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COM-I

THE AGREEMENT ON AGRICULTURE

I.

INTRODUCTION

A. WORLD TRADE ORGANISATION (WTO) The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (19861994). The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector(requested

by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there have been an increasing number of bilateral free trade agreements signed. As of July 2012, there were various negotiation groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate.

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B. THE AGREEMENT ON AGRICULTURE The Agreement on Agriculture 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 January 1, 1995 C. HISTORY OF THE AGREEMENT Original idea The idea of replacing agricultural price support with direct payments to farmers decoupled from production dates back to the late 1950s, when a Panel of Experts, chaired by Professor Gottfried Haberler, was established at the twelfth session of the GATT Contracting Parties 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 by direct supplementary payments not linked with production, anticipating discussion on green box subsidies. Only more recently, though, has this shift from price support to producer support become the core of the reform of the global agricultural system.

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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. The round would open up markets in services and high technology goods, and ultimately generate much needed efficiency gains. With a view to engaging developing countries in the negotiations, many of which were demandeurs of new international disciplines, agriculture, textiles and clothing were added to the grand bargain. In leading up to the 1986 GATT Ministerial Conference, developed country farm groups that had benefited from protectionist policies strongly resisted any specific compromise on agriculture. In this context, the idea of exempting production and trade-neutral subsidies from WTO commitments was first proposed by the US in 1987, and echoed soon after by the EU. By guaranteeing farmers a continuation of their historical level of support, it also contributed to neutralising opposition to the round. In exchange for bringing agriculture within the disciplines of the WTO and committing to future reduction of trade-distorting subsidies, developed countries would be allowed to retain subsidies that cause not more than minimal trade distortion in order to deliver various public policy objectives.

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D. THREE PILLARS The AoA has three central concepts, or "pillars": domestic support, market access and export subsidies Domestic support: the boxes The first pillar of the AoA is "domestic support". The WTO Agreement on Agriculture negotiated in the Uruguay Round (19861994) includes the classification of subsidies into boxes depending on their effects on production and trade: amber (most directly linked to production levels), blue (production-limiting programmes that still distort trade), and green (causing not more than minimal distortion of trade or production).[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 Agreement on Agriculture. 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. The AoA's domestic support system currently allows Europe and the USA to spend $380 billion every year on agricultural subsidies alone. "It is often still argued that subsidies are needed to protect small farmers but, according to the World Bank, more than half of EU support goes to 1% of producers while in the US 70% of subsidies go to 10% of producers, mainly agri-businesses.". The effect of these subsidies is to flood global markets with below-cost commodities, depressing prices and undercutting producers in poor countries a practice known as dumping.

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This pertains to government support to domestic producers. The AoA categorizes domestic support measures into three types: Amber Box These are measures that are considered trade-distorting and are therefore subjected to reduction. These are support that have effect on production like price support and input subsidies. Green Box These are assumed not to have effects on production and therefore considered not trade-distorting. They are acceptable under AoA and are not subjected to reduction. They include support for research, marketing assistance, infrastructure services, domestic food aid, etc. Blue Box These are measures such as direct payments to farmers that are intended to limit production. These are considered acceptable and are not subject to reduction, too. Subsidies categorized under the Amber Box are calculated using the Aggregate Measure of Support (AMS) and are reduced in each year of the implementation period. This means that the annual reduction is computed based on the over-all support in terms of the annual amounts and not on product-specific subsidies. A country is free to choose the product and the rates of subsidy subjected to reduction discipline within the over-all limit of the total amount of subsidy during that year. This provision stipulates for a general de minimis exclusion from subsidy reduction, which is 5% of the value of production of a product for product-specific subsidies and 5% of the value of total agricultural production for non-product specific

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M.COM-I Market Access

THE AGREEMENT ON AGRICULTURE

"Market access" is the second pillar of the AoA, and refers to the reduction of tariff (or non-tariff) barriers to trade by WTO member-states. The 1995 AoA required tariff reductions of:

36% average reduction by developed countries, with a minimum per tariff line reduction of 15% over six years.

