Agreement on Agriculture | UGC NET Commerce Preparation Course PDF Download

Overview of the Agreement on Agriculture

The Agreement on Agriculture is part of the World Trade Organization (WTO) agreements aimed at promoting free trade and reducing trade barriers in the agricultural sector. The primary goal of this agreement is to reform policies that distort agricultural production and trade by requiring countries to reduce subsidies and lower tariff barriers. This leads to more open and competitive agricultural markets.

Key Provisions of the WTO Agreement on Agriculture

The Agreement on Agriculture was a significant outcome of the Uruguay Round negotiations, which culminated in the formation of the WTO in 1995. The main objective was to correct and reduce the trade-distorting effects of government policies, such as subsidies, tariffs, and quotas, that protect domestic farmers from global competition. The key provisions of the agreement include:

• Reduction of Agricultural Export Subsidies: Member countries were required to reduce export subsidies by 36% over six years to ensure that exports are more market-driven.

• Cutting Internal Support Measures: Countries were mandated to reduce domestic support measures, like input subsidies and price supports, by 20% over six years, which aimed at reducing artificial inflation of farm incomes.

• Lowering Tariffs on Agricultural Imports: The agreement required countries to lower tariffs on agricultural imports by an average of 36% over ten years, thus reducing barriers to trade.

• Increasing Minimum Access Opportunities: Countries had to increase import quotas, allowing more agricultural products to enter domestic markets.

Impact on India

The WTO Agreement on Agriculture has had a significant impact on India's agricultural sector:

• Reduction in Import Duties and Quotas: India had to reduce import duties and eliminate quotas on several agricultural products, exposing domestic farmers to international competition.

• Reduction in Export Subsidies: India was required to cut its agricultural export subsidies by 36% over six years, impacting its ability to promote farm exports effectively.

• Reduction in Domestic Support: India had to reduce domestic support measures, such as minimum support prices and input subsidies, leading to uncertainty for farmers dependent on these policies.

• Disparities with Developed Countries: While India had to reduce subsidies, developed countries were still able to provide higher subsidies within agreed limits, making it challenging for Indian farmers to compete.

• Limited Gains: India did not benefit much from the market access commitments of developed countries due to non-tariff barriers faced by its exports.

Objectives of the Agreement on Agriculture

The main objectives of the Agreement on Agriculture under the WTO are:

• Reduction of Trade Distortions: The agreement aims to reduce distortions in agricultural markets caused by subsidies and other policies that governments use to support their farm sectors.

• Increasing Discipline and Transparency: The agreement introduces clear commitments and limits on subsidies, tariffs, and import quotas, bringing more discipline and transparency to global agricultural trade.

• Increasing Market Access: The agreement requires member countries to lower tariffs and increase import quotas to facilitate trade based on demand and supply.

• Reducing Export Subsidies: The agreement seeks to reduce export subsidies that create an uneven playing field, particularly those provided by developed countries.

• Promoting Market-Determined Prices: The agreement aims to move world agricultural trade towards market-determined prices by reducing subsidies and policy support that interfere with market signals.

Criticisms of the Agreement on Agriculture

While the Agreement on Agriculture was intended to reform global agricultural trade, it has faced several criticisms:

• Continued Subsidies in Developed Countries: Developed countries can still provide higher subsidies within agreed limits, making competition difficult for farmers in developing countries.

• Favoritism in Base Period Calculations: The base period for calculating reduction commitments favored developed countries, leading to unequal cuts in subsidies.

• Non-Compliance by Some Countries: Several countries, including developed ones, have not fully met their subsidy and tariff reduction commitments, limiting the effectiveness of the agreement.

• Loopholes for Trade-Distorting Subsidies: The agreement allows developed countries to continue providing trade-distorting subsidies through 'Green Box' measures.

• Limited Benefits for Developing Countries: The provisions to increase market access have primarily benefited exporters from developed countries, not farmers in developing nations.

Conclusion

The Agreement on Agriculture aimed to reform global farm trade by reducing subsidies, import barriers, and export competition. However, it has faced numerous challenges and criticisms. While the agreement's intent was positive, many countries have not fully met their commitments, and several loopholes have allowed developed countries to continue providing trade-distorting subsidies. As a result, the agreement has only partially achieved its goals, leaving an uneven playing field between developing and developed countries.