INTERNATIONAL TRADE LAW

ASSIGNMENT ON THREE PILLARS IN AGREEMENT ON

AGRICULTURE

Submitted To:
Dr. PARTHA PRATIM MITRA
[Assistant Professor, VLS]

Submitted By:
SHUBHAM JAIN
VIII Semester (Section E)
BA.LLB (H)
41017703815
Batch: 2015-2020

VIVEKANANDA INSTITUTE OF PROFESSIONAL STUDIES,

GGSIP UNIVERSITY, NEW DELHI

Three Pillars in Agreement on Agriculture
The Agreement on Agriculture (AoA) is an international treaty of the World Trade Organization.
It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and
entered into force with the establishment of WTO on January 1, 1995. In some areas, the
Agreement on Agriculture does not have specific rules. In these cases, either the GATT, 1994 or
one of the other WTO Agreements apply. Although other Agreements may apply to trade in
agricultural products, under Article 21 of the Agreement on Agriculture, if conflict arises
between the rules of the Agreement on Agriculture and any other WTO provision, the
Agreement on Agriculture prevails. The Agreement on Agriculture applies to Agricultural
Products as defined in Article 2 and Annex 1 of the Agreement on Agriculture. The core
objective of AOA was to establish a fair and market oriented trading system which was to be
implemented for a period of 6 years in developed countries and 9 years in developing countries.
With this, agriculture was brought under the new rules of world trading system for the first time.

The Agreement on Agriculture is divided into thirteen parts (composed of 21 articles) and it has
5 annexes.

Three Pillars:
The Agreement on Agriculture constitutes of three pillars. These are:

1. Market Access

2. Domestic Support

3. Export Competition

MARKET ACCESS
(ARTICLE 4)
The first pillar of the Agreement on Agriculture is “market access’’. Article 4 of the Agreement
on Agriculture is the legal basis for market access. There should be no discrimination in market
access i.e. free market access based on the principle of non- discrimination. The market access
required that tariffs for agricultural product fixed by individual countries be reduce to equivalent
tariff in order to allow free trade and encourage liberalization in world trade.

Prior to the Uruguay Round, market access for many agricultural products was restricted by
variable import duties and non-tariff measures, such as quantitative restrictions or import
prohibitions. Market access refers to the reduction of tariff (or non-tariff) barriers to trade by
WTO members. The 1995 Agreement on Agriculture consists of tariff reductions of:
 36% average reduction – developing countries - with a minimum of 15% per-tariff line
reduction in next six years.
 24% average reduction – developing countries - with a minimum of 10% per-tariff line
reduction in next ten years.

Least developed countries were exempt from tariff reductions, but they either had to convert
non- tariff barriers to tariffs- a process called “tariffication” or ‘bind’ their tariffs, creating a
ceiling that could not be increased in future.

WTO Members agreed to use the process called “tariffication’’ to convert all non-tariff barriers
into tariff barriers as they existed during the 1986-1988 base period (whether they were in
compliance with the GATT or country- specific exemptions) into tariff equivalents. As a result
of the Uruguay Round, WTO Members can only use ordinary custom duties to restrict imports of
agriculture goods with very few exemptions. In many cases, tariffs were so high or the import
restrictions so severe that very little, if any, imports actually got into the applying country. In
other cases, the quantitative restriction applied allowed only limited amounts. In such situations,
the tariff that resulted from tariffication would have been too high to permit trade.
Therefore, WTO Members also committed to maintain current market access opportunities
and/or to create new minimum market access opportunities. At present, many countries have
bound their tariffs at relatively high rates but, in many cases, the applied tariff rates are lower
than the bound tariff.

