GS 2 -Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key phrases: World Trade Organisation, Agreement On Agriculture (AoA),Green Box, Amber Box, Blue Box, Aggregate Measurement of Support (AMS), countervailing measures, SCM Agreement

Why in News?

• Recently, World Trade Organisation (WTO) panel has ruled against India’s sugar export subsidy and domestic support to sugarcane growers in a dispute filed by Australia, Brazil and Guatemala. India has said that it will appeal against the verdict.

Background Information

• Australia, Brazil and Guatemala challenged some of India’s policy measures in the sugar sector at the WTO dispute panel in 2019. The countries complained that domestic support provided by India to sugarcane producers was in excess of the limit allowed by the WTO and India provided prohibited export subsidies to sugar mills.
• India has maintained its stand that the country’s sugar exports comply with WTO rules. India does not extend a subsidy to its farmers for exports, but instead gives a production subsidy.

Agreement On Agriculture (AoA)

AoA is aimed to remove trade barriers and to promote transparent market access and integration of global markets. Agreement on agriculture has three components:

1. Domestic Support: It aims for reduction in domestic subsidies that distorts free trade and fair price.

• Under this provision, the Aggregate Measurement of Support (AMS) is to be reduced by 20% over a period of 6 years by developed countries and 13% over a period of 10 years by developing countries.
  • Under this, Subsidies are categorized into three parts:

  • Green Box: Subsidies that do not distort trade, or at most cause minimal distortion. They are government-funded and must not involve price support. “Green box” subsidies are therefore allowed without limits.
  • Amber Box: All types of support measures that distort production and trade (with some exceptions) fall into the amber box. These include measures to support prices, or subsidies directly related to production quantities.
  • Blue Box: This is the “amber box with conditions”. Such conditions are designed to reduce distortion. Any support that would normally be in the amber box is placed in the blue box if the support also requires farmers to limit production. At present, there are no limits on spending on blue box subsidies.

1. Market Access: It requires that tariffs fixed (like custom duties) by individual countries be cut progressively to allow free trade. It also required countries to remove non-tariff barriers and convert them to Tariff duties.
2. Export Subsidy: Subsidy on agriculture inputs or making export cheaper or other incentives for exports such as import duty remission etc are included under export subsidies. These can result in dumping of highly subsidized (and cheap) products in other countries and damage the domestic agriculture sector of other country.

Criticism of AoA:

1. AoA has been criticized for reducing tariff protections for small farmers, a key source of income in developing countries, while simultaneously allowing rich countries to continue subsidizing agriculture at home.
2. In 2017 India and China jointly submitted a proposal to the WTO calling for the elimination – by developed countries – of the most trade-distorting form of farm subsidies.
3. They are known in WTO parlance as Aggregate Measurement of Support (AMS) or ‘Amber Box’ support as a prerequisite for consideration of other reforms in domestic support negotiations

WTO Panel Findings:

1. In its report, the panel observed that for five consecutive sugar seasons, from 2014-15 to 2018-19, India provided non-exempt product-specific domestic support to sugarcane producers in excess of the permitted level of 10 percent of the total value of sugarcane production, which is a violation under the Agreement on Agriculture (AoA).
2. The panel also found that the challenged schemes are export subsidies within the purview of Agreement on Agriculture.
3. In addition panel said, India has provided subsidies contingent upon export performance, also inconsistent with the SCM Agreement.

India’s Response:

1. On the issue of price support being violative of WTO norms, India has dismissed these allegations and has demanded that price support should be calculated by using the recent reference period instead of 1986/88 prices, which was factored in at the time of the creation of the WTO.
2. India said that its measures are consistent with its obligations under the WTO agreements.
3. The Indian government asserted that there is no impact of the panel’s findings on any of India’s existing and ongoing policy measures in the sugar sector.

Way Forward:

• The WTO ruling may not have any impact on sugar exports current season as the Indian government is not extending any assistance for shipments. However, last season, India exported a record 7.1 million tonnes of sugar. This season, sugar shipments are expected to top 6 million tonnes. So no big worry for now.
• But, the need is for a comprehensive reform in the agriculture sector, to develop Agriculture as an Enterprise, as recommended by Ashok Dalwai Committee. Moreover India with support of like minded countries should raise the matter in coming WTO summit, in order to safeguard the interests of its agriculture sector.

Mains Question

Q. Recently, WTO panel gave an adverse finding on India government support to sugar export violating various provisions of Agreement on Agriculture(AoA). Discuss how the AoA has become a tool for developed countries to pressurize developing countries to reduce domestic support given to the Agriculture sector. (15 marks)

Source: The Hindu BL