - Article 9.1  Direct subsidies contingent on export performance  Sale or disposal for export by governments or their agencies of non-commercial stocks at prices below domestic market price  Payments on exports financed by government action (including producer financed subsidies)  Subsidies to reduce cost of marketing, including handling, upgrading, international transport and freight  Favourable internal transport and freight charges on export shipments  Subsidies on agricultural products contingent on their incorporation in exported products
  17. 17. 17 Subsidy Circumvention – Article 10  Other forms of export subsidies  Export credits, insurance and guarantees  develop internationally agreed disciplines  but ... negotiations with no result - OECD Arrangement on Officially Supported Export Credits does not cover agriculture  Food aid  specific criteria, Food Aid Convention, FAO  but ... is it always genuine aid or dumping?
  18. 18. Market Access:  Reduction of Tariffs  By a simple average of 36% over 6 years for developed countries  By a simple average of 24% over 10 years for developing countries  Ceiling bindings & reduction commitments)  Minimum Access  Not less than 3%, rising to 5% by 2004 for developing countries  Not less than 3%, rising to % by 2004 for developing countries Quantitative Restrictions  Variable Levies  Minimum Import Prices  Discretionary Import Licensing  NTMs Maintained Through STEs  Voluntary Export Restraints  Similar Border Measures Tariffication of Non Tariff Barriers (NTB’s) Prohibition not to maintain, resort or revert to: BUT Annex 5 – Special Treatment
  19. 19. 19 TIERED FORMULA Tariff escalation (list) Tropical products (list) Minimum average cut (Developed) SVE flexibility Maximum average cut (Developing) LDC flex SENSITIVE PRODUCTS SPECIAL PRODUCTS (Developing) RAMs SP flexibility SVEs SP flexibility Commodities MARKET ACCESS SSG SSM (Developing) LDC products VRAMs and small low-income RAMs flexibility RAM flexibility Preference Erosion
  20. 20. 20 Uruguay Round Reduction Commitments Developed Developing Time period 6 years (1995-2000) 10 years (1995-2004) Market access Tariff reduction 36% average, 15% minimum 24% average, 10% minimum Domestic support Total AMS reduction De minimis S&D exemption 20% 5% 13.3% 10% Article 6.2 (investment, input and diversification subsidies) Export competition Export subsidy reduction S&D exemption 36% value, 21% volume 24% value, 14% volume Article 9.4 (transport and marketing subsidies) No reduction commitments for LDCs (least-developed countries)
  21. 21. Notification Obligations  Members bound to notify changes in Market Access, Export Subsidies and Domestic Support  India notifies  AMS  Product Specific for 19 crops  Non product specific: Fertilizer, Irrigation Electricity and seeds  Green Box  Special & differential , provisions for low income/ resource poor farmers
  22. 22. India’s Commitments  Market Access No tariffication; ceiling bindings of  100% for primary commodities  150% for processed agricultural products  300% for edible oils  Domestic Support Price Support for 19 products AMS is negative by a large margin and below De Minimis  Export subsidy India does not have these. No commitments
  23. 23. 23 Doha Negotiating Mandate  Comprehensive negotiations aimed at: • substantial improvements in market access • reductions of, with a view to phasing out, all forms of export subsidies • substantial reductions in trade-distorting domestic support  S&D - integral to negotiations and outcome  Non-trade concerns to be taken into account
  24. 24. 24 TIERED FORMULA Developed countries Threshold/Tier/Band (tariffs) Cuts 0-20% 50% 20-50% 57% 50-75% 64% >75% 70% The Tiered Formula Overall Minimum Average cut of 54%
  25. 25. 25 Developing Countries SVEs RAMs* Threshold/Tier/B and (tariffs) Cuts (2/3rds Developed cuts) Cuts Cuts 0-30% 33.3% 23.3% 25.3%* 30-80% 38% 28% 30% 80-130% 42.7% 32.7% 34.7% >130% 46.9% 46.9% 38.9% THE TIERED FORMULA Overall maximum average cut of 36% (Venezuela 30%, S&D for Bolivia & Suriname) *No cuts if tariff less than or equal to 10% Very recent RAMs and small low-income RAMs with economies in transition exempt from reduction commitments Longer implementation period, 10 years
