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AMS
The subsidies provided by the government to the agricultural sector (i.e., domestic support) is termed by the WTO as Aggregate Measure of Support (AMS).66 It is calculated in terms of product and input subsidies. The WTO argues that the product subsidies like minimum support prices and input subsidies (non-product) like credit, fertilizers, irrigation and power will cut production cost of farming and will give undue advantage to such countries in their access to the world market—such subsidies are called to cause ‘distortions’ to the world trade. Such subsidies are not permitted in one sense as they have a minimum permissible limit de minimis under the provisions which is 5 per cent and 10 per cent of their total agricultural output in the case of developed and developing countries, respectively.
The agricultural subsidies, in the WTO terminology have in general been identified by ‘boxes’ which have been given the colours of the traffic lights
—green (means permitted), amber (means slow down, i.e., to be reduced) and red (means forbidden).
In the agriculture sector, as usual, things are more complicated. The WTO provisions on agriculture has nothing like red box subsidies, although subsidies exceeding the reduction commitment levels is prohibited in the ‘amber box’. The ‘blue box’ subsidies are tied to programmes that limit the
level of production. There is also a provision of some exemptions for the developing countries sometimes called the ‘S & D box’.67
We may see them individually though they are very much connected in their applied form. The objective meaning of each one of them becomes clear, once one has gone through all of them.
All subsidies which are supposed to distort production and trade fall into the amber box, i.e., all agricultural subsidies except those which fall into the blue and green boxes.68 These include government policies of minimum support prices (as MSP in India) for agricultural products or any help directly related to production quantities (as power, fertilizers, pesticides, irrigation, etc).
Under the WTO provisions, these subsidies are subject to reduction commitment to their minimum level—to 5 per cent and 10 per cent for the developed and the developing countries, respectively, of their total value of agricultural outputs, per annum accordingly. It means, the subsidies directly related to production promotion above the allowed level (which fall in either the blue or green box) must be reduced by the countries to the prescribed levels.
In the current negotiations, various proposals deal with issues like deciding the amount by which such subsidies should be reduced further, and whether to set product-specific subsidies or to continue with the present practice of the ‘aggregate’ method.