24% average reduction by developing countries with a minimum per tariff line reduction of 10% over ten years.

Least Developed Countries (LDCs) were exempted from tariff reductions, but either had to convert nontariff barriers to tariffsa process called tarifficationor "bind" their tariffs, creating a "ceiling" which could not be increased in future. All countries are obliged to eliminate all their non-tariff barriers like import ban, import quota or quantitative restrictions on imports, etc. and convert these to tariffs. This is called, in the WTO, tariffication. The tariff rate should be equivalent to the barriers that were imposed in the base reference period of 1986-88. All countries have to bind their tariffs on all agricultural products and progressively reduce all tariffs starting from their initial bound rate in 1995 to their final bound rate at the end of the implementation period.

The average reduction for developed countries is 36% within six years and for developing countries, 24% within 10 years. Exceptions to tariffication are allowed under the Special Safeguard provision and the Special Treatment clause for specific commodities. The Special safeguard can be invoked only for commodities which have been subjected to tariffication

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This provision allows countries to apply additional duties on imports that should not exceed one-third of their existing normal custom duties, in the event of import surges or sudden fall in the world price of the affected commodities. Only one of this condition can be used to justify a safeguard action at any one time. The Special Treatment clause, like the safeguard clause is not a full exemption to tariffication but a mere postponement to allow protection of specific commodities like staple foods. For developed countries, postponement is allowed until at least at the end of their implementation period which is 2000 and for developing countries until the 10th year or 2004.

Another provision for increasing market access is the minimum and current access volumes. However, this is contained only in the modality paper and is therefore legally binding only if it is reflected in the specific commitments and detailed in the members country schedules. The minimum access obliges a country to provide access opportunities for agricultural products where there have been no significant imports in the past, at lower or minimal tariffs. This lower tariff is referred to as the within-quota tariff and the quantity of goods imported at this lower tariff is called the tariff-rate quota (TRQ). The TRQs are to be allocated equally to all countries or on what they call the most-favoured nation (MFN) basis.

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Export subsidies "Export subsidies" is the third pillar of the AoA. The 1995 AoA required developed countries to reduce export subsidies by at least 36% (by value) or by at least 21% (by volume) over the six years. In the case of developing country Members, the required cuts are 14% (by volume) and 24% (by value) over 10 years.

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M.COM-I II. SAILENT FEATURES

THE AGREEMENT ON AGRICULTURE

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy: market access, domestic support and export subsidies. a. Market Access This includes tariffication, tariff reduction and access opportunities. Tariffication means that all non-tariff barriers such as quotas, variable levies, minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements etc. need to be abolished and converted into an equivalent tariff. Ordinary tariffs including those resulting from their tariffication are to be reduced by an average of 36% with minimum rate of reduction of 15% for each tariff item over a 6 year period. Developing countries are required to reduce tariffs by 24% in 10 years. Developing countries as were maintaining Quantitative Restrictions due to balance of payment problems, were allowed to offer ceiling bindings instead of tariffication. 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. It has also been stipulated that minimum access equal to 3% of domestic consumption in 1986-88 will have to be established for the year 1995 rising to 5% at end of the implementation period. b. Domestic support For domestic support policies, subject to reduction commitments, the total support given in 1986-88,measured by the total Aggregate Measurement of Support (AMS) should be reduced by 20% in developed countries (13.3% in developing countries). Reduction commitments refer to total levels of support and not to individual commodities. Policies which amount to domestic support both under the product
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specific and non-product specific categories at less than 5% of the value of production for developed countries and less than 10% for developing countries are also excluded from any reduction commitments. Polices which have no or at most minimal trade distorting effects on production are excluded from any reduction commitments. The list of exempted green box policies includes such policies which provide services or benefits to agriculture or the rural community, public stock holding for food security purposes, domestic food aid and certain de-coupled payments to producers including direct payments to production limiting programmes, provided certain conditions are met. Special and Differential Treatment provisions are also available for developing country members. These include purchases for and sales from food security stocks at administered prices provided that the subsidy to producers is included in calculation of AMS. Developing countries are permitted untargeted subsidised food distribution to meet requirements of the urban and rural poor. Also excluded for developing countries are investment subsidies that are generally available to agriculture and agricultural input subsidies generally available to low income and resource poor farmers in these countries. c. Export Subsidies The Agreement contains provisions regarding member's commitment to reduce Export Subsidies. Developed countries are required to reduce their export subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalment (from 1986-1990 levels). For developing countries the percentage cuts are 24% and 14% respectively in equal annual installment over 10 years. The Agreement also specifies that for products not subject to export subsidy reduction commitments, no such subsidies can be granted in the future.