  26. 26. 26 Special Agricultural Safeguard  Developed countries – reduce coverage to 1% of schedule tariff lines on 1st day of implementation  Remaining SSG coverage eliminated after 7 years  Developing countries – reduce coverage to 2.5% on 1st day of implementation  SVEs – reduce coverage to 5% of tariff lines over 12 years
  27. 27. 27 Other Market Access Elements  Tariff escalation (the problem of higher tariffs on processed products than on raw materials, which hinders processing for export in the country producing the raw materials).  Commodities – inter alia, if tariff escalation not eliminated, Members to engage with commodity-dependent producers to find satisfactory solution  Tariff simplification- conversion of complex tariffs to their ad- valorem equivalents  Tariff quotas • reductions in bound in-quota tariff rates • tariff quota administration)  LDCs – inter alia, duty- and quota-free access for at least 97 percent of products at a tariff line level  Cotton market access - duty- and quota-free for cotton exports from LDCs
  28. 28. 28 Domestic Support Main issue – size of reductions Green Box Product-specific limits Cotton de minimis Overall trade-distorting domestic support Amber Box/AMS 10% VoP (Avg 95-00) Blue Box S&D
  29. 29. 29 Reductions in OTDS  Tiered reduction formula – higher cuts for higher levels of OTDS  Developed Countries with high relative levels of OTDS in the second tier (≥ 40% of Value of Production) to undertake additional 5% effort (Japan) Minimum overall commitment Tier Threshold (US$ billion) Cuts 1 > 60 (EC) 80% 2 10-60 (US and Japan) 70% 3 < 10 (all other DDC) 55%
  30. 30. 30 Reductions in OTDS Special & Differential Treatment  Developing Countries reduction 2/3rds of Developed Countries cuts in the third tier (37%) BUT  Developing Countries exempt from OTDS reductions if: don’t have Amber box commitments; NFIDCs ; very recent RAMs and small low-income RAMs with economies in transition very recently acceded Members
  31. 31. Product-Specific AMS Limits Current situation: Total AMS New product-specific AMS limits sugar beef dairy rice wheat dairy beef rice wheat sugar limit Beef limit Rice limit
  32. 32. 32 De minimis Developed Countries  Reduce by at least 50% but more if necessary to meet OTDS Special and Differential Treatment  Reduce by at least 2/3rds of Developed Countries but more if necessary to meet OTDS commitment  RAMs with de minimis of 5 percent reduce by at least 1/3rd Developed Countries reduction  Longer implementation period (i) Developing with no Final Bound Total AMS; (ii) Developing with AMS but which allocate almost all that support to subsistence and resource poor producers; (iii) NFIDCs as list in G/AG/5/Rev.8; (iv) Very recently acceded Members; (v) Small low-income RAMs with economies in transition Exempt from reductions
  33. 33. 33 Blue Box  Additional criteria – expansion of policy coverage to include direct payments that do not require production  Overall cap on Blue Box – 2.5% of average total value of agricultural production, 1995-2000 (i.e. reduction from 5% vop to 2.5%) but if BB more than 40% of trade- distorting support, reduce by level of AMS cut  Product-specific limits  Special and Differential Treatment  Blue box cap at 5% of the average total value of agricultural production, either over the period 1995- 2000 or 1995-2004  Flexibilities with respect to determining the product- specific limits
  34. 34. 34 Final Bound Total AMS 10% value of Ag. production Higher of: avg. Blue Box payments OR 5% val. Ag. prod Base Overall OTDS Lower Blue Box Limit Reduced AMS Reduced de minimis Tiered reductions Tiered reductions Final Overall OTDS Reductions in Overall Trade-Distorting Domestic Support + + S&D for Developing Countries
  35. 35. 35 Green Box – Proposals Possible amendments to Annex 2, including:  expand coverage of para.2 to specifically cover the special needs of developing country Members  Additional flexibility when accounting for the acquisition of stocks for foodstuffs for food security purposes under para 3  tighten provisions related to base period update (paras. 6, 11 & 13)  fine-tune eligibility criteria in para 8, base periods and an allowance for payments in the event of destruction of animals or crops to control/prevent pest and diseases  exempt developing country Members from the condition that disadvantaged regions must constitute a clearly designated contiguous geographical area with a definable economic and administrative identity
