wtoagriculture

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WTO & ITS IMPACT

ON AGRICULTURE

Group Members

Sagar Kumar 33125

Mukesh Pareek 33133Sandeep Suhag 33141

Karan Shah 33178

MBA I, Marketing A


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CONTENTS

1. WTO

2. Indian Agriculture-Overview3. WTO Agreements

4. Implications

5. Q & A


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WTO

}GATT-Genaral Agreement on Tariffs andTrade

}As a result of Uruguay round GATT

transformed in to WTO with effect fromJanuary 1995


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URUGUAY ROUND

September 1986

Three basic subjects for discussion:1. Reducing specific trade barriers &

improving market access

2. Strengthening GATT disiplines

3. Problems of liberalisation of services andTRIPs & TRIMs


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2.Indian Agriculture Overview


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3.WTO Agreement on Agriculture

} Introduction

} Salient features

} Product coverage

} Implementation period

} Peace Clause

}Committee on Agriculture} Implication of the agreement


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Introduction} The AoA forms a part of the Final Act of the

Uruguay Round.

} It was signed by the member countries in April1994 at Marrakesh, Morocco and came intoforce on 1st January 1995

} Uruguay Round agreement sought to bringorder and fair competition to the highly

distorted sector of world trade byestablishment of a fair and market orientedagricultural trading sector.


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}What is the Root cause of destruction?

- massive domestic subsidies given by theindustrialized countries to their agricultural sector for

many years.

This in turn led to excessive production

-dumping in international markets

-as well as import restrictions to keep out foreignagricultural products from their domestic markets


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Hence, the starting point for the establishment of afair agri-trade has to be:

1. Reduction of domestic subsidies given byindustrilised countries

2. Reduction in the volume of subsidised exports

3. Minimum market access opportunities foragricultural producers world wide


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Salient Features

The AoA contains provisions in thefollowing three broad areas of agriculture

and trade policy.

1. Market Access

2. Domestic Subsidy or domestic support

3. Export Subsidy


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1. Market Access On market access , the Agreement has two

basic elements

(i) Tariffication of non-tariff barriers i.e. quantitative restrictions and export and

import licensing etc. are to be replaced bytariffs to provide the same level of protection.

Tariffs to be reduced by a simple average of

36% over 6 years in case of developedcountries and 24% over 10 years in case ofdeveloping countries.


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} The only commitment India hasundertaken is to bind its tariffs

-on primary goods at 100%

- on processed foods at 150% and

- on edible oils at 300%


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} (ii) The second element relates to minimum level for

imports of agricultural products by membercountries as a share of domestic consumption.

}Countries are required to maintain currentlevels(1986-88) of access for each individualproduct.

}Where the current level of import is negligible, theminimum access should not be less than 3% ofdomestic consumption.


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} The minimum level is to rise by 5% by theyear 2000 in the case of developed

countries and by 2004 in the case ofdeveloping countries.


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2.Domestic Support

Provisions of the agreement regarding domesticsupport have two main objectives

1. To identify acceptable measures that support

farmers.2. To deny unacceptable, trade distorting support to

the farmers.

These provisions are aimed largely at thedeveloped countries where the levels of domesticagricultural support have risen to extremely highlevels in recent decades.


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All domestic support is quantified through themechanism of total Aggregate Measurement ofSupport(AMS)

AMS is a means of quantifying the aggregate valueof domestic support or subsidy given to eachcategory of agricultural product.

A commitment made requires 20% reduction in

total AMS for developed countries over 6 years: fordeveloping countries this percentage is 13% and noreduction is required in least developed countries.


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AMS consists of two parts- product specific subsidiesand non-product specific subsidies.

Product specific subsidy refers to the total level ofsupport for each individual agricultural commodity,essentially signified by procurement price in India.

Non-product specific subsidy refers to the total levelof support for the agricultural sector as a whole, i.e.

subsidies on inputs such as fertilizers, electricity,irrigation, seeds, credit etc.


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(3) Export Subsidies

The AoA lists several types of subsidies towhich reduction commitments apply.

However, such subsidies are virtually non-existent in India as exporters ofagricultural commodities do not get

direct subsidy.

