Module 1. Management Concepts & Principle
Module 2. Management Functions
Module 3. Marketing Management
Module 4. Concepts and application of management p...
Module 5. Production, Consumption, Processing and ...
Module 6. Meaning & Theories of International ...
Module 7. WTO provisions for trade in agricultural...
12 April - 18 April
19 April - 25 April
26 April - 2 May
Lesson-41 Agreement on Agriculture
The Agreement on Agriculture forms a part of the Final Act of the Uruguay Round of Multilateral Trade Negotiations, which was signed by the member countries in April 1994 at Marrakesh, Morocco and came into force on 1st January, 1995. The Uruguay Round marked a significant turning point in world trade in agriculture. For the first time, agriculture featured in a major way in the GATT round of multilateral trade negotiations. The obligations and disciplines incorporated in the Agreement on Agriculture, therefore, relate to, market access, domestic subsidy or domestic support and export subsidy which are explained below.
41.2 MARKET ACCESS
Under the reform programme, members have converted their non-tariff measures to equivalent bound tariffs. Some additional market access is provided through tariff rate quotas, and the tariffs are being reduced. Contingency protection is provided through special safeguards, and transparency works through notifications.
41.2.1 The Conceptual Framework
On the market access side, the Uruguay Round resulted in a key systemic change: the switch from a situation where a myriad of non-tariff measures impeded agricultural trade flows to a regime of bound tariff-only protection plus reduction commitments. The key aspects of this fundamental change have been to stimulate investment, production and trade in agriculture by
making agricultural market access conditions more transparent, predictable and competitive,
establishing or strengthening the link between national and international agricultural markets, and thus
relying more prominently on the market for guiding scarce resources into their most productive uses both within the agricultural sector and economy-wide.
In many cases, tariffs were the only form of protection for agricultural products before the Uruguay Round — the Round led to the “binding” in the WTO of a maximum level for these tariffs. For many other products, however, market access restrictions involved non-tariff barriers. The Uruguay Round negotiations aimed to remove such barriers. For this purpose, a “tariffication” package was agreed which, amongst other things, provided for the replacement of agriculture-specific non-tariff measures with a tariff which afforded an equivalent level of protection. The tariffs resulting from the tariffication process account, on average of the developed country Members, for around one fifth of the total number of agricultural tariff lines. For the developing country Members, this share is considerably smaller. Following the entry into force of the Agreement on Agriculture, there is now a prohibition on agriculture-specific non-tariff measures, and the tariffs on virtually all agricultural products traded internationally are bound in the WTO.
41.2.2 Schedule of Tariff Concessions
Developed country members have agreed to reduce, their tariffs by 36 per cent on average of all agricultural products, with a minimum cut of 15 per cent for any product over a six-year period beginning in 1995. For developing countries, the cuts are 24 and 10 per cent, respectively, to be implemented over ten years. Those developing country Members which bound tariffs at ceiling levels did not, in many cases, undertake reduction commitments. Least-developed country Members were required to bind all agricultural tariffs, but not to undertake tariff reductions.
41.2.3 Tariff Quota Commitments
As part of the tariffication package, WTO Members were required to maintain, for tariffied products, current import access opportunities at levels corresponding to those existing during the 1986-88 base period. Where such “current” access had been less than 5 per cent of domestic consumption of the product in question in the base period, an (additional) minimum access opportunity had to be opened on a most-favoured-nation basis. This was to ensure that in 1995, current and minimum access opportunities combined represented at least 3 per cent of base-period consumption and are progressively expanded to reach 5 per cent of that consumption in the year 2000 (developed country Members) or 2004 (developing country Members), respectively.
41.2.4 The Prohibition of Non-Tariff Border Measures
Article 4.2 of the AoA prohibits the use of agriculture-specific non-tariff measures. Such measures include quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing procedures, voluntary export restraint agreements and non-tariff measures maintained through state-trading enterprises. All similar border measures other than “normal customs duties” are also no longer permitted.
However, Article 4.2 of the AoA does not prevent the use of non-tariff import restrictions consistent with the provisions of the GATT or other WTO agreements which are applicable to traded goods generally (industrial or agricultural). Such measures include those maintained under balance-of-payments provisions (Articles XII and XVIII of GATT), general safeguard provisions (Article XIX of GATT and the related WTO agreement), general exceptions (Article XX of GATT), the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade or other general, non-agriculture-specific WTO provisions.
41.3 DOMESTIC SUPPORT
In WTO terminology, subsidies in general are identified by “Boxes” which are given the colours of traffic lights: green (permitted), amber (slow down — i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no Red Box, although domestic support exceeding the reduction commitment levels in the Amber Box is prohibited; and there is a Blue Box for subsidies that are tied to programmes that limit production. There are also exemptions for developing countries.
41.3.1 The Conceptual Framework
A key objective has been to discipline and reduce domestic support while at the same time leaving great scope for governments to design domestic agricultural policies in the face of, and in response to, the wide variety of the specific circumstances in individual countries and individual agricultural sectors. The approach agreed upon is also aimed at helping ensure that the specific binding commitments in the areas of market access and export competition are not undermined through domestic support measures.
