Table of Contents

Introduction- ......................................................................................................................................................... 1
WTO Agreement on Agriculture ........................................................................................................................... 2
Purpose ................................................................................................................................................................. 3
Agreement on Agriculture .................................................................................................................................... 4
Features of WTO Agreement on Agriculture ........................................................................................................ 5
WTO Agricultural Subsidies Boxes ........................................................................................................................ 7
Special and Differential Treatment (SDT) ............................................................................................................. 9
Criticism ................................................................................................................................................................ 9
Quantitative Restrictions on Agricultural Imports .............................................................................................. 10
Policy examples – ................................................................................................................................................ 12
Domestic Support Measures............................................................................................................................... 14
Conclusions and Recommendations ................................................................................................................... 15

Introduction-

The domestic provision systems in agriculture are governed by the Agreement on

Agriculture (AoA), which entered into force in 1995 and was negotiated during the
Uruguay Round (1986-1994). The long-term goal of the AoA is to establish a fair
and market-oriented agricultural trading system and to initiate a reform process
through the negotiations of commitments on support and protection, and through
the establishment of strengthened and more operationally effective rules and
discipline. Agriculture is therefore special because the sector has its own
agreement, whose provisions prevail.1

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WTO Agreement on Agriculture

GATT 1947 initially applied to agriculture, but it was incomplete, and signatory
states (or ‘contracting parties’) excluded this sector from the scope of the
principles stated in the general agreement. In the 1947-1994 period members were
allowed to use export subsidies on agricultural primary products and to impose
import restrictions under certain conditions, with the result that main agricultural
commodities faced barriers to trade on a scale uncommon in other merchandise
sectors. The way towards a fair and market-oriented agricultural trading system
was thus tough and long; and negotiations were finally concluded during the
Uruguay Round. Agriculture has special status in the WTO’s Agreements and
Memoranda of Understanding on trade (which were signed in 1994 and entered
into force on 1 January 1995) because the sector has a specific agreement, the
Agreement on Agriculture (AoA), whose provisions prevail. In addition, some
provisions of the Agreement on the Application of Phytosanitary Measures (SPS)
also involve agricultural production and trade. The same is true of the Agreement
on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in relation to the
protection of geographical designations. Furthermore, the provisions of the
Agreement on Agriculture are supplemented by the Agreement on technical
barriers to trade (TBT), as well as by technical assistance mechanisms.

These agreements contain a certain degree of flexibility as regards their

implementation by both developing country, WTO members (special and
differential treatment) and least developed countries (LDCs) and net food-
importing developing countries (special provisions).2

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The AoA’s effect on domestic production can be measured in many ways,
including:

 Levels of food imports and self-sufficiency in food staples.

 Production subsidies before and after trade liberalisation.
 Tariff levels and types for different commodities before and after
liberalisation.
 The degree to which imported seed, fertiliser and other inputs are used.
 Rainfall and vulnerability to drought and floods.
 Market structures in domestic agricultural production.
 Access to credit by commercial farmers and small farmers; men and women;
remote localities and those close to urban centres.
 Land scarcity and distribution.
 Consumer’s access to food through trade.

Purpose
The objective of the Agriculture Agreement is to reform trade in the sector and to
make policies more market-oriented. This would improve predictability and
security for importing and exporting countries alike.

The new rules and commitments apply to:

1. market access — various trade restrictions confronting imports
2. domestic support — subsidies and other programs, including those
that raise or guarantee farms prices and farmers’ incomes

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 3. export subsidies and other methods used to make exports artificially
competitive.
The agreement does allow governments to support their rural economies, but
preferably through policies that cause less distortion to trade. It also allows some
flexibility in the way commitments are implemented. Developing countries do not
have to cut their subsidies or lower their tariffs as much as developed countries,
and they are given extra time to complete their obligations. Least-developed
countries don’t have to do this at all. Special provisions deal with the interests of
countries that rely on imports for their food supplies, and the concerns of least-
developed economies.