  36. 36. 36 Export Competition Parallel elimination of all forms of export subsidies by 2013 Food Aid Main issues – definition of safe box, monetisation Exporting STEs Main issue – monopoly powers Export credits Main issue - self-financing Export subsidies Main issue – phasing Special and differential treatment
  37. 37. 37 Export Subsidy Elimination Developed Country Members Developing Country Members Elimination End of 2013 End of 2016 (no reductions for LDCs) Budgetary Outlays 50% by the end of 2010 and remaining by end 2013 Equal annual instalments Quantity levels Standstill at actual average 2003-05 levels – not to be used to new markets Equal annual instalments Article 9.4 NA 2021 (5 years after the end-date for elimination of export subsidies)
  38. 38. 38 Export Credits – Key Elements  Forms and providers subject to disciplines  Maximum repayment term: 180 days  Must be self-financing:  When premium rates charged over a previous 4 year (6yrs for Developing Countries ) rolling period are adequate to cover the operating costs and losses of the programme during the same period  Still subject to provisions of other Agreements, including the Agreement on Subsidies and Countervailing Measures (ASCM)  If an export subsidies within the meaning of Item (j) of Annex I of the ASCM, also deemed not to be self-financing  Repayment period between 360 & 540 days for LDCs and NFIDCs. Additional time in exceptional circumstances
  39. 39. 39 Agricultural Exporting State Trading Enterprises (STEs)  Provisions applicable to any exporting STEs meeting the definition set out in the Understanding on the Interpretation of Article XVII  Elimination of:  Export subsidies  Government financing of STEs  Government underwriting of losses  Monopoly powers – except if have small share of trade, so-called de minimis  S&D – provisions for Deveoping Countries, including SVEs and LDCs to maintain or use monopoly powers
  40. 40. 40 What is at Stake? To preserve flexibility in domestic support policies to ensure food and livelihood security. To create opportunities for a meaningful expansion of agricultural exports.  Tariff reductions – continued reform process with a high level of ambition  Improved possibility for developing countries to increase trade with developed countries but also other developing countries  Flexibility for developing countries to protect their sensitive sectors  Reduction of trade-distorting domestic support and elimination of export subsidies for improved competition, both on domestic and international markets  No new concessions for LDCs but duty- and quota-free access for 97 percent of tariff line India’s Objectives
  41. 41. As a S&D measure, developing countries to be allowed to maintain appropriate levels of tariffs Developing countries to retain flexibility for public stock holding and public distribution of food grains Use of special safeguard in the event of a surge in imports or a decline in prices Measures for poverty alleviation, rural development and employment to be exempt from AMS. Primary agricultural commodities like jute, rubber, coir and primary forest produce which provide employment and livelihood to many to be covered by AOA. Exemption to developing countries from any obligations to provide minimum market access. Historical low tariff bindings to be rationalised commensurate with bindings on similar category of products under the Uruguay Round. Negative product specific support to be allowed to be adjusted against positive non-product specific support. Proposal:
  42. 42.  Suitable accounting of all trade distorting support in the AMS calculations  Elimination of all forms of export subsidies including export credits, guarantees, insurance etc. by developed countries.  Flexibility available to developing countries under ASCM to be preserved in AOA  Peace clause not to be extended for developed countries  Down payment by way of 50% reduction in trade distortion and tariffs by developed countries by the end of 2001  Retaining and strengthening the existing S&D provisions To achieve meaningful market access it is proposed to seek:  Substantial reduction in tariffs, tariff peaks and tariff escalation by developed countries  Eventual abolition of TRQs  Transparent administration of TRQs with preference to developing countries in the interregnum Proposals Continued….
  43. 43. Web: www.cetglad.org Mail: yogeshbandhu@cetglad.org Cell: 09415118971