1.5.4. Agreement on agriculture

Agriculture Agreement is to reform trade in the sector and to make policies more market- oriented. The agreement does allow governments to support their rural economies, but preferably through policies that cause less distortion to trade. It also allows some flexibility in the way commitments are implemented.

♤ Tariffs only: Before the Uruguay Round, some agricultural imports were restricted by quotas and other non-tariff measures. These have been replaced by tariffs that provide more-or-less equivalent levels of protection. It was agreed that developed countries would cut the tariffs by an average of 36%, in equal steps over six years. Developing countries would make 24% cuts over 10 years while Least-developed countries do not have to cut their tariffs.

o Special Safeguard: For products whose non-tariff restrictions have been converted to tariffs, governments are allowed to take special emergency actions (“special safeguards”) in order to prevent swiftly falling prices or surges in imports from hurting their farmers.

♤ Domestic support: The main complaint about policies which support domestic prices, or subsidize production in some other way, is that they encourage over-production. This squeezes out imports or leads to export subsidies and low-priced dumping on world markets. The Agriculture Agreement distinguishes between support programmes that stimulate production directly, and those that are considered to have no direct effect.

o Amber box subsidies - Domestic policies that do have a direct effect on production and trade. WTO members calculated how much support of this kind they were providing per year in the base years of 1986-88. for the agricultural sector known as “total aggregate measurement of support” or “Total AMS”. These total AMS figures were to be reduced in various amounts by developed and developing countries.

 De-Minimis provision: Under this provision developed countries are allowed to maintain trade distorting subsidies or ‘Amber box’ subsidies to level of 5% of total value of agricultural output. For developing countries this figure was 10%.

o Green box subsidies - Measures with minimal impact on trade. They can be used freely. They include government services such as research, disease control, infrastructure and food security. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers restructure agriculture, and direct payments under environmental and regional assistance programmes.

o Blue Box subsidies: Certain direct payments to farmers where the farmers are required to limit production. These are also permitted.

♤ Export subsidy: These can be in form of subsidy on inputs of agriculture, making export cheaper or can be other incentives for exports such as import duty remission etc. These can result in dumping of highly subsidized (and cheap) products in other country. This can damage domestic agriculture sector of other country. These subsidies are also aligned to 1986-1990 levels, when export subsidies by developed countries was substantially higher and Developing countries almost had no export subsidies that time.

o Special Safeguard Mechanism (SSM) for Developing Country Members- a mechanism that would allow developing countries to temporarily raise import tariffs on agriculture products in cases of import surges or price declines.