The document analyzes agricultural producer support in India from 1995-2013 and whether it complies with World Trade Organization (WTO) rules. It examines four crops - rice, wheat, cotton, and sugarcane - under different price gap scenarios and calculates their Aggregate Measurements of Support (AMS). It finds that using a fixed external reference price from 1986-88, India's AMS for rice, wheat, and sugarcane production exceeds the de minimis threshold in many years. However, adjusting the reference price for inflation or currency depreciation results in zero or negative price gaps and AMS for most crops and years. The analysis shows that India's methodology and use of administered prices versus market prices has significant implications

1. Agricultural producer support
in India in 1995-2013 and
the rules of the WTO
Lars Brink
IAMO Forum 2014: The rise of the ‘emerging economies’: Towards functioning agricultural markets and trade relations?
Leibniz Institute of Agricultural Development in Transition Economies (IAMO)
Agricultural and Applied Economics Association (AAEA)
International Agricultural Trade Research Consortium (IATRC)
25-27 June 2014, Halle (Saale), Germany Lars.Brink@hotmail.com

2. – Support from domestic measures only
• General services, payments, subsidies, administered prices
• Not border measures: tariffs, export subsidies, etc.
– Two kinds of domestic support
• Not limited: green box, blue box, Article 6.2
• Limited: everything else
– Measure support in particular ways
• AMSs Aggregate Measurements of Support
– Price gap support
– Payments, subsidies
Domestic support in the WTO
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2

3. – 1986-88 submission AGST
• Establishes data and methods for later notifications
• Price gaps in 19 product-specific AMSs
– Administered prices INR/tonne
– Reference prices INR/tonne
• Multiply by “eligible production”: total production
• Generates WTO market price support
• All product-specific AMSs negative in 1986-88
– Latest notification for 2003
• Need for up to date information on policies and support
India’s domestic support
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4. – Many questions in WTO CoAg
• Major issue called “notified in USD”
• Even more major issue is:
• Which reference price?
– Fixed 1986-88?
– Or continually raised in proportion to currency depreciation?
– Effect of India’s new method
• Raises reference price in INR/tonne, not in USD/tonne
• Result: price gap remains negative
– All product-specific AMSs negative in 1995-2003
India’s 1995-2003 notifications questioned
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5. – 4 crops: rice, wheat, cotton, sugarcane
– 4 price gap scenarios
I. Fixed external reference price FERP in INR/tonne
II. Deflate price gap by inflation
III. Increase reference price (no longer fixed) by inflation
IV. Increase reference price (no longer fixed) by currency
depreciation
– 2 eligible production scenarios
• Total production
• Government procurement
32* PS AMS calculations for 1995-2013
Lars Brink
5*Effectively less than 32 AMSs because no procurement of sugarcane and negative gaps in some scenarios.

6. Lars Brink
6-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Price gap: rice
I: using FERP
INR/tonne

7. Lars Brink
7-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Price gap: rice
I: using FERP
II: Deflated gap using FERP
INR/tonne

8. Lars Brink
8-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Price gap: rice
I: using FERP
II: Deflated gap using FERP
III: Using inflation adjusted ERP
INR/tonne

9. Lars Brink
9-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Price gap: rice
I: using FERP
II: Deflated gap using FERP
III: Using inflation adjusted ERP
IV: Using INR/USD adjusted ERP
INR/tonne

10. – I. Fixed external reference price
• Production
– AMS above 10 % of VOP for rice, wheat, cotton (some years), sugarcane
» In recent years: hugely above
• Procurement:
– AMS above 10 % of VOP in recent years for rice, wheat
– II. Deflated price gap
• Production
– AMS above 10 % of VOP for rice, wheat, sugarcane
• Procurement
– AMS never above 10 % of VOP
Results: Scenarios I and II
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11. – III. Inflation-adjusted ERP
• Production
– Price gap negative for rice, wheat, cotton, so AMS = zero
– But sugarcane AMS above 10 % of VOP
• Procurement
– Price gap negative for rice, wheat, cotton, so AMS = zero
• No procurement of sugarcane
– IV. Currency-depreciation-adjusted ERP
• Production
– Price gap not negative for rice in later years
– Significantly: rice AMS above 10 % of VOP in 2009-13
• Procurement
– Rice AMS below 10 % of VOP in later years
Results: Scenarios III and IV
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12. Lars Brink
12
-
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
AMS: rice
I: FERP; production
I: FERP; procurement
10% of VOP
INR billion

