WTO agreement on agriculture

WTO agreement on agriculture

The Agreement on Agriculture is one of the key agreements within the WTO system. Its importance is reflected by its presence as the first Agreement annexed to the Marrakesh Agreement establishing the WTO.

Market access

Market access simply means the right which exporters have to access a foreign market. The WTO agreements allow WTO Members to protect their markets. In practice “market access” refers to the ways in which that protection can be implemented. In the WTO framework it is a legalistic term indicating the government-imposed conditions under which a product may enter a country and be released for free circulation within that country under normal conditions.

Tariffication

Prior to the Uruguay Round, border protection for agricultural products was not always in the form of tariffs. In addition to tariffs, other non-tariff border measures were applied. A core element of the Uruguay Round negotiations was the agreement to convert these other types of border protection mechanisms into tariffs. This process was called “tariffication.

The process of tariffication is not straightforward. Economists argue as to the appropriate methodology. In theory it is simple. The tariff equivalent of a nontariff border measure is the difference between the world market price and the domestic market price for any specific product.

However, it is not easy to determine what is the world market or domestic market price, how these prices should be measured and over what period should the measurement take place. It is also not clear to what extent geographic and transport costs should be taken into consideration.

Special Safeguard Measures

In spite of the market access obligations contained in the Agreement on Agriculture, special safeguard measures may be introduced in respect of those products for which non-tariff measures have been converted into ordinary customs duties and have been “labelled” with the symbol “SSG” in WTO Members’ Country Schedules.

With respect to special safeguard measures, the relevant provision is Article 5 of the Agreement on Agriculture. Article 5 allows the imposition of an additional customs duty, over and above the bound customs duty (or tariffied duty), when the imported product does not reach a predetermined “trigger” price, or where the volume of imports passes a “trigger” volume.

This means that WTO Members may raise their duties on agricultural products even when the more stringent requirements of Article XIX and the Agreement on Safeguards are not met. This provision is very detailed and must be interpreted strictly to ensure that WTO Members do not abuse their right to invoke exceptions.

The special agricultural safeguards can only be used on products that were tariffied. These amount to less than 20 per cent of all agricultural products. But they cannot be used on imports within the tariff quotas, and they can only be used if the WTO Member reserved the right to do so in its Schedule of agricultural commitments. This might explain why, in practice, the special agricultural safeguards have been used only in relatively few cases.

Agriculture subsdies

The Agreement on Agriculture seeks to ensure that agricultural trade is not distorted through the use of subsidies. Agricultural support measures are classified as belonging to two major groups:

  • domestic support and general support; and
  • export subsidies.

In WTO non-legal terminology, domestic subsidies to agricultural products are identified by special “boxes” which are given the colours of traffic lights: “Green” meaning permitted because they have no, or minimal, distortive effect on trade; “Amber” meaning possibly legal or illegal because of their tradedistortive nature; and “Blue” meaning possibly trade-distorting but permitted as the measures are linked to production limitation programmes.

Amber Box Measures

All domestic support measures which do not correspond to the exceptional arrangements known as the “Green” and “Blue” boxes, are considered to distort production and trade and therefore fall into the “Amber Box” category.

 

Green Box Exemption

The subsidies falling under this category are non-actionable (in other words, immune from challenge) by virtue of Article 13 of the Agreement on Agriculture (the Due Restraint or “peace clause” provision). In particular, the domestic support measures that fully conform to the provisions of Annex 2 to the Agreement on Agriculture are considered non-actionable subsidies for purposes of countervailing duties during the implementation period of the Agreement on Agriculture.

Blue Box Measures

The “Blue Box” exemption category is contained in Article 6.5 of the Agreement on Agriculture. It covers any support measure that would normally be in the “Amber Box”, but which is placed in the “Blue Box” if the support also requires farmers to limit their production.

“Blue Box” subsidies are considered to be possibly trade-distorting but permitted under the Agreement on Agriculture. This means that they are not immune from challenge through WTO dispute settlement proceedings or under unilateral and multilateral remedies.

 

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