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M.COM-I III. INDIAS COMMITMENTS

THE AGREEMENT ON AGRICULTURE

a. Market Access As India was maintaining Quarantine Restrictions due to balance of payments reasons (which is a GATT consistent measure), it did not have to undertake any commitments in regard to market access. The only commitment India has undertaken is to bind its primary agricultural products at 100%; processed foods at 150% and edible oil at 300%. Of course, for some agricultural products like skimmed milk powder, maize, rice, spelt wheat, millets etc. which had been bound at zero or at low bound rates, negotiations under Article XXVIII of GATT were successfully completed in December, 1999 and the bound rates have been raised substantially. b. Domestic Support India does not provide any product specific support other than market price support. During the reference period (1986-88), India had market price support programmes for 22 products, out of which 19 are included in our list of commitments filed under GATT. The products are: rice, wheat, bajra, jawar, maize, barley, gram, groundnut, rapeseed, toria, cotton, soyabean, (yellow), soyabean (black), urad, moong, tur, tobacco, jute and sugarcane. The total product specific AMS was (-) Rs. 24,442 crores during the base period. The negative figure arises from the fact that during the base period, except for tobacco and sugarcane, international prices of all products was higher than domestic prices, and the product specific AMS is to be calculated by subtracting the domestic price from the international price and then multiplying the resultant figure by the quantity of production. Non-product specific subsidy is calculated by taking into account subsidies given for fertilisers, water,seeds, credit and electricity. During the reference period the total non- product specific AMS wasRs. 4581 crores. Taking both product specific

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andnon-product specific AMS into account, the total AMS was (-) Rs.19,869 crores i.e., about (-) 18% of the value of total agricultural output. Since our total AMS is negative and that too by a huge magnitude, the question of our undertaking reduction commitment did not arise. As such, we have not undertaken any commitment in our schedule filed under GATT. The calculations for the marketing year 1995-96 show the product specific AMS figure as (-) 38.47% and non-product specific AMS as 7.52% of the total value of production. We can further deduct from these calculations the domestic support extended to low income and resource poor farmers provided under Article 6 of the Agreement on Agriculture. This still keeps our aggregate AMS below the de minimum level of 10%. c. Export Subsidies In India, exporters of agricultural commodities do not get any direct subsidy. The only subsidies available to them are in the form of (a) exemption of export profit from income tax under section 80-HHC of the Income Tax Act and this is also not one of the listed subsidies as the entire income from Agriculture is exempt from Income Tax per se. (b) subsidies on cost of freight on export shipments of certain products like fruits, vegetables and floricultural products. We have, in fact, indicated in our schedule of commitments that India reserves the right to take recourse to subsidies (such as, cash compensatory support) during the implementation period.

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M.COM-I IV.

THE AGREEMENT ON AGRICULTURE

COMMITTEE ON AGRICULTURE

The Agreement on Agriculture is overseen by the Committee on Agriculture which reviews progress in the implementation of commitments mentioned above. The Agreement also calls for further negotiations to be initiated before the end of the fifth year of implementation. The Agreement is thus coming up for review at the end of 1999. India has not undertaken any commitments under the Uruguay Round Agreement on Agriculture (AoA) which constrain us from following our developmental policy with regard to agriculture or which entail any action on our side immediately. We would, however, need to study the implications of removal of quantitative restrictions on market access, subsidy to farmers and tariffs on imports. The structure of the Agreement on Agriculture as it exists today seems to be slightly imbalanced, since it enables countries subsidising the agriculture sector heavily to retain a substantial portion of their subsidies upto the end of the implementation period while those countries which were not using these measures earlier are prohibited to use these measures in future beyond the de-minimis limit. We have to find ways to bring about more equity into the structure of the Agreement.

