Agreement on Agriculture

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The Agreement on Agriculture (AoA) is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on 1 January 1995.

History

Origins

The idea of replacing agricultural price support with direct payments to farmers decoupled from production dates back to the late 1950s, when the twelfth session of the

GATT Contracting Parties selected a Panel of Experts chaired by Gottfried Haberler to examine the effect of agricultural protectionism, fluctuating commodity
prices and the failure of export earnings to keep pace with import demand in developing countries.

The 1958 Haberler Report stressed the importance of minimising the effect of agriculture subsidies on competitiveness and recommended replacing price support with direct supplementary payments not linked with production, anticipating discussion on green box

agricultural system.[1]

Historical context

By the 1980s, government payments to agricultural producers in industrialised countries had caused large crop surpluses, which were unloaded on the world market by means of export

subsidies, pushing food prices down. The fiscal burden of protective measures increased, due both to lower receipts from import duties and higher domestic expenditure. In the meantime, the global economy had entered a cycle of recession, and the perception that opening up markets could improve economic conditions led to calls for a new round of multilateral trade negotiations.[2] The round would open up markets in services and high-technology goods, ultimately generating much needed efficiency gains. In order to engage developing countries, many of which were "demandeurs" of new international disciplines, agriculture, textiles, and clothing were added to the grand bargain.[1]

In leading up to the 1986

subsidies that cause "not more than minimal trade distortion" in order to deliver various public policy objectives.[1]

Three pillars

The Agreement on Agriculture consists of three pillars — domestic support, market access, and export subsidies.

Domestic support

The first pillar of the Agreement on Agriculture is "domestic support". AoA divides domestic support into two categories: trade-distorting and non-trade-distorting (or minimally trade-distorting). The WTO Agreement on Agriculture negotiated in the

subsidies by "boxes" depending on consequences of production and trade: amber (most directly linked to production levels), blue (production-limiting programmes that still distort trade), and green (minimal distortion).[3] While payments in the amber box had to be reduced, those in the green box were exempt from reduction commitments. Detailed rules for green box payments are set out in Annex 2 of the AoA. However, all must comply with the "fundamental requirement" in paragraph 1, to cause not more than minimal distortion of trade or production, and must be provided through a government-funded programme that does not involve transfers from consumers or price support to producers.[1]

The Agreement on Agriculture's domestic support system currently allows

agribusinesses.[4] These subsidies end up flooding global markets with below-cost commodities, depressing prices, and undercutting producers in poor countries, a practice known as dumping
.

Market access

Market access refers to the reduction of tariff (or non-tariff) barriers to trade by WTO members. The 1995 Agreement on Agriculture consists of tariff reductions of:

  • 36% average reduction —
    developed countries
    — with a minimum of 15% per-tariff line reduction in next six years.
  • 24% average reduction —
    developing countries
    — with a minimum of 10% per-tariff line reduction in next ten years.

non-tariff barriers to tariffs — a process called tariffication — or "bind" their tariffs, creating a ceiling that could not be increased in future.[5]

Export subsidies

developed countries
to reduce export subsidies by at least 36% (by value) or by 21% (by volume) over six years. For developing countries, the agreement required cuts were 24% (by value) and 14% (by volume) over ten years.

Criticism

The Agreement has been criticised by

developing countries
, while simultaneously allowing rich countries to continue subsidizing agriculture at home.

The Agreement was criticised by

WTO
members to reduce their trade-distorting "amber box" and "blue box" support, developed countries' green box spending has increased.

A 2009 book by the International Centre for Trade and Sustainable Development (ICTSD) showed how green box subsidies distorted trade, affecting developing country farmers and harming the environment. While some green box payments only had a minor effect on production and trade, others have a significant impact.

WTO, the United States provided $76 billion (more than 90% of total spending) in green box payments in 2007, while the European Union notified €48 billion ($91 billion) in 2005, around half of all support. The EU's large and growing green box spending was decoupled from income support, which could lead to a significant impact on production and trade.[1]

Third World Network stated, "This has allowed the rich countries to maintain or raise their very high subsidies by switching from one kind of subsidy to another...This is why after the Uruguay Round the total amount of subsidies in OECD countries have gone up instead of going down, despite the apparent promise that Northern subsidies will be reduced." Moreover, Martin Khor argued that the green and blue box subsidies can be just as trade-distorting — as "the protection is better disguised, but the effect is the same".[7]

At the 2005 WTO meeting in Hong Kong, countries agreed to eliminate export subsidy and equivalent payments by 2013. However, Oxfam argued that EU export subsidies comprise for only 3.5% of its overall agricultural support. United States, removed export subsidies for cotton which only covers 10% of overall spending.

[8]

on 18 July 2017 India and China jointly submitted a proposal to the World Trade Organization (WTO) calling for the elimination — by developed countries — of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support (AMS) or 'Amber Box' support as a prerequisite for consideration of other reforms in domestic support negotiations. [9]

Mechanisms for developing countries

During the Doha negotiations,

trade liberalization
, becoming increasingly vulnerable to market instability and import surges as tariff barriers are removed. Several mechanisms have been suggested in order to preserve those countries: the Special Safeguard Mechanism (SSM) and treatment of Special Products (SPs).

Special Safeguard Mechanism

A Special Safeguard Mechanism (SSM) would allow developing countries to impose additional safety measures in the event of an abnormal surge in imports or the entry of unusually cheap imports.[10] Debates have arisen around this question, some negotiating parties claiming that SSM could be repeatedly and excessively invoked, distorting trade. In turn, the G33 bloc of developing countries, a major SSM proponent, has argued that breaches of bound tariffs should not be ruled out if the SSM is to be an effective remedy. A 2010 study by the International Centre for Trade and Sustainable Development simulated the consequences of SSM on global trade for both developed and developing countries.[10]

Special Products

At 2005

WTO Ministerial Conference in Hong Kong, WTO members agreed to allow developing countries to assign or make appropriate list of products for tariff lines as Special Products (SPs) based on "food security, livelihood security and rural development".[11]

See also

References

  1. ^ a b c d e Agricultural Subsidies in the WTO Green Box Archived 2 June 2018 at the Wayback Machine, ICTSD, September 2009.
  2. ^
    ISBN 978-0521519694
    .
  3. ^ "Agriculture Negotiations: Background Fact Sheet", World Trade Organization.
  4. ^ "Fine words - now we need action". The Guardian. 15 November 2005.
  5. ^ "WTO | Understanding the WTO - Agriculture: Fairer markets for farmers".
  6. ISBN 978-0521519694
    .
  7. ^ TWN Statement on Agriculture at the UN ECOSOC High-Level Session" Archived December 27, 2010, at the Wayback Machine TWN, July 2003
  8. ^ "WTO agreement a betrayal of development promises" Archived September 28, 2011, at the Wayback Machine, Oxfam December 2005
  9. ^ Srinivas, Vasudeva. "India,China Join Hand in WTO for Amber Box". No. Online. ABC Live. Retrieved 1 September 2017.
  10. ^
    ISSN 1817-356X
    .
  11. ^ International Centre for Trade and Sustainable Development and Food and Agriculture Organization, "Indicators for the Selection of Agricultural Special Products: Some Empirical Evidence", ICTSD Information Note Number 1. July 1, 2007.

External links

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