Even exemption of Export profits fromincome tax under Section 80-HHC of theIncome Tax Act is not among the listed

subsidies.


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Note that developing countries are free to providethree of the listed subsidies-

1. Reduction of Export Marketing Costs

2. Internal and International Transport

3. Freight Charges-charges assessed for transportingCargo


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Product Coverage The Agreement defines agri.products by reference o he

harmonised system of product classification.

The definition covers not only basic agricultural goods

such as wheat, milk and live animals but the products

derives from them such as bread, butter, other dairyproducts and meat, as well as processed agriculturalproducts such as chocolates and sausages.

The coverage includes wines, spirits and tobocco

products, fibres such as cotton, wool and silk, and raw

materials skins destinated for leather production. Fishand fish products are not included.


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Implementation period

} The implementation period for thecountry-specific commitments is the six-

year period commencing in 1995.

} However, developing countries have theflexibility to implement their reduction andother commitments over a period of up to

10 years.


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Implication of Agreement

} Implications of AoA differ from country tocountry.

} Indian agriculture is characterized by apreponderant majority of small andmarginal farmers holding less than 2hectares of land, less than 35.7 % of land,

is under any assured irrigation system andfor the large majority of farmers , the gainsfrom the application of science andtechnology are yet to be realised.


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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.

The average growth of developed countries

imports of agricultural products increased by

just 1%. Indias share in total agricultural exports from

developing Asia is 8%, behind Chinas 19%,

Thailands 17%, Malasiyas 14%, andIndonesias 10%.


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Regarding freedom to pursue our domestic policies, it is quite

evident that in the short term India will not be affected by theWTO AoA.

India has been maintaining QRs on import of 825 agri productsas on 1.4.1997 . QRs are proposed to be eliminated within theover all time frame of six years in three phases 1.4.97 to31.3.2003.

In Trade Policy 2004-09 it has removed all QRs.

In India, for the present, he MSP provided to commodities isless than the fixed external reference price determined underagreement.

Therefore, AMS is negative. Therefore we could increase theproduct specific support up to 10%.


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Implications-Long Term

To enjoy the gain from the application ofScience& Technology it would require

1. Infrastructural support

2. Improved technologies

3. Provision of inputs at reasonable costs


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} Regarding the impact of liberalization of trade inagriculture in the long term, Indian agricultureenjoys the advantage of cheap labour.

} a comparison with world prices of agri-commodities reveals that domestic prices in Indiaare considerably less with the exceptions of a few

commodities.

} Imports to India would not be attractive in the caseof rice, tea, sun flower oil and cotton.


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}On the whole , large scale import of agriculturalcommodities as a result of trade liberalization isruled out.

} Even the exports of those food grains which arecheaper in the domestic market.

} But they are sensitive from the point of view ofconsumption by the economically weaker sectionsare not likely to raise to unacceptable levelsbecause of high inland transportation cost and

inadequate export infrastructure in India.


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Improved export prospects leads to increasingprice of domestic agri -commodities.

Farmers would get benefits which in turn wouldencourage investment in resource scarce

agricultural sector.

With decrease in production subsidies as well asexport subsidies, the international prices of agri-

commodities will rise and this will help in making ourexports more competitive in world market.


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Likely Issues for Negotiations

1. India argued for additional flexibility byappropriate adjustments to the

provisions of the AoA, in order to enableus to pursue our legitimate non-tradeconcerns

2. India believes that a focused discussion

on the subject will contribute toincreased awareness to the non-tradeconcerns such as food security and ruralemployment


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}Q: What are the prospects andopportunities for increasing agri exports

from Indias a result of WTO AoA?

}Ans: It is expected that reduction in exportsubsidy and domestic support to theagricultural sector by the developed

countries may lead to a decrease inproduction in those countries.

} Therefore it will give scope for expansionof exports from developing countries.


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} India with its cheap labour , diversified climaticconditions and large agricultural sector candefinitely gain though expansion of international

trade in agricultural products.

} However, the concerns relating to quality ofproducts for seeking markets in the advancedcountries needs to be addressed on an urgentbasis.


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THANK YOU

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