“Peace” provisions within the agreement aim to reduce the likelihood of disputes
or challenges on agricultural subsidies over a period of nine years, until the end of
2003.3

Agreement on Agriculture
The Agreement on Agriculture (AoA) is a WTO treaty that was negotiated during
the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and
formally ratified in 1994 at Marrakesh, Morocco. The AoA came into effect in
1995.

According to its provisions, developing countries were to complete their reduction

commitments by 2000 and developing countries by 2004.
The Least Developed Countries were not required to make any reductions.
The Agreement covers products that are normally considered part of agriculture
but excludes forestry and fishery products and also rubber, sisal, jute, coir and
abaca.

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The focus of the AoA is the elimination of what are called “trade distorting”
agricultural subsidies.
According to the WTO, the overall aim of the Agreement is “to establish a fairer
trading system that will increase market access and improve the livelihoods of
farmers around the world.”4

Features of WTO Agreement on Agriculture

The provisions of the WTO Agreement on Agriculture relate mainly to three broad
categories of agriculture and trade policy, which are discussed below.
 Market Access
 This includes:
 Tariffication – implies all non-tariff barriers to be abolished and
converted to tariffs. Non-tariff barriers include variable levies,
minimum import prices, quotas, state trading measures,
discretionary licensing, etc.
 Tariff reduction – Developing countries were obligated to
reduce tariffs by 24% in 10 years.
 Access opportunities – Minimum access equal to 3% of
domestic consumption in 1986-88 will have to be established
for the year 1995 rising to 5% at the end of the implementation
period.
 This head includes improving access to markets by removing trade
barriers.

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  Domestic Support
 This concerns the policy support and subsidies given by countries to
enhance domestic production. WTO has classified agricultural
subsidies and policies into different boxes, which are explained in a
section below in detail.
 Export Subsidies
 Here, there are provisions related to member countries’ commitments
to reduce export subsidies.
 Developed countries are mandated to reduce their export subsidy
volume by 21% and expenditure by 36% in 6 years, in equal
installment (from 1986 –1990 levels).
 Developing countries need to reduce export subsidy volume by 14%
and expenditure by 24% over ten years in equal installments.

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WTO Agricultural Subsidies Boxes
The domestic support subsidies are categorized into various boxes in the WTO.
The various boxes and their implications are discussed in this section.

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Special and Differential Treatment (SDT)
Other than the three boxes, there is also another box of subsidies that confer special
and differential treatment for developing countries and LDCs. This is also called
the Development Box.
 Under this, countries are permitted untargeted subsidized food distribution to
satisfy the requirements of the urban and rural poor.
 They may also give investment subsidies that are usually available to
agriculture and agricultural input subsidies available to low income and
resource-poor farmers.
 These include purchases for and sales from food security stocks at
administered prices provided that the subsidy to producers is included in
calculation of the Aggregate Measure of Support (AMS).
 Under SDT, developed countries may be given an exemption from
implementing their reduction commitments at the AoA for ten years.
 As of now, LDCs are not required to make any kind of reduction
commitment at the AoA.
 Developed countries are not provided with the SDT.

Criticism
Opponents of the Agreement say that it reduces tariff protection for small farmers,
which is a major income source in developing countries, while at the same time, it
allows rich countries to continue subsidising their farmers.
 Through clever classification of the subsidies into trade-distorting (amber
box) and non-trade distorting (green box), developed countries manage to
heavily subsidize agriculture in their countries while targeting developing
countries including India of indulging in trade-distorting practices.

