After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were concluded on December 15, 1993 and were formally ratified in April 1994 at Marrakesh, Morrocco. The WTO Agreement on Agriculture was one of the many agreements which were negotiated during the Uruguay Round.
The implementation of the Agreement on Agriculture started with effect from 1.1.1995. As per the provisions of the Agreement, the developed countries would complete their reduction commitments within 6 years, i.e., by the year 2000, whereas the commitments of the developing countries would be completed within 10 years, i.e., by the year 2004. The least developed countries are not required to make any reductions.
The products which are included within the purview of this agreement are what are normally considered as part of agriculture except that it excludes fishery and forestry products as well as rubber, jute, sisal, abaca and coir. The exact product coverage can be accessed in the legal text of the agreement from the web site http://www.wto.org.
The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy : market access, domestic support and export subsidies.
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 the end of the implementation period.
Domestic Support
For domestic support policies, subject to reduction commitments, the total support given in 1986-88, measured by the Total Aggregate Measure of Support (total 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 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. Policies which have no or at most minimal, trade distorting effects on production are excluded from any reduction commitments (‘Green Box’-Annex 2 of the Agreement on Agriculture --- http://www.wto.org ). 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.
Export Subsidies
The Agreement contains provisions regarding members 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 installment (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.
Market Access
As India was maintaining Quantitative 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 oils 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.
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 fertilizers, water, seeds, credit and electricity. During the reference period, the total non-product specific AMS was Rs.4581 crores. Taking both product specific and non-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 commitments 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 minimis level of 10%.
India’s notifications on AMS are available at web site address www.wto.org/wto/online/ddf.htm (G/AG/N/IND/1).
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.
Revised on 4.7.2001
Article 20 of the Agreement on Agriculture (AoA) (www.wto.org.) 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 culminated at the end of the year 2000, the negotiations on the Agreement on Agriculture have begun in January 2000.
These negotiations are being conducted in special sessions of the WTO Committee on Agriculture (COA) at Geneva. The following are the broad parameters for carrying out negotiations:
Experience of member countries in implementation of reduction commitments till date;
The effects of reduction commitments on World Trade in Agriculture;
Non trade concerns, special and differential treatment to developing country members and the objective of establishing a fair and market oriented agricultural trading system; and
Identifying further commitments 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 had agreed to broadly adhere to the mandate of Article 20 of the Agreement. In pursuance of the same, in the first phase of the negotiations, members have submitted 47 negotiating proposals, which were discussed in Seven Special Sessions of the CoA. With the approval of the Cabinet Committee on WTO Matters, India also submitted its negotiating proposals to the WTO on 15th January 2001, in the areas of market access, domestic support, export competition and food security. These proposals were drawn up and drafted based on inputs received from wide ranging consultations with various stakeholders and keeping in view India’s objectives in the negotiations, which are to protect its food and livelihood security concerns and to protect all domestic policy measures taken for poverty alleviation, rural development and rural employment as also to create opportunities for expansion of agricultural exports by securing meaningful market access in developed countries. India also co-sponsored two papers, one on "Market Access" along with 11 other developing countries and another on "Export Credits for Agricultural Products" along with 9 other countries/group of countries.
The first phase of the negotiations was wrapped up at the Seventh Special Session of the Committee on Agriculture held in March, 2001. During this phase, several countries highlighted their positions through their negotiating proposals. While some countries were of the view that the present negotiations on agriculture should be linked to a larger round, there were many countries, like India, who took the stand that Article 20 of AoA is a stand-alone commitment of all members and that the progress of negotiations under AoA cannot be linked to the launch of any new comprehensive round of negotiations. During the negotiations in the first phase, while it was evident that there were differences in positions taken by developed and developing countries, there was no common stance that emerged either within the developed countries or the developing countries.
In their proposals, the European Union and Japan have highlighted the multifunctional role of agriculture, and supported progressive liberalisation as opposed to substantial liberalisation being pursued by USA and the Cairns Group. The EU also pressed for improvements in food safety and food quality standards as well as in supporting environmental and social sustainability. Japan highlighted 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.
Developing countries demanded better market access opportunities and sought flexibility to pursue their domestic support policies to safeguard their food and livelihood security. Countries like India, Pakistan, Sri Lanka, ASEAN, etc., highlighted the significance of the role of agriculture in their economies and sought to preserve their domestic policy flexibility to safeguard food security concerns. Developing countries of the Cairns Group like Argentina, Brazil, South Africa, etc. favoured a market oriented non-trade distortive approach. The Net Food Importing countries, or the single crop economies, like Egypt, Mauritius, etc. would like to see a gradual and phased reduction in export subsidies as the same would keep the world prices low which would ultimately be beneficial for these countries.
