IMPLICATIONS OF WORLD TRADE ORGANISATION ON AGRICULTURE

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IMPLICATIONS OF WORLD TRADE ORGANISATION ON
AGRICULTURE

• BY
• DR. P. K. VASUDEVA
• SENIOR PROFESSOR,
• ICFAI (UNIVERSITY) IBS,
• CHANDIGARH

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IMPLICATIONS OF WTO ON AGRICULTURE

• The Agreement on Agriculture of the WTO
  establishes a programme for the gradual reform of
  trade in agriculture. The programmes aims at
  establishing a fair and equitable
  market-oriented agricultural trading system by
  requiring countries to adopt new disciplines
  governing both
• The use of border measures to control imports.
• The use of export subsidies and other subsidies
  that governments grant to support the prices of
  agriculture products and assure a reasonable
  income to farmers.

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BORDER MEASURES

• Tariffication
• Country to abolish non-tariff measures (such as
  quantitative restrictions, discretionary
  licensing and variable levies).
• The obligation to tariffy quantitative
  restrictions does not apply to restriction
  maintained by developing countries in balance of
  payment difficulties. These countries are
  however, required to bind their tariffs.

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PERCENTAGE OF REDUCTION IN TARIFFS

• The developed and transitional economy countries
  have undertaken to reduce tariffs by an average
  of 37 (in six years) and developing countries by
  24 (in ten years). The least developed countries
  even though they have bound tariffs at higher
  sealing rates were not required to reduce them.
• Tariffs on a particular product must be reduced
  by at least 15 by developed countries and 10 by
  developing countries.

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CURRENT ACCESS COMMITMENTS

• In order to ensure that imports are not
  affected by application of higher rates resulting
  from tariffication, importing countries have
  given current access commitments by establishing
  tariff quotas on either a duty free or a
  preferential basis to cover imports that were
  entering market at lower duty rates.

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MINIMUM ACCESS COMMITMENTS

• For products for which little or no imports took
  place in the past because of the highly
  restrictive nature of the regime, countries were
  required to give minimum market access
  opportunities.
• The commitments provide for the establishment of
  tariff quotas equal to 3 of domestic consumption
  in the base period 1986-88 and rising to 5 by
  the end of 2000 for developed countries and 2004
  for the developing countries.

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• Lower rates (specified in the national schedules
  but not greater than 32 of the bound tarriffied
  rates) are applicable to the imports up to the
  quota limits, while the higher rates resulting
  from the tariffication will apply to imports over
  the quota limits.
• As a result of minimum access commitments,
  countries will have to import modest amount of
  their most restricted products.

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AGREMENT ON SCM

• The Agreement on SCM which deals with industrial
  products, divides subsidies into three categories
  according to traffic lights system Red, Amber
  and Green.
• Red Subsidies
• Red Subsidies are prohibited they include
  export subsidies. The rule against the use of
  export subsidies on industrial products,
  previously applicable to only developed
  countries, now covers developing countries.
  However, the later countries have a traditional
  period of eight years.

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Amber Subsidies

• Amber Subsidies mainly cover domestic support
  subsidies. These subsidies are permissible but
  actionable by importing countries. These are
  mainly covering domestic support subsidies. It
  requires that AMS should be reduced by developed
  countries by 20 over a period of 6 years from
  the average level reached in the base period
  1986-88. Developing countries are required to
  reduce AMS by 13.33 over a period of 10 years.

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Green Subsidies

• Green Subsidies include subsidies that are both
  permissible but non-actionable and to which
  reduction commitments do not apply. These
  subsidies are exempt from reduction commitments,
  if the specific conditions prescribed by the
  Agreements are met
• Government expenditure on agriculture research,
  pest control, inspection and grading of
  particular products, marketing and promotion
  subsidies.

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• Financial participation by governments in income
  insurance and income safety-net programmes.
• Payment for natural disaster.
• Payment under environmental programmes.
• Structural adjustment assistance provided through
  producers operations
• Payments under regional assistance programmes.

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Blue Box Subsidies

• The blue box is an exemption from the general
  rule that all subsidies must be reduced or kept
  within de minimis levels.
• It covers payments directly linked to acreage or
  animal numbers, but under schemes which also
  limit production by imposing production quotas or
  requiring farmers to set aside part of their land.

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Export Subsidies

• Developed countries are expected to reduce their
  export subsidy expenditure by 36 in six years,
  in equal installments form 1986-1990 levels.
• The volume of subsidized imports must also be cut
  by 21 over six years in equal installments in
  the same base period.
• For developing countries the percentage cuts are
  24 and 14 respectively in equal annual
  installments over 10 years.

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• The agreement also specifies that for products
  not subject to export subsidy reduction
  commitments, no such subsidies can be granted in
  future.
• The total outlay on export subsidies on
  agriculture products like wheat, coarse grains,
  meat, dairy products and sugar by the end of
  implementation period will be reduced from 22.5
  billion to 14.5 billion of which European union
  will account for half.

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IMPACT OF WTO ON AGRICULTURE

• The implementation of the AoA was to bring
  structural change in the agricultural trade of
  the world, however, developed countries have not
  opened their markets as per the agreement.
• The average growth of developed country imports
  of agriculture products grew by about 1 only.

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Special Safeguard Measures

• The special safeguard (SSG) provision was
  introduced to allow countries (with no QRs for
  sound BoP situation) to impose additional duties
  in order to protect them from sudden import
  surges in terms of volume or low prices.

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SPECIAL / SENSITIVE PRODUCTS

• A certain number of products of the developing
  countries would be exempt from tariff reduction
  known as Special Products in order to protect and
  promote food production, livelihood security and
  rural development.
• The key issues here are associated with the
  mechanism to decide on country-wise crops.
  Developed countries based on political, social
  and cultural considerations have designated
  Sensitive Products which will be treated with
  less stringently.

