Curb on Indian agri-exports

World Trade Organization (WTO) is looking into resolving its rules that are making it difficult for India to export food-grains. This was announced by Ngozi Okonjo-Iweala, Director-General of WTO while speaking at the IMF Plenary meeting.

What is happening?

• India has reached out to more than 20 countries regarding exporting wheat.
• India is targeting a record 15 million tonnes of wheat for export this year.
• India is expected to have a surplus this year, producing more than 111 million tonnes of the crop.

About the ‘Agreement on Agriculture’ –

• AoA is a treaty of WTO. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The WTO Agreement on Agriculture was one of the many agreements which were negotiated during the Uruguay Round.
• The implementation of the AoA started with effect from 1st January, 1995.
• The agreement aims to remove trade barriers and to promote transparent market access and integration of global markets.
• The products which are included within the purview of this agreement are what are normally considered as part of agriculture. It excludes fishery and forestry products as well as rubber, jute, sisal, abaca and coir.

Obligation under the agreement –

As per the provisions of the Agreement –

• The developed countries were to complete their reduction commitments within 6 years, i.e., by the year 2000;
• the commitments of the developing countries were to be completed within 10 years, i.e., by the year 2004.
• The least developed countries were not required to make any reductions.

Provisions of the agreement –

1. Market Access –

• This includes tariffication, tariff reduction and access opportunities.
• Tariffication means that all non-tariff barriers need to be abolished and converted into an equivalent tariff. Quotas, variable levies, minimum import prices, discretionary licensing, etc. are termed as non-tariff barriers.
• Special safeguard provision allows the imposition of additional duties when there are either import surges above a particular level or particularly low import prices as compared to 1986-88 levels.

2. Domestic Support –

• It calls for reduction in domestic subsidies that distorts free trade and fair price.
• The AoA classifies domestic subsidies into different types; under various boxes by assigning certain colours:
  • • Amber Box – All subsidies which are supposed to distort production and trade fall into the amber box, i.e., all agricultural subsidies except those which fall into the blue and green boxes. These include government policies of minimum support prices (as MSP in India) for agricultural products or any help directly related to production quantities (as power, fertilizers, pesticides, irrigation, etc). Under the WTO provisions, these subsidies are subject to reduction commitment to their minimum level—to 5 per cent and 10 per cent for the developed and the developing countries, respectively, of their total value of agricultural outputs, per annum accordingly.
    • Blue Box – This is the amber box with conditions. The conditions are designed to reduce distortions. Any subsidy that would normally be in the amber box, is placed in the blue box if it requires farmers to go for a certain production level. These subsidies are nothing but certain direct payments (i.e., direct set-aside payments) made to farmers by the government in the form of assistance programmes to encourage agriculture, rural development, etc. At present there are no limits on spending on subsidies in the blue box.
    • Green Box – The agricultural subsidies which cause minimal or no distortions to trade are put under the green box. They must not involve price support. This box basically includes all forms of government expenses, which are not targeted at a particular product, and all direct income support programmes to farmers, which are not related to current levels of production or prices. This is a very wide box and includes all government subsidies like—public storage for food security, pest and disease control, research and extension, and some direct payments to farmers that do not stimulate production like restructuring of agriculture, environmental protection, regional development, crop and income insurance, etc. The green box subsidies are allowed without limits provided they comply with the policy-specific criteria.
    • S&D Box – The Social and Development Box (S & D Box) allows the developing countries for some subsidies to the agriculture sector under certain conditions. These conditions revolve around human development issues such as poverty, minimum social welfare, health support, etc., specially for the segment of population living below the poverty line. Developing countries can forward such subsidies to the extent of less than 5 percent of their total agricultural output.

3. Export Subsidies –

• The Agreement contains provisions regarding members commitment to reduce Export Subsidies.
• Subsidy on inputs of agriculture, making export cheaper or other incentives for exports are included under export subsidies.