Agricultural Subsidies and WTO Agreement on Agriculture (AoA)
Context:
The Rajya Sabha recently cleared the first batch of Supplementary Demands for Grants, authorizing over ₹18,000 crore specifically towards fertilizer subsidy.
This highlights the significance of domestic support in agriculture (a key area governed by the WTO's Agreement on Agriculture).
About Agreement on Agriculture (AoA):
Negotiated during the Uruguay Round, the AoA was ratified in Marrakesh in 1994 and came into effect on January 1, 1995
Its objective is to establish a fair and market-oriented agricultural trading system through substantial progressive reductions in agricultural support and protection.
Three Pillars of AoA:
The agreement stands on three main pillars
Market Access:
Removal of trade barriers and tariffication of non-tariff barriers.
Domestic Support:
Subsidies under the AoA are primarily addressed under this pillar, along with specific rules on export subsidies
Export Competition:
Reduction of export subsidies to prevent dumping.
Domestic Support Boxes: Subsidies are categorized into 4 Boxes based on their trade-distorting effects:
Amber Box:
Trade-distorting subsidies (for example, Minimum Support Price).
These are subject to reduction commitments if they exceed “de minimis” levels (5% of production value for developed countries, 10% for developing countries).
Green Box:
Measures with minimal impact on trade (for example, research, pest control, infrastructure).
These are exempt from reduction commitments.
Blue Box:
Amber Box subsidies with conditions designed to limit production.
These are also exempt from reduction.
S & D Box:
Special and Differential Treatment investment and input subsidies for developing countries.
Peace Clause (Article 13 under AoA)
It prohibits action against subsidy under the normal procedure of the Agreement on Subsidies.
It allow Members time to implement their reduction commitments.
Domestic support measures and export subsidies that were in conformity with the AoA:
Could not be challenged under GATT 1994
Could not be challenged under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
Agricultural subsidies are primarily regulated by the AoA, not by the SCM Agreement.
Thus, Where the AoA applies, it overrides the SCM Agreement for agricultural subsidies.