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DOHA ROUND DEVELOPMENT AGENDA

• At the Doha Ministerial in November 2001 the 121
  member countries had committed themselves on the
  following three pillars on agriculture besides
  TRIPS, GATS and SD totalling negotiations on the
  25 WTO agreements at the future Ministerial known
  as Doha Development Agenda-

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DDA Three Pillars of Agriculture

• Achieving Market Access for all the countries
• Reduction of Domestic Support or trade distorting
  subsidies
• Phasing out of Export subsidies step by step.

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POSITION OF THE DEVELOPING COUNTRIES ON DOHA ROUND

• Safeguarding the interests of Indias low income
  and resource poor agricultural producers remain
  paramount for India. This cannot be traded off
  against any gains elsewhere in the Doha
  negotiations.
• The G-33 proposed at least 20 agricultural
  tariff lines as Special Products, at least half
  of which should be exempted from any tariff cut.

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• Substantial and effective cuts in overall
  trade-distorting domestic support by US (70-75
  cut) and by EU (75-80 cut), including resolving
  the issue of product-specific caps on AMS and in
  new Blue Box were emphasised by the G-20
  countries.
• The collapse of the Mini-Ministerial WTO in
  Geneva on Doha Development Round after nine days
  of intense negotiations (July 21-29) confirms the
  solidarity of the developing countries.

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Collapse of Doha Round

• The negotiations broke down as the United States
  rejected the demand made by India and China that
  developing countries should be allowed to make
  use of special safeguard measures (SSM) in order
  to insulate their farmers from the sudden decline
  in the international prices or surge in import
  volumes of agricultural commodities.

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• The US refused to agree to the proposals from
  India and China that they should be allowed to
  impose extra 25 per cent duties, if imports are
  up 15 per cent of farm products.
• The US wanted the trigger for extra duties should
  be given only after imports surge 40 per cent
  surge over the average of the preceding three
  years.
• By the time we have 40 per cent surge in imports
  our farmers would have committed suicide said the
  Commerce Minister.

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CONCLUSION

• The negotiations should continue as about 17
  agreements out of twenty on TRIPS, GATS, NAMA, S
  D had been accepted.
• The issue on Agriculture will also get settled
  with little more give and take by the developed
  and the developing countries for the sake of poor
  farmers and for saving the future of WTO getting
  collapsed once for all.

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THANK YOU
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WTO AND DAIRY INDUSTRY

• INTRODUCTION
• From iron deficiency to diabetes and cancer, the
  risks of drinking milk could outweigh its
  benefits, both for children and adults. However,
  an over dependence on milk in a childs diet
  could lead to an iron deficiency.
• SOME FACTS
• India has emerged as the largest producer of
  milk in the world with annual production of 85
  million tonne.
• Maintained a steady growth rate of 4 per cent
  though there is a decline 2 per cent in the
  global milk production
• Milk yield per animal is the lowest 2 litres
  compared to US 19 litres.

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• Export of milk and milk products have been
  miniscule
• Our milk is laced with antibiotics, Indian milk
  has high counts of bacteria, pesticides and heavy
  metals.
• Milk quality is largely affected by diseases of
  the cow like foot-and-mouth disease, mastitis,
  hemorrhagic septicemia, anestrons, problems
  arising out of retention of placenta and milk
  fever.
• Mad cow disease is not there, because foreign
  cows are non-vegetarians and the Indian cows are
  vegetarians.

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US FARM ACT 2008

• The Bill-officially titled the Farm Security and
  Rural Investment Act of 2002 and signed by the US
  President, Mr. George Bush, on May-13 provides
  for continuation of the existing Milk Price
  Support Programme (MPSP).

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• Under THIS Act the US Department of Agricultures
  Commodity Credit Corporation (CCC) is committed
  to buy unlimited quantities of butter, cheese and
  non-fat dry milk (I.e. skimmed milk powder) from
  dairy plants at prices that enable them to pay a
  minimum support price for the milk supplied by
  farmers.
• The support price has, in turn, been fixed at
  9.90 per hundred weight for milk containing 3.67
  per cent fat, with CCCs purchase prices for
  dairy products being set at levels sufficient to
  enable plants of average efficiency to pay
  producers. a price that is not less than the
  rate of price support for milk.

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• Considering that a hundred weight equals 100
  pounds or 45.36 and one kg of cow milk is
  equivalent to 0.973 litres, this translates into
  an assured milk price of around Rs. 11 per litre
  at current exchange rates. Compare this to the
  Rs. 9.40-9.50 per litre rate that organised
  dairies are paying to farmers here for cow milk.
  Significantly, under the previous Clinton
  administrations Federal Farm Act of 1996, the
  MPSP was to have been eliminated from January 1,
  2000.

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• The 1996 Act had been established an
  incrementally downward movement in the support
  price from 10.35 per hundred weight in 1996 to
  9.90 hundredweight in 1999, after which the
  programme was to be discontinued altogether.
  This, however, did not take place and the
  programme was extended beyond January 1, 2000 at
  the support price of 9.90 per hundredweight.

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RECOMMENDATIONS

• Government to formulate mandatory quality
  standards for milk in line with the globally
  accepted norms
• Awareness should be generated from farm to
  processing levels for proper dairy management and
  strict adherence to quality standards.
• Standards for assessing the somatic cell count
  and (SCC) and total bacterial count (TBC) should
  be laid for ensuring public health and export
  quality standards.

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• India should take up the case to Dispute
  Settlement Body (DSB) of the WTO against the US
  for repealing the US Farms Act 2002 to make our
  dairy industry more competitive in the
  International Market.
• Taxes and the Cess on the dairy industry by the
  State Governments should not be levied to make it
  more competitive