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M.COM-I V. MANDATED NEGOTIATIONS

THE AGREEMENT ON AGRICULTURE

Article 20 of the Agreement on Agriculture mandates that negotiations for continuing the reform process in agriculture will be initiated one year before the end of the implementation period. As the implementation period for developed countries culminates at the end of the year 2000, the negotiations on the Agreement on Agriculture have begun this year. These negotiations are to be conducted in special sessions of the WTO Committee on Agriculture at Geneva. The following are to be the broad parameters for carrying out negotiations: a. Experience of member countries in implementation of reduction commitments till date. b. The effects of reduction commitments on World Trade in Agriculture. c. Non-trade concerns, special and differential treatment to developing country members and the objectives of establishing a fair and market oriented agricultural trading system are the other objectives of the negotiations. d. What further commitments are necessary to achieve the long term objectives of the Agreement. During extensive deliberations in the WTO Committee on Agriculture and in the General Council, member countries have agreed to broadly adhere to the mandate of Article 20 of the Agreement. Members have also agreed to submit their proposals by the end of this year.

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M.COM-I VI. STATE OF PLAY

THE AGREEMENT ON AGRICULTURE

Through formal and informal discussions in the Committee on Agriculture, the WTO membership has been debating on various issues of concern to them. The demarcation in various groups of countries has now become clearer. The EU, certain Nordic countries like Norway and Japan are on the one side, wanting to continue their subsidy regimes in agriculture, whereas the Cairns group of countries who are naturally endowed agriculture producers, are totally opposed to the trade distorting subsidies and the protectionist regime being practiced by EU and Japan. The United States, though opposing EU and not completely with the Cairns group either, forms the third dimension. The developing countries are somewhere in the middle, not having decided whether or not to form a 4th dimension. The Cairns group of countries, votaries of unrestricted trade, comprises a group of 18 major agricultural exporting countries. They have listed the elimination of export subsidies and domestic subsidies as goals of the ongoing agricultural negotiations at the World Trade Organisation. They have also called for better information and analysis of tariff rates, quota administration, export subsidies, domestic support programmes and market access as well as members position on bio-technology and Genetically Modified Organisms. The U.S agenda for negotiations would be driven by further trade liberalisation in the agricultural sector, which would benefit US interests. There is likely to be an emphasis on global tariff reduction on agricultural products, greater transparency and improved disciplines on state trading enterprises, proper implementation of tariff rate quotas and greater disciplines on bio-technology, as well as, further strengthening of the sanitary and phytosanitary agreement.

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The European Union is more vulnerable to attack in the WTO on the issue of its distortion of markets through domestic subsidisation of agriculture. In the context of further liberalisation, EU would strongly defend its "Blue Box" policies. They feel that in case Blue Box is to be abolished, the WTO contracting parties will have to agree to change of the present rules in the Agreement on Agriculture. The EU would be pressing at the international level for improvements in food safety and food quality standards as well as in supporting environmental and social sustainability. It is, thus, apparent that EU intends to maintain protection of its agricultural industry at the highest possible level while maximising concessions to be gained in other country markets. Japan highlights the importance of the multifunctional role of agriculture, food security and a fair balance between rights and duties of importing and exporting countries from the standpoint of a net importer of farm products. Briefly, it has been emphasised that Article 20 of the Agreement adequately reflects both the emphasis and context in which these negotiations should be entered upon. The most important aspect of the negotiations would be to address implementation problems up front, in the areas ofmarket access, domestic support, export subsidy, notification requirements & technical assistance. The inadequate implementation of special & differential provisions in the above mentioned areas is a cause of particular concern to us. India has suggested that an in-depth analysis and assessment of the effect of the Uruguay Round on the trade of developing countries should be an essential pre-requisite of any negotiations.