DOMESTIC SUPPORT
(ARTICLE 3, 6 & 7)
The second pillar of the Agreement on Agriculture is "domestic support". The main purpose of
this pillar is to support subsidies. Domestic support was targeted to reduce the subsidies given by
governments within their country for agricultural production and related activities. As India is an
agriculture intensive country so its main focus is gather the market that supports agriculture. The
main complaint about policies which support domestic prices or directly subsidize production is
that they encourage over-production and distort the market either by increasing exports or
reducing imports. The total domestic support should be below the level of de minimis within a
maximum period of 3 years for developed countries and 5 years for developing countries. This
was to reduce price distortion and unfair competition in agricultural world trade. AoA divides
domestic support into two categories: trade-distorting and non-trade-distorting (or minimally
trade-distorting). The WTO Agreement on Agriculture negotiated in the Uruguay Round (1986-
1994) includes the classification of subsidies into "boxes" depending on their effects on
production and trade:

1. “Amber Box’’ - (most directly linked to production levels)

2. “Blue Box’’ – supporting agriculture with the help of industrial or other manufacturing
establishment. (Production-limiting programmes that still distort trade)
3. “Green Box’’ – directly supporting agriculture. (Minimal distortion)

4. “Development Box’’

While payments in the amber box had to be reduced, those in the green box were exempt from
reduction commitments.

The Agreement on Agriculture's domestic support system currently allows Europe and
the United States to spend $380 billion a year on agricultural subsidies. These subsidies end up
flooding global markets with below-cost commodities, depressing prices, and undercutting
producers in poor countries, a practice known as ‘Dumping’.

EXPORT COMPETITION
(ARTICLE 3, 8-11)
The third pillar of the Agreement on Agriculture is “export competition”. The Agreement on
Agriculture does not prohibit the use of export subsidies, provided that Members remain within
their commitments, as set out in their Schedules, and subject to a set of rules. Members that grant
export subsidies also agreed to reduce the amount spenditure and the quantities exported with
subsidies. The Agreement also specifies that for products not subject to export subsidy reduction
commitments, no such subsidies can be granted in future. Export subsidy aims to reduce
subsidies of export related to agricultural products and to ban the introduction of new subsidies.
This aimed to protect small and marginal farmers in home countries especially in developing
countries.

SPECIAL SAFEGUARD MECHANISM

(ARTICLE 5)
A Special Safeguard Mechanism would allow developing countries to impose additional safety
measures in the event of an abnormal surge in imports or the entry of unusually cheap imports.

SPECIAL and DIFFERENTIAL TREATMENT provisions are also available for developing
country members. These include purchases for and sales from food security stocks at
administered prices provided that the subsidy to producers is included in calculation of AMS.
Developing countries are permitted untargeted subsidized food distribution to meet requirements
of the urban and rural poor. Also excluded for developing countries are investment subsidies that
are generally available to agriculture and agricultural input subsidies generally available to low
income and resource poor farmers in these countries. The idea was to protect the developed
countries and least developed countries from unfair competition in world market and to create a
world trading system where each individual country can come together and trade on equal
footing without any discrimination and distortion by the more advantageous countries of the
world.

IMPACT of AGREEMENT ON AGRICULTURE on INDIA

Indian agriculture is characterized by an overwhelming majority of small and marginal farmers
holding less than two hectares of land, less than 35.7% of the land, is under any assured
irrigation system. Farmers, therefore, require support in terms of development of infrastructure
as well as extension of improved technologies. The implications of the Agreement would thus
have to be examined in the light of the food demand and supply situation. The size of the
country, the level of overall development, balance of payments position, realistic future outlook
for agricultural development, structure of land holdings etc. are the other relevant factors that
would have a bearing on India’s trade policy in agriculture. Implications of the Agreement on
Agriculture for India should thus be evaluated from the impact it will have on the following:

a) Whether the Agreement has opened up markets and facilitated exports of products; and

b) Whether India would be able to continue with its domestic policy aimed at improving
infrastructure and provision of inputs at subsidized prices for achieving increased agricultural
production.

One of the major impacts of the Agreement was that India has been maintaining Quantitative
restrictions on certain agricultural import products. This clearly suggests that the AOA was more
beneficial for the developed countries as it furthers opened up new market opportunities for them
to exploit with their cheap agricultural products.

It is expected that reduction in domestic support and export subsidy by the developed countries
will lead to a decrease in production in their countries and will eventually give scope for
expansion of exports from the developing countries which will create a balanced export and
import situation in the world trade system. India, with its cheap labour, diverse agro- climatic
conditions and large agricultural sector can definitely gain through expansion of international
trade in agricultural product. The safeguards provided in the Agreement for the developing
countries protect India from any major impact of liberalization of the world trade. Thus, the
Agreement on Agriculture is believed to provide a link between domestic reforms and
international reforms by providing constraints that channel domestic policy change in the right
direction.