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 trade distortive domestic support as goals of the ongoing agricultural negotiations at the World Trade Organization. They also called for better information and analysis of tariff rates, quota administration, exports subsidies, domestic support programs and market access as well as members position on biotechnology and Genetically Modified Organisms.
The Indian position is articulated in detail in our proposal, G/AG/NG/W/102, and is also available at the web site www.wto.org.
The Work Programme for the Second Phase includes, Tariff Quota administration, Tariffs, Amber Box, Export subsidies, Export credits, State Trading enterprises, Export Restrictions, Food security, Food Safety, and Rural development. The first Special Session of the CoA in the Second Phase of negotiations was held on May 21-23, 2001. One of the items discussed at this Session was "Tariff Rate Quotas (TRQs)". While there was unanimity among the members on the need for improvement in Tariff Rate Quota administration to bring about predictability and transparency, there was no consensus on the most appropriate method for achieving the same. On the issue of tariffs also there were differing views among the members. Among the issues raised during discussion on Amber box subsidies, were the continuation of Blue and Green Boxes; co-relation of reduction of subsidy level by developed countries with the reduction in tariff to be affected by developing countries; change in base period and redrafting of Article 18.4, etc. Our position on the need for preservation and strengthening of Article 6.2 did not find favour with the US who felt that Article 6.2 should be reviewed to tighten the criteria for inclusion of support under that box.. Malaysia and Columbia supported India's view and criticised US’s position on this issue. The next Special Session of the CoA is scheduled for 23-27 July, 2001.
Consultation Process within Government of India
During the preceding 2 years, wide ranging consultations have been undertaken both by the Department of Agriculture & Cooperation and Department of Commerce to jointly formulate the strategy for the mandated negotiations on Agreement on Agriculture. As part of preparations undertaken for the negotiations, various studies have been commissioned to assess and analyse India’s domestic support commitments, export competitiveness as well as the current tariff bindings. In addition both the departments have also jointly organised regional level consultations at Ahmedabad, Calcutta, Cochin and New Delhi in an effort to involve state governments, farmers organisations, agricultural experts and non-governmental organisations. The Agriculture Minister has also separately held consultations with leaders of all political parties, farmers’ representatives and state agricultural and food ministers. Commerce & Industry Minister had also written to the Chief Ministers of all States/Union Territories as well all political parties seeking their input for the ongoing negotiations. Other administrative inter-ministerial consultations have also been held to formulate the negotiating strategy.Subsequent to submission of India’s negotiating proposals based on inputs received from all such consultations, Department of Commerce had organised a meeting of Chief Secretaries, who were presented with the latest position and details on the ongoing negotiations. On 21st May 2001, the Ministry of Agriculture organise a meeting of the Chief Ministers of all State Governments and Union Territories. As a follow up to this, Department of Commerce has requested all State Governments to organise Workshops in their state capitals to sensitise farmers’ organisations, agricultural experts, governmental and non-governmental organisations and other stake holders on WTO issues, particularly with reference to developments in the negotiations on the Agreement on Agriculture. Accordingly, the Department of Commerce and the Ministry of Agriculture are deputing their resource persons for the various workshops as are being organized by the State Governments/Union Territories from time to time.
Brief Summary of Indian Proposals.
On 15th January 2001, India submitted its negotiating proposals to the World Trade Organisation (WTO) for the mandated negotiations under the Agreement on Agriculture (AoA) in the areas of market access, domestic support, export competition and food security.India’s basic objectives in the ongoing negotiations are:
(a) To protect its food and livelihood security concerns and to protect all domestic policy measures taken for poverty alleviation, rural development and rural employment.
(b) To create opportunities for expansion of agricultural exports by securing meaningful market access in developed countries.
The Indian proposals are based on the inputs received from wide-ranging consultations with various stakeholders and can be broadly be classified into the following 2 categories:
(i) Increasing the flexibility enjoyed by developing countries for providing domestic support to the agriculture sector under the special and differential provisions as also further strengthening of trade defence mechanisms with a view to ensuring the food security and to take care of livelihood concerns.
