WTO & ITS IMPACT ON AGRICULTURE
Group Members ² Sagar Kumar ² 33125 Mukesh Pareek ² 33133 Sandeep Suhag ² 33141 Karan Shah ² 33178 MBA ² I, Marketing A
1. 2. 3. 4. 5.
WTO Indian Agriculture-Overview WTO Agreements Implications Q&A
Agreement on Tariffs and
a result of Uruguay round GATT transformed in to WTO with effect from January 1995
September 1986 Three basic subjects for discussion: 1. Problems of liberalisation of services and TRIPs & TRIMs
. Reducing specific trade barriers & improving market access 2. Strengthening GATT disiplines 3.
Indian Agriculture Overview
3.WTO Agreement on Agriculture
} Introduction } Salient
features } Product coverage } Implementation period } Peace Clause } Committee on Agriculture } Implication of the agreement
It was signed by the member countries in April 1994 at Marrakesh.Introduction
The AoA forms a part of the Final Act of the Uruguay Round. Morocco and came into force on 1st January 1995 Uruguay Round agreement sought to bring order and fair competition to the highly distorted sector of world trade by establishment of a fair and market oriented agricultural trading sector.
is the Root cause of destruction? . This in turn led to excessive production -dumping in international markets -as well as import restrictions to keep out foreign agricultural products from their domestic markets
.massive domestic subsidies given by the industrialized countries to their agricultural sector for many years.
3. the starting point for the establishment of a fair agri-trade has to be: Reduction of domestic subsidies given by industrilised countries Reduction in the volume of subsidised exports Minimum market access opportunities for agricultural producers world wide
. 1. Domestic Subsidy or domestic support 3. Market Access 2.Salient Features
The AoA contains provisions in the following three broad areas of agriculture and trade policy.
Tariffs to be reduced by a simple average of 36% over 6 years in case of developed countries and 24% over 10 years in case of developing countries. are to be replaced by tariffs to provide the same level of protection. quantitative restrictions and export and import licensing etc.1.e.
. the Agreement has two basic elements (i) Tariffication of non-tariff barriers i. Market Access
On market access .
only commitment India has undertaken is to bind its tariffs -on primary goods at 100% .on edible oils at 300%
.on processed foods at 150% and .
are required to maintain current levels(1986-88) of access for each individual product.} (ii)
The second element relates to minimum level for imports of agricultural products by member countries as a share of domestic consumption.
. the minimum access should not be less than 3% of domestic consumption. the current level of import is negligible.
minimum level is to rise by 5% by the year 2000 in the case of developed countries and by 2004 in the case of developing countries.
Provisions of the agreement regarding domestic support have two main objectives To identify acceptable measures that support farmers. trade distorting support to the farmers. 2.2.
1. To deny unacceptable. These provisions are aimed largely at the developed countries where the levels of domestic agricultural support have risen to extremely high levels in recent decades.
All domestic support is quantified through the mechanism of total Aggregate Measurement of Support(AMS) AMS is a means of quantifying the aggregate value of domestic support or subsidy given to each category of agricultural product.
. A commitment made requires 20% reduction in total AMS for developed countries over 6 years: for developing countries this percentage is 13% and no reduction is required in least developed countries.
subsidies on inputs such as fertilizers. seeds.
AMS consists of two parts.product specific subsidies and non-product specific subsidies.e. Product specific subsidy refers to the total level of support for each individual agricultural commodity. essentially signified by procurement price in India. i.
. Non-product specific subsidy refers to the total level of support for the agricultural sector as a whole. electricity. credit etc. irrigation.
(3) Export Subsidies
The AoA lists several types of subsidies to which reduction commitments apply. such subsidies are virtually nonexistent in India as exporters of agricultural commodities do not get direct subsidy. However.
. Even exemption of Export profits from income tax under Section 80-HHC of the Income Tax Act is not among the listed subsidies.
Reduction of Export Marketing Costs 2. Internal and International Transport 3. Freight Charges-charges assessed for transporting Cargo
.Note that developing countries are free to provide three of the listed subsidies1.