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VII. LIKELY ISSUES FOR NEGOTIATIONS AND POSSIBLE INDIAN STAND a. Market Access: i) High agricultural tariffs and tariff peaks being applied by some WTO members are significant barriers to meaningful market access opportunities. We would have to very carefully articulate it as India will need to have a reasonable level of tariff protection for taking care of its food security and rural employment concerns. ii) Tariff escalation is another factor, which discourages developing countries from diversifying from primary commodity production to processed value added agricultural products for export purposes. iii) The operation of tariff rate quotas in a non-transparent and complex manner limits trade opportunities of new suppliers, particularly from developing countries. In this context, thus, guidelines on TRQ allocation and administration would be sought so as to enhance market access opportunities. It may be desirable to press for the elimination of tariff rate quota system itself. iv) Certain aspects of sanitary and phytosanitary measures which limit market access particularly for exports of developing countries would also figure prominently in the forthcoming negotiations. v) The special safeguard provisions, which are available to only a few Member countries, would also be coming up for review and India would press for its availability to all developing countries.

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M.COM-I b. Domestic Support:

THE AGREEMENT ON AGRICULTURE

i) During the course of implementation of obligations/commitments, a number of member countries particularly from the developing world have experienced difficulty in calculating and notifying their aggregate measurement of support (AMS) on account of the following factors:a) Financial/resource constraints limit the capacity of most developing countries to provide support to their agricultural sector even upto the de minimis level. b) Lack of clarity in the agreement with regard to the treatment of negative AMS and "excessive inflation", reduces the flexibility provided to developing countries during the Uruguay Round to address their domestic policy concerns. Such implementation issues would require clarification during the current negotiations. ii) The 'Green Box' should be revisited for a further tightening of criteria as it currently incorporates various provisions for support, many of which are not non-trade distorting. Moreover, as it is currently designed, it is not of much assistance to developing countries as it does not reflect their support programmes. iii) The Blue Box measures which refer to direct payments to farmers under production limiting programmes which are currently exempt from AMS reduction commitments, should either be totally dispensed with or alternatively should be subject to reduction commitments. iv) Ways and means to incorporate increased flexibility in the level and use of de minimis support would also be discussed.

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M.COM-I c. Export Subsidies:

THE AGREEMENT ON AGRICULTURE

i) Export subsidies are universally acknowledged to be the single most trade distortive impact in agriculture because of their potential of displacing developing country exports. There would be a strong demand for a complete outlawing of export subsidies. India would also press for it. However, as long as the export subsidies are permitted to be given by any country above the de minimis limit provided under the WTO's Subsidies and Countervailing Measures agreement, India should also have right to give export subsidies upto an appropriate level. ii) Establishment of disciplines in the field of export credits, guarantees and deferred payments which have a negative effect on prices and competition in the world agricultural market, would be insisted and India would like it to be also included under the disciplines of Export Subsidies. iii) On account of ambiguity in the existing language of the Agreement on Agriculture, certain countries are resorting to 'rolling over of export subsidies. This practice would need to be suitably addressed as it amounts to negation of reduction commitments.

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M.COM-I VIII. NON TRADE CONCERNS:

THE AGREEMENT ON AGRICULTURE

The Non Trade Concerns (NTCs) including food security and the need to protect the environment, alluded to in Article 20 of the Agreement on Agriculture would be taken into account during negotiations. Food Security for India is not only availability of sufficient food but also adequate means to procure the same. Eminent agricultural economists and scientists like Dr. Swaminathan also believe that food security is economic access to food. Accordingly this has ramifications for employment and livelihood. For developing countries like India which are still grappling with the twin problems of poverty and unemployment, the production of food and economic access to it are primary objectives. As opposed to this certain developed countries are advocating multifunctional character of agriculture which essentially signifies that agriculture has functions other then providing food and fibre and also includes the protection of evironment and maintaining the economic viability or rural areas. Viewed against the needs of developing countries concerns about the maintenance of rural landscape appear to be hollow. Any attempts to try and equate the two different scenarios and continue heavy subsidisation of agriculture would be resisted. The concept of multificationality needs to the examined from the perspective of developing countries. Here, we would like to highlight the fact that the non-trade concerns of devloped countries and those of developing countries differ not only in content but in priority also. For countries like India, multifunctionality of agriculture is best mainfested in its ramifications in areas such as food security, employment and the elimination of poverty in rural areas. Moreover, these issues are neither emotive nor undefined but are practical and harsh realities which decision makers have to confront when addressing issues of agricultural policies. The need to provide employment opportunities in pre-dominantly rural agrarian areas is one of the main NTCs which India would like to see addressed.

