WTO and Indian Agriculture

The Uruguay Round of negotiations led to the birth of the WTO in January 1995. Under the Uruguay Round, all member nations of GATT participating in negotiations committed themselves to a widespread reduction in tariffs, removal of quantitative restrictions and opening up their economies to international competition in most fields of economic activity. Thus the new international economic order that is taking shape under the aegis of WTO is likely to pull down drastically the levels of domestic protection in all areas of economic activity. As far as agriculture is concerned, the Agreement on Agriculture (AoA) provides framework for the long-term reform of agricultural trade and domestic policies over the years to come, with the objective of introducing increased market orientation in agricultural trade. AoA deals specifically with: (1) providing market access, (2) regulating domestic support, and (3) containing export subsidies.

Market Access. AoA required that the prevailing trade-distorting non-tariff barriers in agriculture were to be abolished and converted into tariffs so as to provide the same level of protection and subsequently the tariffs were to be progressively reduced by a simple average of 36 per cent by the developed countries over 6 years (year ending 2000) and by 24 per cent by the developing countries over 10 years (year ending 2004).

Domestic Support. AoA divides domestic support into two groups – (1) trade distorting and (2) non-trade distorting or minimal trade distorting. All trade distorting domestic support is placed in ‘Amber Box’. This has to be quantified in accordance with the Aggregate Measure Support (AMS) and removed. Non-trade distorting domestic support measures have been divided into (1) Green Box, (2) Blue Box and (3) Special and Differential (S & D) Box. The Green Box measures include assistance given through environmental assistance programmes, services such as research training and extension, marketing information, certain types of rural infrastructure etc. The support under Green Box is excluded from any reduction commitments and is not subject to any upper limit. Subsidies under Blue Box include direct payments given to farmers in the form of deficiency payment (i.e., the difference in the government’s minimum support price and market price is paid directly to the farmers, as in USA), direct payments to farmers under production limiting programmes, as in European Union etc. Support under Blue Box is also exempted from any reduction commitments, but it has an upper limit. The S & D Box includes measures taken by developing countries, otherwise subject to reductions, such as investment subsidies and various agricultural input subsidies generally available to low income and resource poor producers in a developing country.

Export Subsidies. The developed countries were required to reduce the volume of subsidized exports by 21 per cent over 6 years and the budgetary outlays for export subsidies by 36 per cent with respect to the base period 1986-90. Developing countries were required to reduce the volume by 10 per cent and budgetary outlays by 24 per cent over 10 years.

Other Agreements Related to Agriculture

There are some other WTO agreements that have a clear bearing on agriculture: (1) Agreement on Sanitary and Phyto-Sanitary (SPS) measures, which sets international standards for protection of human, animal or plant life or health. (2) Agreement on Technical Barriers to Trade (TBT) aims to encourage use of international standards and calls for national testing and certifying bodies to avoid discrimination against imports. and (3) Agreement on Trade Related Intellectual Property Rights (TRIPs) covers seven types of intellectual property for protection, namely, patents, copyrights, trademarks, industrial designs, geographical indications, design layouts of integrated circuits and undisclosed information. As far as agriculture is concerned, article 27.3 (b) of the agreement requires members to provide for protection of plant varieties either by patent or by an effective sui generis system or by any combination thereof.

India had expected that with the dismantling of domestic support in developed countries and widespread reduction in export subsidies by these countries, as part of their commitments under WTO, market access for Indian agricultural products in developed countries would expand. But the developed countries have played their cards cleverly and have taken effective steps to block agricultural exports from developing countries including India behind various loopholes in AoA and allies agreements. On the other hand, India has provided increased market access to other countries by effectively dismantling quantitative restrictions during the last few years. To protect Indian agriculture and farmers from foreign competition, it is imperative for the government to lay down priorities for action.