WTO’s Agreement on Agriculture Issues and Concerns for India

Yogesh Bandhu

Workshop on WTOU.P. Academy of Administration & Management, Lucknow

August 28th , 2012

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.

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

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

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

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

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

ProgrammesDe minimis

8

Green BoxNo, 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

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

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

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

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

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

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

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

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

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?

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

TIERED FORMULA

Tariff escalation (list) Tropical products (list)

Minimum average cut (Developed)

SVE flexibility

Maximum average cut (Developing)

LDC flex

SENSITIVEPRODUCTS

SPECIALPRODUCTS (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

Uruguay Round Reduction Commitments

Developed Developing

Time period 6 years (1995-2000) 10 years (1995-2004)

Market accessTariff reduction 36% average, 15%

minimum24% average, 10% minimum

Domestic supportTotal AMS reductionDe minimisS&D exemption

20%5%

13.3%10%

Article 6.2 (investment, input and diversification subsidies)

Export competitionExport subsidy reductionS&D exemption

36% value, 21% volume 24% value, 14% volumeArticle 9.4 (transport and

marketing subsidies)

No reduction commitments for LDCs (least-developed countries)

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

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 productsAMS is negative by a large margin and below De Minimis

Export subsidy

India does not have these.No commitments

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

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

Developing CountriesSVEs RAMs*

Threshold/Tier/Band

(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 commitmentsLonger implementation period, 10 years

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

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

Domestic Support

Main issue – size of reductions

Green BoxProduct-specific

limits Cotton

de minimisOverall trade-distorting

domestic support

Amber Box/AMS

10% VoP(Avg 95-00)

Blue Box

S&D

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

Reductions in OTDSSpecial & Differential Treatment

Developing Countries reduction2/3rds 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 transitionvery recently acceded Members

31

Product-Specific AMS Limits

Current situation:

Total AMSNew product-specific

AMS limits

sugar

beef

dairy

rice

wheat

dairy

beef

rice

wheat

sugar

limit

Beef limit

Rice limit

32

De minimisDeveloped 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

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

Final Bound Total AMS

10% value of Ag. production

Higher of: avg. Blue Box payments

OR5% val. Ag. prod

Base OverallOTDS

Lower Blue Box Limit

Reduced AMS

Reduced de minimis

Tiered reductions

Tieredreductions

Final OverallOTDS

Reductions in Overall Trade-Distorting Domestic Support

+

+

S&D for Developing Countries

35

Green Box – ProposalsPossible 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

Export Competition

Parallel elimination of all forms of export subsidies by 2013

Food AidMain issues – definition of safe

box, monetisation

Exporting STEsMain issue – monopoly powers

Export creditsMain issue -self-financing

Export subsidiesMain issue – phasing

Special and differential treatment

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

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

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

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

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:

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 provisionsTo 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….

Web: www.cetglad.orgMail: yogeshbandhu@cetglad.org

Cell: 09415118971