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M.COM-I IX.

THE AGREEMENT ON AGRICULTURE

IMPLICATIONS OF THE AGREEMENT

Implications of the Agreement would differ from country to country and would depend largely on the overall agricultural scenario in the country. Indian agriculture is characterised by a preponderant majority of small and marginal farmers holding less than two hectares of land, less than 35.7% of the land, is under any assured irrigation system and for the large majority of farmers, the gains from the application of the science & technology in agriculture are yet to be realised. Farmers, therefore, require support in terms of development of infrastructure as well as extension of improved technologies and provisions of requisite inputs at reasonable cost. Indias share of worlds agricultural trade is of the order of 1%. There is no doubt that during the last 30 years, Indian agriculture has grown at a reasonable pace, but with stagnant and declining net cropped area it is indeed going to be a formidable task to maintain the growth in agricultural production. The implications of the Agreement would thus have to be examined in the light of the food demand and supply situation. The size of the country, the level of overall development, balance of payments position, realistic future outlook for agricultural development, structure of land holdings etc. are the other relevant factors that would have a bearing on Indias trade policy in agriculture. Implications of the Agreement on Agriculture for India should thus be gauged from the impact it will have on the following: i) Whether the Agreement has opened up markets and facilitated exports of our products; and ii) Whether we would be able to continue with our domestic policy aimed at improving infrastructure and provision of inputs at subsidised prices for achieving increased agricultural production.

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M.COM-I Implications - Short Term

THE AGREEMENT ON AGRICULTURE

As far as opening of markets and impact on trade in agriculture is concerned, it may be noted that the share of developing countries in world exports of food remained at 44% and of agricultural raw materials increased insignificantly from 32% in 1994 to 34% in 1996, that is the post-Agreement period. The average growth of developed countries imports of agricultural products increased by just 1% during 1994-96. Nearer home, agricultural exports of ten Asian developing countries increased from US $ 49252 million in 1994 to US $ 55902 million in 1996. Indias share in total agricultural exports from developing Asia is 8%, behind Chinas 19%, Thailands 17%, Malaysias 14% and Indonesias 10%. Indias exports of agricultural products have increased from US $ 4151 million in 1993-94 to US $ 7054 million in 1997-98. No tangible opening up of the markets has thus been noticed Implications - Long Term As mentioned earlier, for a large majority of farmers in different parts of the country, the gains from the application of science and technology in agriculture are yet to be realised which would require infrastructural support, improved technologies and provision of inputs at reasonable cost. The Agreement on Agriculture thus recognised this and developing countries have been given the freedom to implement such policies under Article 6 relating to differential treatment, but any attempt in future to dilute provisions relating to differential treatment for developing countries could affect us adversely. Regarding the impact of liberalisation of trade in agriculture in the long term, Indian agriculture enjoys the advantage of cheap labour. Therefore, despite the lower productivity, a comparison with world prices of agricultural commodities would reveal that domestic prices in India are considerably less with the exceptions of a few commodities (notably oilseeds). Hence, imports to India would not be attractive in the case of rice, tea, sunflower oil and cotton. On the whole, large scale import of agricultural commodities as a result of trade liberalisation is ruled out.

