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at that time USA and EU extended these tariff to the agriculture sector also that causes the resulting artificial maintenance of high level production led to sale of agriculture surplus to world market at the below cost of production this practice dumped agriculture based economy. These distortions in agriculture led to pressure from many counties to establish multilateral trade rule to create a fairer and market – oriented agriculture system. Than WTO agriculture agreement was negotiated in 1986-94 and was significant step toward fairer competition and less distorted sector .it include specific commitment by WTO member government to improve market access and reduce trade distorting subsidies in agriculture These commitments were to be implemented in six year period for developed nation and 10 year time period for developing nation
1. INCREASE MARKET ORIENTATION IN AGRICULTURE SECTOR 2. STERENGTH RULES TO IMPROVE PREDICTIBILITY AND STABILITY FOR DEVELOPING AS WELL AS DEVELOPED NATION 3. TO PROTECT THE INTEREST OF AGRICULTURE LED ECONOMY 4. REDUCE OBSTACLES OF BOUNDIIES BARRIER
Provision the Agreement on Agriculture The AoA has three pillars: main consideration on these factor 1. market access 2. Domestic support 3. export subsidies Market Access: aims to reduce border obstacles to imports of agricultural products, such as taxes and duties – commonly known as tariffs. Furthermore, countries had to abolish restrictions on the quantity of agricultural goods entering their markets. All other barriers that were not tariffs, known as ‘non-tariff barriers’ and Including health standards or packaging requirements, had to be converted into tariffs, a process known as “ratification.” The Special Safeguard (SSG) is a tariff mechanism that provides temporary protection against sudden import falls in world prices. However, only countries that underwent ratification can apply the SSG. Many countries, particularly developing countries, did not undergo tariffication because they did not have a significant amount of nontariff barriers. In Asia, only Korea, Malaysia, the Philippines, Taiwan and Thailand are eligible tousle the SSG – the rest are left with no mechanism to protect themselves from floods of food imports.
Domestic Support: this is the WTO name for the subsidies given by governments to farmers for specific agricultural products, or for agricultural infrastructure and research. Developed countries are the major providers of domestic support frothier farmers. The stated objective of the domestic support pillar of the AoA was to Reduce the amount of money going into production of farm goods that are subsequently exported, in other words to reduce subsidies that distort the otherwise free trade of agricultural products. The amount of support is measured on the basis of an “Aggregate Measure of Support” (AMS) which is a measure that attempts to calculate all the financial factors that influence a farmer to produce Certain product.
Export Subsidies: the AoA’s approach to export subsidies is to list the export subsidies that WTO Members have to reduce, and to ban the introduction of new subsidies. Export subsidies are harmful because they directly support exporters, most commonly agribusinesses or transnational commodity traders, enabling them to displace local producers – most commonly small-scale farmers in the countries to which they sell their goods – with artificially cheap products. Reductions in agriculture subsidy agreed in URUGVAY round Developed country Developing country 6 year: 1995 -96 10 year: 1995-96 Average cut for all -36% -24% agriculture product Minimum cut per product Domestic support Cut in total support for sector Export Value of subsidy Subsidized quantity -15% -10%
-20% -36% -21%
-10% -24% -14%
Some other measure also adopted in WTO. AoA beside of above three pillars 1.Anti-dumping measure- These are duties that a government imposes if it judges that the company exporting the product is engaged in unfair pricing. For example, if a company has different prices in different markets, the importing country receiving the imports at the lower price can impose a duty to raise the price to the level in another importer’s market. In addition, anti-dumping duties can be imposed where a company sells a product for a higher price in its
domestic market than it does in its export markets. Where there is no open market 2 Countervailing duties- These are tariffs that can be levied on imports that have benefited from the use of government subsidies, either domestic or export-related, in their country of origin. Under the AoA, a number of government subsidies were categorized as “noncountervailable,”which in effect legitimized a system in which countries had to accept imports whose price did not reflect their true production and marketing costs. With the expiry of the Peace Clause a number of U.S., European and other countries’ agricultural exports are now vulnerable to countervail by importing governments. Countervailing duties are distinct from anti-dumping duties; they are triggered by the use of government support payments in the country of origin, while anti-dumping duties are related to the behavior of exporting firms
3.Special product- A mechanism created by developing countries to protect and promote food production, livelihood security and rural development. The proposal is that developing countries would be allowed to designate a certain number of products that would be exempt from tariff reduction requirements and other disciplines. A number of initiatives have been undertaken to establish criteria that would be effective in putting this idea into practice. The question is complicated, both technically (Which crops should be eligible?) and politically (How many crops? Which countries will be eligible? How much protection will be granted?). it desided by AoA
BENEFITS OF AOA Importance of the Agreement for the Trading System • It deals with a significant sector of world economic activity. In many countries, including many least-developed and developing countries, agricultural trade remainsan important part of overall economic activity and continues to play a major role in domestic agricultural production and employment. • It corrects serious economic and trade distortions caused by non-marketoriented mechanisms that result in grossly inefficient use of resources • It could substantially reduce world poverty. The World Bank estimates that an end to trade-distorting farm subsidies and tariffs could expand global wealth by as much as 0.5 trillion dollars and lift 150 million people out of poverty by 2015. • Developing countries are insisting that it should receive utmost priority if multilateral trade negotiations are to proceed • If developed countries with the most agriculture protection (the US, EU, and Japan) renege on their commitments to the agreement, they stand to lose credibility with developing countries in efforts to further liberalize trade • It addresses food security issues. The trading system also plays a fundamentally important role in global food security. For example, it ensures that temporary or protracted food deficits arising from adverse climatic and other conditions can be met from world markets.
• It is long overdue. The products of greatest interest to the leastdeveloped countries .many agricultural products, together with clothing and other labor-intensive Manufactures are among the most heavily protected in the markets of their current
Problem with working of WTO AoA
Since it came into force, the AoA has demonstrated several weaknesses. These can be categorized under two broad headings - design related issues and implementation related issues 1. Design related issue a. No reorganization of difference in agriculture system b. subsidy system not design equally 2 Implemented related issue a. actually there is no reduction in subsidy b. unfair implementation of AoA
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