The main conceptual consideration is that there are basically two categories of domestic support — support with no, or minimal, distortive effect on trade on the one hand (often referred to as “Green Box” measures) and trade-distorting support on the other hand (often referred to as “Amber Box” measures). For example, government provided agricultural research or training is considered to be of the former type, while government buying-in at a guaranteed price (“market price support”) falls into the latter category. Under the Agreement on Agriculture, all domestic support in favour of agricultural producers is subject to rules. In addition, the aggregate monetary value of Amber Box measures is, with certain exceptions, subject to reduction commitments as specified in the schedule of each WTO Member providing such support.
41.3.2 The Green Box
The AoA sets out a number of general and measure-specific criteria which, when met, allow measures to be placed in the Green Box. These measures are exempt from reduction commitments and, indeed, can even be increased without any financial limitation under the WTO. The Green Box applies to both developed and developing country Members but in the case of developing countries special treatment is provided in respect of governmental stockholding programmes for food security purposes and subsidized food prices for urban and rural poor. The general criteria are that the measures must have no, or at most minimal, trade-distorting effects or effects on production.
Government service programmes
The Green Box covers many government service programmes including general services provided by governments, public stockholding programmes for food security purposes and domestic food aid -as long as the general criteria and some other measure-specific criteria are met by each measure concerned. The Green Box thus provides for the continuation (and enhancement) of programmes such as research, including general research, research in connection with environmental programmes, and research programmes relating to particular products; pest and disease control programmes, including general and product-specific pest and disease control measures; agricultural training services and extension and advisory services etc
Direct payments to producers
The Green Box also provides for the use of direct payments to producers which are not linked to production decisions, i.e. although the farmer receives a payment from the government, this payment does not influence the type or volume of agricultural production (“decoupling”).
41.3.3 Other Exempt Measures
In addition to measures covered by the Green Box, two other categories of domestic support measures are exempt from reduction commitments under the AoA (Article 6). These are certain developmental measures in developing countries and certain direct payments under production-limiting programmes (Blue Box). Furthermore, so-called de minimis levels of support are exempted from reduction. It includes all domestic support measures in favour of agricultural producers that do not fit into any of the above exempt categories are subject to reduction commitments.
41.3.4 Reduction Commitments
The reduction commitments are expressed in terms of a “Total Aggregate Measurement of Support” (Total AMS) which includes all product-specific support and non-product-specific support in one single figure. Members with a Total AMS have to reduce base period support by 20 per cent over 6 years (developed country Members) or 13 per cent over 10 years (developing country Members). There was no requirement in the agreement for reduction commitment it the AMS was 5% for developed countries and 10% for developing and least developed countries.
41.4 EXPORT COMPETITION/SUBSIDIES
The core of the reform programme on export subsidies is the commitments to reduce subsidized export quantities, and the amount of money spent subsidizing exports.
41.4.1 The Conceptual Framework
The proliferation of export subsidies in the years leading to the Uruguay Round was one of the key issues that were addressed in the agricultural negotiations. While under the GATT 1947 export subsidies for industrial products have been prohibited all along, in the case of agricultural primary products such subsidies were only subject to limited disciplines (Article XVI of GATT) which moreover did not prove to be operational.
41.4.2 Reduction Commitments
Developed country members are required to reduce, in equal annual steps over a period of 6 years, the base-period volume of subsidized exports by 21 per cent and the corresponding budgetary outlays for export subsidies by 36 per cent. In the case of developing country Members, the required cuts are 14 per cent over 10 years with respect to volumes, and 24 per cent over the same period with respect to budgetary outlays.
41.5 OTHER ISSUES
The main reduction commitments are in market access, domestic support and export subsidies. But the Agriculture Agreement contains other provisions, including export restrictions, a “peace clause”, dispute settlement and further negotiations.
41.5.1 Export Restrictions
The AoA requires Members which consider to institute new export restrictions on foodstuffs to give due consideration to the effects of such restrictions on importing Members’ food security. Members, except developing country Members which are not net exporters of the product concerned, must notify the Committee on Agriculture before introducing new export restrictions on foodstuffs and consult with affected Members if so requested.
41.5.2 Peace Clause
The AoA contains a “due restraint” or “peace clause” which regulates the application of other WTO agreements to subsidies in respect of agricultural products (Article 13).
41.5.3 Resolving Disputes
In the case of disputes involving provisions of the AoA, the general WTO dispute settlement procedures apply. Nevertheless, the Agreement also provides for certain mechanisms that can be used by Members to address their concerns without recourse to these procedures.
41.5.4 Continuation Clause
The commitments taken under the AoA and within the Members’ schedules are part of an ongoing process. Already at the conclusion of the Uruguay Round, Members agreed to hold further negotiations on agriculture commencing one year before the end of the six-year implementation period.