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  A collaborative India-China study has shown that developed countries such
as the United States, Canada and countries of the EU give out several times
higher subsidies to their farmers than the rest of the world.
 Developed countries continue to provide trade-distorting subsidies without
attracting any penalties under the WTO.
 Under the Amber Box, developed countries were given the choice of either
accepting a product-specific ceiling of 5 per cent, or an overall cap. By
choosing the latter option, most developed countries have been able to better
target sops for specific crops.
 Even with low subsidies, For example India should be worried of breaching
the 10% limit on subsidies.
 The developed countries constantly take developing countries to task on
policies like the Minimum Support Price (MSP) while they continue to
support their farmers and also make barriers for trade and market entry.
 The WTO’s push towards globalisation threatens three dimensions of a
sustainable and equitable agricultural policy, namely, ecological security,
livelihood security and food security. Globalisation will adversely affect
producers with low or no capital and investment.5

Quantitative Restrictions on Agricultural Imports

The pre-Uruguay Round GATT generally prohibited quantitative restrictions, such

as import quotas and embargoes. Agricultural products, however, were the subjects
of several exemptions from that prohibition. The most important of the agricultural
exemptions, which are also the ones most subject to GATT trade
disputes, are contained in Article XI:2(c). These exemptions permit import
restrictions on agricultural products to the extent that these restrictions are

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designed (i) to reinforce controls on domestic production or marketing of like or
substitutable products,
(ii) to facilitate the disposal of temporary surpluses of agricultural
products, or (iii) to support domestic efforts to reduce animal
production.
However, the Article XI:2 exemptions were not the sole factor that permitted
import restrictions to flourish under the pre-
Uruguay Round GATT. Another important factor was the United
States' successful demand for a waiver of its GATT Article XI obligations. This
waiver enabled the United States to impose import quotas that were not connected
to domestic production control
programs and would otherwise violate Article XI. Furthermore, GATT Article XI
does not prohibit the use of many other protectionist devices, such as quotas
pursuant to GATT Article XIX (which permits quotas to protect domestic industry
against a surge in imports)44 or price manipulation to achieve
quota-like effects. Prices can be manipulated to increase the price of imports
relative to domestic production (via tariffs or via variable levies applied in addition
to base tariffs) or to decrease the price of domestic goods below the price of
imports (via subsidies). The European Union (E.U.), in furtherance of its Common
Agricultural Policy (CAP), has imposed substantial levies on agricultural imports
in addition to base tariffs in order to ensure that these imports do not compete with
E.U. production.
the European Union and the United States maintained significant
restrictions on the import of agricultural products under the pre-
Uruguay Round GATT, notwithstanding the requirements of GATT Article XJ.
While other nations did not benefit from waivers of GATT obligations or any other
special GATT concessions, they nevertheless cited the U.S. and E.U. deviation
from the GATT Article XI prohibition on quantitative restrictions in order to
justify their own violations of these rules in the agricultural sector. Consequently,

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the provisions of GATT Article XI have seldom been enforced with respect to
agricultural commodities.6

Policy examples –

The common agricultural policy (CAP) and the Treaty

Legal basis
Articles 38 to 44 of the Treaty on the Functioning of the European Union (TFEU).
Rationale behind the CAP
When the Treaty of Rome established the common market in 1958, state
intervention was a major feature of agriculture in the six founding Member States.
If the principle of the free movement of goods was to apply to agricultural produce,
ongoing state intervention notwithstanding, national intervention mechanisms
which were incompatible with the common market had to be transferred to
Community level: this is the basic rationale behind the establishment of the CAP.
What is more, at the time, intervention in agriculture reflected the broad consensus
regarding the specific characteristics of the sector – that is to say that it is highly
dependent on climate and geography and prone to systemic imbalances between
supply and demand, and hence substantial fluctuations in prices and incomes.
Demand for food is inelastic; in other words, price fluctuations have little bearing
on it. Moreover, the length of production cycles and the unchanging nature of
certain inputs mean that farmers themselves have scant control over the global
supply of farm produce. Under these conditions, an increase in supply
automatically forces prices down, whereas a decrease forces them up. All these
factors create permanent market instability. Faced with this situation, governments
have always been keen to regulate agricultural markets and to support farmers’
incomes, a tendency inherited by the CAP.