(ii) Demanding of substantial and meaningful reductions in tariffs including elimination of peak tariff and tariff escalation, substantial reductions in domestic support and elimination of export subsidies by the developed countries so as to get meaningful market access opportunities.
The proposals in the first category include:
- Additional flexibility for providing subsidies to key farm inputs for agricultural and rural development.
- Exemption from any reduction commitments of measures taken by developing country members for alleviation of poverty, rural development, rural employment and diversification of agriculture.
- Exclusion from AMS calculations of product specific support given to low income and resource poor farmers.
- Clarifications on certain implementation issues, such as, offsetting of positive non product specific support with negative product specific support, suitable methodology of notifying domestic support in stable currency to take care of inflation and depreciation.
- Rationalisation of product coverage of AoA by inclusion of certain primary agricultural commodities such as rubber, jute, coir etc.
- Flexibility enjoyed by developing countries in taking certain measures in accordance with other WTO covered Agreements should not be constrained by the provisions of AoA.
- Maintenance of appropriate level of tariff bindings on agricultural products in developing countries, keeping in mind their developmental needs and high distortions prevalent in the international markets with a view to protect livelihood of their farming population. Also linking the appropriate levels of tariffs in developing countries with trade distortions in the areas of market access, domestic support and export competition.
- Rationalisation of low tariff bindings in developing countries, which could not be rationalised in the earlier negotiations.
- Separate safeguard mechanisms on the lines of SSG including a provision for imposition of QRs in the event of a surge in imports or a decline in international prices, as an S&D measure to protect food security and livelihood concerns.
- No minimum market access commitments for developing countries.
The proposals in the second category include:
- Blue box and de-coupled income support and direct payments in Green Box to be included in the Amber Box and subjected to reduction commitments.
- Accelerated reduction in AMS so as to bring it below de minimis by the developed countries in 3 years and by the developing countries in 5 years.
- Substantial reduction in tariff bindings including elimination of peak tariffs and tariff escalation in developed countries.
- Expansion and transparent administration of TRQs pending their eventual abolition.
- Elimination through accelerated reduction in export subsidies and disciplining of all forms of export subsidisation etc.
- Abolition of Peace Clause for developed countries.
The proposal on Market Access co-sponsored by India along with other developing countries calls upon the developed countries to reduce tariff peaks and eliminate tariff escalation; simplify the administration of tariff rate quotas making it more transparent and equitable for all trading partners; to address the provisions and procedures of the SPS Agreement which inhibit exports from developing countries, etc. The proposal also calls for prohibition of dumping; elimination of all forms of export subsidies and demands substantial reduction in domestic support provided by developed countries.
The proposal on Export Credits for Agricultural Products, which is the other paper co-sponsored by India along with MERCOSUR and other countries, is designed to bring the work related to establishing rules and guidelines on export credits into the WTO, so that any rules/guidelines framed are fully compatible with WTO rules and procedures. These proposals have been made with the objective of bringing agricultural export credits, export credit guarantees and export insurance programmes under specific multilateral discipline under WTO.
Responses to India’s proposals submitted to the WTO The Indian proposals have by and large been well received and endorsed by most of the developing countries as well as some of the developed countries. However, Thailand expressed some reservations with regard to our proposal on exempting developing countries from minimum market access obligations while EC and USA have commented that since trade was 2-way process, India should also offer reciprocal concessions with a view to furthering the process of liberalisation in agricultural trade. In the context of the reluctance of developing countries like India to implement further reforms due to the highly trade distorting policies still being practised by some developed countries, Australia opined that the high tariffs and other import restrictions in developing countries will make it difficult to make food more accessible and affordable for their populations and also that dismantling trade barriers will contribute to food security and economic development throughout the developing world. Canada was critical of our proposals. In their view, major distortions in developed countries should not be replaced by protection in developing countries and developing country markets should be opened for ensuring food security of their population. Other points they made were that some of our proposals on export subsidies may expand the scope of export subsidies rather than reducing it and that some criteria should be spelt out for the exemptions we have proposed on support measures for rural development and poverty alleviation.
The paper on Market Access co-sponsored with other developing countries received support from a wide gamut of countries like EC, most of the Cairns group countries and US. However, US was not in favour of raising SPS issues in these negotiations.
The paper on Export Credits co-sponsored by India, was supported by Japan, EC and members of the Cairns Group such as Guatemala, Thailand, Philippines, New Zealand, Canada and Columbia.