GATT

was a multilateral treaty to liberalize world trade. It took effect on 1st January,1948. Under GATT, total 8 rounds took place The 8th round began in September ,1986 at part del Este, Uruguay and it was concluded in December ,1994. The AoA was included in the final act of Uruguay round 15th April,1994. This round gave birth to WTO in the year1995,Jan 1st

 Comparative

advantage Instability in the world market Effects of protectionism Market Access difficult

High Tariffs Non Tariff Barriers Grey Area Measures

To

establish a fair and market-oriented agricultural trading system. A reform process should be initiated through the negotiation of commitments on support and protection and through the establishment of strengthened and more operationally effective GATT rules and disciplines.
To

provide for substantial progressive reductions in agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets.

 The

URAA represents a fundamental change in the way agriculture is treated. Prior to URAA rules applying to agriculture largely ineffective. the URAA, countries agreed to reduce agricultural support in three areas:

Under

Market access

Domestic support
Export subsidies

 TARIFFICATION TRQs TARIFF

REDUCTION &

BINDING SPECIAL SAFEGUARDS

 Eliminate

all non-tariff trade barriers like ban, quota or quantitative restrictions on import of agricultural products, and convert them into tariffs (tariffication).
rates according to the base period 1986-88 in the respective countries.

Tariff

A two leveled-tariff: lower (in-quota) tariff : charged on imports within the quota higher (over-quota) tariff : charged on imports in excess of

volume.
A

the quota volume.

Minimum Access Opportunity Commitment: quota equal to 3 % of domestic consumption (86-88) quota equal to 5 % of domestic consumption by 2001 for

Tariff Tariff

developed countries and 2005 for developing countries.

Particular\Countries

Developed Countries
36 % 15 % 6 years

Developing Countries
24 % 10 % 10 years

Least developed Countries 0% 0% -

Average reduction

Minimum reduction on each tariff line

Time period

1. 2. 3. 4. 5.

When actual import volumes rise above a specified trigger level. When import prices denominated in domestic currency fall below a certain trigger level. It is an additional import duty. Only for products in tarrification. Can not apply to in quota imports.

 Removal

of QRs would hit the producers and impair the growth prospects of the farm sector. Removal of QRs leads to dumping and transfer of excess productions by exporting countries. But this might benefit the consumers and safeguard food security in event of domestic shortage.

 Objective:

To identify acceptable and unacceptable measures to support the farmers. Any domestic subsidy that promoted agricultural sector was subjected to reduction commitments under AoA. Aggregate Measures of Support (AMS)

 Developed Developing

countries will cut by 20% by 2000 countries will cut by 13.3% by 2005

Many

policies exempt [policies categorized by degree of perceived distortions --- called green box (permitted), amber box (slow down), and blue box (limited)]

Amber Box: Amber box measures are considered as trade distorting elements, and are subjected to reduction. Measures like price support, export subsidies, cheap loans etc comes under this category .
Green Box: Green Box measures are not considered as trade distorting and are acceptable under AoA. Measures like support for research, infrastructure services, domestic food aid etc comes under this category. Blue Box: Blue Box measures are intended to limit production. Measures like direct payment to farmers, cattle limiting programs etc.

 The

amount of total subsidies subject to reduction commitments made by government to its agricultural sector. Exemptions in AMS calculations:

Green box subsidies excluded Amber Box de minimis : < 5 % of value of production of a product , for developed countries and < 10 % for developing countries

 Export

subsidies are special incentives provided by governments on products destined for foreign markets to encourage increased foreign sales.
3.3 of the Agreement on Agriculture (AoA) establishes a basic rule, which places a limit on agricultural export subsidies measured in terms of volume of and expenditures on subsidized exports i.e. value.

Article

 Developed

countries agreed to reduce the volume of export subsidies by 21 percent and the expenditure on export subsidies by 36 percent by 2000.
countries agreed to reduce the volume of export subsidies by 14 percent and the expenditure on export subsidies by 24 percent by 2004. base period used for export subsidies commitments is 1986-1990.

Developing

The

Export subsidies play a significant role in depressing and distorting world market prices in agriculture. Reasons : Choice of Base period Circumvention

 Choice

of base year (1986-90): Due to the extremely low world prices for agricultural products, export subsidies during 1986-1990 were quite sizeable. The limited reduction commitments taken in the AoA therefore left large margins for continued subsidization
Frontloading: The Agreement allowed for reductions to be made from the 1991-1992 levels if a country's export subsidies were higher than the 1986-1990 levels. As a result some countries practiced "front loading" whereby they increased their expenditure levels from 1986-1990 levels thereby minimizing the impact of reductions taken.

 Agreement

is virtually non existing in India as the country is giving far less subsidy than limited by WTO. This reduction in subsides and increasing market centralization result in shift from food to cash crop.

Recent Study of Central India(Narmada Valley Belt) indicates that pulses have been pushed out by Soya bean which results in expansion of land of Soya bean cultivation to 48 lakh hectares.

Multinational Agro giants have patented the varieties which are centuries were known to Indian Farmers. Major countries like Australia, Argentina, Canada and New Zealand are advocating for liberalization of agriculture on the lines of the liberalization that has occurred in other sectors. The total liberalization of agriculture would mean exposing the vast majority of small and medium Indian farmers to face competition of price. European Union(EU) also is not comfortable with the idea of liberalizing its agriculture and hopes to block the issue with India and the other third world countries.

Prior to AoA
- Extreme import restriction clubbed with high levels of tariff for agricultural products. - Import of mass consumption items like cereals and edible oil were canalized through state trading bodies. - Existence of cash compensatory support for select exporters. - All export profits were exempted from income tax. - Farmers availed inputs at subsidized prices and minimum support price was guaranteed.

Post AoA
- India is almost out of Quantitative Restrictions and is now fully in the tariff regime. - But India continues to maintain high tariff on several commodities with a view to checking expected surge of imports - Post 1991 Economic Reforms, cash incentives for exports were abolished and so were Income Tax exemptions for export profits. - AoA did not object to India's MSP(Minimum Support Price) Programmes. Therefore MSP coverage was increased to several other agricultural products. - There was a surge in non-product support because of increased power subsidy, irrigation subsidy and concessional loans

Agricultural Tariffs continue to be 6 times as high as industrial tariff Provisions regarding SSM(Special Safeguard Mechanism) were only available to developed & Tariffied countries Developed countries continued with very high domestic support that artificially increase production and distort trade affecting developing nations like India badly. Developed countries deny market access to the developing countries.