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Even though agriculture today represents only a small share of the economies of
developed countries, including that of the European Union, public intervention has
recently been stepped up, with agro-rural policies that have added other
dimensions in support of the traditional function of primary activity, namely the
production of foodstuffs, including sustainable development, the fight against
climate change, spatial and landscape planning, diversification and vitality of the
rural economy, public health, product quality, and the production of energy and
biomaterials. Support for public assets or non-commercial aspects of agriculture –
in other words, those not rewarded by the market – has thus become a key strand of
today’s agricultural and rural policies, including the CAP.

Objectives
Article 39 TFEU sets out the specific objectives of the CAP:
1. To increase agricultural productivity by promoting technical progress and
ensuring the optimum use of the factors of production, in particular labour
2. To ensure a fair standard of living for farmers
3. To stabilize markets
4. To ensure the availability of supplies
5. To ensure reasonable prices for consumers.7

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Domestic Support Measures
Although domestic support commitments do not appear to have imposed
constraints on policy design in developing countries as yet, commitments made to
the WTO are of a binding nature and therefore have consequences for policy
flexibility for the coming years. Thus, countries need to examine the extent of
flexibility they currently have and how this may be affected in the next round.
Based on the discussion in Section 1.2, administrative support (i.e. support
governed by the domestic support provisions of the AoA) to agricultural producers
in developing countries could compose the following items1:

Total support = Production/trade distorting support (AMS) above the de minimis

level

+ de minimis support
+ Special & Differential Treatment support
+ Production-limiting support (the Blue Box)
+ Green Box support

There are thus five different options for the developing countries to use
administrative support for agriculture in addition to tariffs2. As mentioned earlier,
the majority of the developing countries reported zero or below de minimize Base
Total AMS in their schedules, which means that they cannot resort to the first
option (above the de minimize AMS support). However, there could be adequate
scope to support agriculture through the remaining options. The Green Box covers
many of the important agricultural support programs in developing countries,
which are mainly government services (research, plant protection etc.). In addition,
the Special and Differential Treatment (SDT) exemption allows these countries a
further scope for supporting their agriculture through input subsidies to low-
income or resource poor farmers and investment subsidies to agriculture. The Blue

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Box is of much less significance since production-limiting support is very rare in
developing countries. 8

Conclusions and Recommendations

Agricultural liberalisation affects countries and people in a variety of ways, but

there are some common threads that are relevant to consumer rights everywhere.
The information provided by the 13 national reports illustrate many of the ways
that agricultural trade liberalisation in general -- and the AoA in particular -- have
affected consumers. Simple access to food has been threatened in a number of
areas:
 Small farmers have lost their livelihoods, severely reducing their purchasing
power as vulnerable consumers.
 The ability to increase purchasing power through export opportunities has
been a mixed experience, and usually has been unequally distributed to the
disadvantage of smaller farmers.
 The ability for consumers to meet their own consumption requirements has
been affected by the loss of land.
 Consumers could be facing new threats to food safety with the rise of GM
foods and lack of monitoring and regulatory capacity of developing
countries.

Based on its research, Consumers International makes a number of

recommendations. Central to these recommendations is the right of consumers to
have access to basic goods and services. To achieve this, a consumer-rights
approach should be adopted in future negotiations. This approach supports recent
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calls for a development box, but seeks to incorporate other issues of central
importance to consumers. Four key recommendations provide the basis to our
consumers rights approach to the AoA9
Increase and protect consumer access to food though:
 Promoting domestic production through encouraging development-oriented
domestic support, assistance where required and measures to protect
domestic market from import surges.
 Promoting foreign exchange earning of developing countries though
increased and reliable market access by reducing protection in developed
country markets.
 Providing consumers with access to safe food, through better monitoring and
the enforcement of safety standards.
 Checking the powers of transnational corporations, to protect competition
and safety of food on the world market.

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https://www.iatp.org/sites/default/files/Agreement_on_Agriculture_An_Impact_Assessment_.htm

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