Fish and fish products are not included. and raw materials skins destinated for leather production.Product Coverage
The Agreement defines agri. wool and silk. as well as processed agricultural products such as chocolates and sausages. butter.products by reference o he harmonised system of product classification. other dairy products and meat. spirits and tobocco products. fibres such as cotton. The definition covers not only basic agricultural goods such as wheat. The coverage includes wines.
. milk and live animals but the products derives from them such as bread.
developing countries have the flexibility to implement their reduction and other commitments over a period of up to 10 years. } However.Implementation period
implementation period for the country-specific commitments is the sixyear period commencing in 1995.
is under any assured irrigation system and for the large majority of farmers .
. } Indian agriculture is characterized by a preponderant majority of small and marginal farmers holding less than 2 hectares of land. less than 35.7 % of land.Implication of Agreement
of AoA differ from country to
country. the gains from the application of science and technology are yet to be realised.
Whether we would be able to continue with our domestic policy aimed at improving infrastructure and provision of inputs at subsidised prices for achieving increased agricultural production.Implications of the AoA for India should thus gauged from the impact it will have on the following: 1. 2. Whether the Agreement has opened up markets and facilitated exports of our products.
. Thailand·s 17%. India·s share in total agricultural exports from developing Asia is 8%. and Indonesia·s 10%. The average growth of developed countries imports of agricultural products increased by just 1%. Malasiya·s 14%. behind China·s 19%.Implications-short period
The share of developing countries in world exports of food remained 44% Raw materials increased insignificantly from 32% in 1994 to 34% in 1996.
Regarding freedom to pursue our domestic policies. he MSP provided to commodities is less than the fixed external reference price determined under agreement. Therefore we could increase the product specific support up to 10%. AMS is negative.2003.4. for the present. India has been maintaining QRs on import of 825 agri products as on 1.1997 . In Trade Policy 2004-09 it has removed all QRs. Therefore. QRs are proposed to be eliminated within the over all time frame of six years in three phases ² 1. In India. it is quite evident that in the short term India will not be affected by the WTO AoA.3.97 to 31.
Infrastructural support 2. Provision of inputs at reasonable costs
. Improved technologies 3.Implications-Long Term
To enjoy the gain from the application of Science& Technology it would require 1.
to India would not be attractive in the case of rice. tea. Indian agriculture enjoys the advantage of cheap labour. a comparison with world prices of agricommodities reveals that domestic prices in India are considerably less with the exceptions of a few commodities. sun flower oil and cotton.
the impact of liberalization of trade in agriculture in the long term.
} Even the exports of those food grains which are cheaper in the domestic market. large scale import of agricultural commodities as a result of trade liberalization is ruled out.} On
the whole .
. } But they are sensitive from the point of view of consumption by the economically weaker sections are not likely to raise to unacceptable levels because of high inland transportation cost and inadequate export infrastructure in India.
. With decrease in production subsidies as well as export subsidies. Farmers would get benefits which in turn would encourage investment in resource scarce agricultural sector.
Improved export prospects leads to increasing price of domestic agri -commodities. the international prices of agricommodities will rise and this will help in making our exports more competitive in world market.
Likely Issues for Negotiations
India argued for additional flexibility by appropriate adjustments to the provisions of the AoA.
2. in order to enable us to pursue our legitimate non-trade concerns India believes that a focused discussion on the subject will contribute to increased awareness to the non-trade concerns such as food security and rural employment
. } Therefore it will give scope for expansion of exports from developing countries.} Q:
What are the prospects and opportunities for increasing agri exports from India·s a result of WTO AoA? } Ans: It is expected that reduction in export subsidy and domestic support to the agricultural sector by the developed countries may lead to a decrease in production in those countries.
the concerns relating to quality of products for seeking markets in the advanced countries needs to be addressed on an urgent basis.
} However. diversified climatic conditions and large agricultural sector can definitely gain though expansion of international trade in agricultural products.} India
with its cheap labour .