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M.COM-I X. CRITICISM

THE AGREEMENT ON AGRICULTURE

The AoA has been criticised by civil society groups for reducing tariff protections for small farmers a key source of income for developing countries. At the same time, the AoA has allowed rich countries to continue paying their farmers massive subsidies which developing countries cannot afford. The Agriculture Agreement has been criticised by NGO's for categorizing subsidies into trade-distorting domestic subsidies (the amber box) which have to be reduced, and non-trade distortingsubsidies (blue and green boxes) which escape disciplines and thus can be increased. As efficient agricultural exporters press WTO members to reduce their trade-distorting amber box and blue box support, developed countries green box spending has increased a trend widely expected to continue. A book from the International Centre for Trade and Sustainable Development shows how green box subsidies do in fact distort trade, affect developing country farmers and can also harm the environment. While some types of green box payments probably have only a minor effect on production and trade, others have a significant impact. According to countries latest official reports to the WTO, the United States provided $76 billion in green box payments in 2007 over nine-tenths of its total spending while the EU notified 48 billion ($91 billion) in 2005, or around half of all support provided by the bloc. In the case of the EU, a large and growing share of green box spending was on decoupled income support, which the book shows can have a particularly significant impact on production and trade. Third World Network states that; "This has allowed the rich countries to maintain or raise their very high subsidies by switching from one kind of subsidy to another... like a magicians trick. 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 argues 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".

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M.COM-I

THE AGREEMENT ON AGRICULTURE

At the WTO meeting in Hong Kong in 2005, countries agreed to eliminate export subsidy and equivalent payments by 2013. However, Oxfam has stated that EU export subsidies account for only 3.5% of its overall agricultural support. In the US, export subsidies for cotton were announced to be removed but these represent 10% of overall spending which "does not address the core issue of domestic payments that have been proven to distort trade and facilitate dumping". Mechanisms for developing countries During Doha negotiations, developing countries have fought to protect their interest and population, afraid of competing on the global market with strong developed and exporting economies. Many still have large rural populations composed of small and resource-poor farmers with limited access to infrastructure and few employment alternatives. Thus, these countries are concerned that domestic rural populations employed in import-competing sectors might be negatively affected by further 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 would allow developing countries to impose additional safeguard duties in the event of an abnormal surge in imports or the entry of unusually cheap imports. Debates have arise around this question, some negotiating parties claiming that SSM could be repeatedly and excessively invoked, distorting the normal flow of trade in the process. In turn, the G-33 negotiating bloc of developing countries, which has been the major proponent of the SSM, has argued that breaches of bound tariffs should not be ruled out if the SSM is to be an effective remedy.[6] A study by ICTSD simulated the consequences of SSM on global trade for both developed and developing countries.

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M.COM-I Special Products

THE AGREEMENT ON AGRICULTURE

At the 2005 WTO Ministerial Conference in Hong Kong, Members agreed that Developing country Members will have the flexibility to self-designate an appropriate number of tariff lines as Special Products guided by indicators based on the criteria of food security, livelihood security and rural development.

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M.COM-I XI. CONCLUSION

THE AGREEMENT ON AGRICULTURE

The role of agriculture in gross domestic product has been declining since 1975 and has become less dominant by the end of 20th century and early of 21st century. The economic crisis of 1978 1979 has brought a pressure for economic and trade liberalization as suggested by the IMF and the World Bank to the Government of Indonesia. Trade liberalization on agricultural products including rice has resulted in a big flow of foreign agricultural products including rice into the Indonesian market. The free liberalization argument is to bring all cheap products to the most poor groups in the country and encourage the local producers to produce with more efficient ways, but on the other sides there are other groups got hit by this policy. Most Indonesian farmers are small farmers. The imported cheap rice competed the local rice, and caused the local rice producers (farmers) to suffer from a very low price of rice. They lost their incomes and incentives to plant rice but had very little alternatives or choices. In other words, they needed government protection. The disappearance of rice crops in Indonesia, besides creating problems for life and employment of a large number of poor people in the villages, will also develop social, political, and environmental problems. Of course the size of benefits and costs of rice crops will depend on the adoption agricultural technology and it is known that its backward and fore ward linkages are known very large.

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