13. Lars Brink
13
-
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
AMS: rice
II: Deflated FERP gap; production
II: Deflated FERP gap; procurement
10% of VOP
INR billion

14. Lars Brink
14
-
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
AMS: rice
IV: INR/USD adjusted ERP; production
IV: INR/USD adjusted ERP; procurement
10% of VOP
INR billion

15. Lars Brink
15
-
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
AMS: rice
I: FERP; production
I: FERP; procurement
II: Deflated FERP gap; production
II: Deflated FERP gap; procurement
IV: INR/USD adjusted ERP; production
IV: INR/USD adjusted ERP; procurement
10% of VOP
INR billion

16. Lars Brink
16
Years in which an AMS exceeds its de minimis threshold
Price gap scenario
I
Fixed ERP
(FERP)
II
Deflated gap
using FERP
III
Inflation-adjusted
ERP
IV
INR/USD-adjusted
ERP
Rice AMS
• Production 1995-2013 1995-2013 - 2009-2013
• Procurement 2000-2013 - - -
Wheat AMS
• Production 1996-2013 1996-2013 - -
• Procurement 2001-2002, 2008-2013 - - -
Cotton AMS
• Production 2008-2009, 2011-2013? - - -
• Procurement - - - -
Sugarcane AMS
• Production 1995-2013 1995-2013 1995-2013 2002-2013
• Procurement Not applicable Not applicable Not applicable Not applicable
Non-product-
specific AMS
2008

17. – Deviating from 1986-88 data and methodology …
• … matters greatly for de minimis compliance
– But even deviating by increasing reference prices …
• … is not enough for de minimis compliance in 2009-13 for rice
– Appearance of compliance requires also …
• … switching from “production” to “procurement”
Implications for compliance
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18. – WTO measurement of support vs. economic support
– Legal interpretation of Agreement matters
• “Taking into account” the 1986-88 method means what?
• “Fixed external reference price” means what?
– Is inflation adjustment allowed?
• Not in notifications
• But CoAg must give due consideration to excessive inflation
• How to give consideration to any excessive inflation?
Points for discussion
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19. – Administered prices are at root of India’s problem
• Not level but use
– Past administered prices have been close to international prices
• Agreement effectively penalizes use of administered prices
• AAP & eligible production are set by policy; FERP is constant
• Must calculate price gap support in AMS
– If no administered price, no price gap support in AMS
• Different from economic measurements of support
– Buy or procure at market prices
• No need to calculate price gap support
– Even if domestic market prices exceed international prices
Bottom line
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20. Thank you!
Lars.Brink@hotmail.com
References
Brink, L. 2014. Support to agriculture in India in 1995-2013 and the rules of the WTO. Working paper 14-01, International Agricultural Trade
Research Consortium (IATRC). http://ageconsearch.umn.edu/bitstream/166343/2/WP%2014-01%20Brink.pdf
Brink, L. 2014 (forthcoming). Evolution of trade-distorting domestic support. In Tackling Agriculture in the Post-Bali Context. Geneva: International
Centre for Trade and Sustainable Development (ICTSD), E-book.
Brink, L. 2011. The WTO Disciplines on domestic support. In WTO Disciplines on Agricultural Support: Seeking a Fair Basis for Trade, ed. D. Orden, D.
Blandford and T. Josling. Cambridge: Cambridge University Press.
Brink, L. 2009. WTO constraints on domestic support in agriculture: past and future. Canadian Journal of Agricultural Economics 57(1): 1-21.
DOI: 10.1111/j.1744-7976.2008.01135.x
With grateful acknowledgement of financial support from
the Global Issues Initiative of the Institute for Society, Culture and Environment, Virginia Tech