WTO and agricultural subsidy controversy

Context

At a time when the government is offering the enhanced Minimum Support Price (MSP) to the farmers for Kharif crops, then India's agricultural subsidy has become a subject of conflict in the World Trade Organization (WTO).

Important point

• The National Food Security Act has also been questioned in the WTO over the past few years. This is happening at the same time on which many WTO member countries have been telling India's agriculture subsidy against the Agriculture AOA rules.

Agreement on Agriculture (AoA)

• Under the international trade arrangements under the various agreements of the WTO, the Agreement on Agriculture (AoA) was introduced to include domestic participants to the top priority of foreign participants and to reduce their subsidies.
• The provisions on Agriculture for Agriculture (AoA) have been given for three special areas of agriculture-

पहुँच Make access to the market easily

में Reduce export subsidy

में Reduce domestic help

• Although India was given temporary relief after a lot of objections saying that any WTO member would not initiate a dispute against India, even if its subsidy is more than its commitments.

Subsidy to farmers

The subsidy given to farmers is known as box and they are classified into three groups-

Green box , the subsidy given under it usually does not cause distortion in the business or it produces a minimum disorder. Under this, financial support provided by the government for environmental protection programs, local development programs, research, disaster relief etc. is included, which does not have any type of restriction.

Blue box , under this box, that financial assistance is included which is given to the farmers for quantitative reduction in the production of the products. These assistance are given for reduction in trade defects.

Amber Box , except those of Blue and Green box, all subsidies that distort agriculture production and trade. In this subsidy, the government is involved in determining the minimum support price for agricultural products and on the basis of the quantity of agricultural products, direct financial assistance etc. Such subsidies on fertileizers, seeds, electricity and irrigation distort trade balance. They encourage excessive production and make the country's products cheaper than other international markets. It is important to bring down the various commitments for which it has been fixed.

The controversial issue relating to agriculture of the WTO is mainly related to this Amber Box subsidy.

• Various aspects of India's agricultural policies were closely examined by many WTO members including Australia, Brazil, Canada, European Union, Japan, Russia and the United States recently.
• India's supply management policies for skimmed milk powder, sugar and pulses, especially export subsidies to be provided to all these products / items and import ban on pulses have also been questioned.

Minimum Support Price

• This is a form of market intervention made by the Government of India to provide protection to agricultural producers against any sharp decline in agricultural value.
• On the basis of the recommendations of the Agricultural Costs and Value Commission (CACP), the minimum support prices are announced by the Government of India for the beginning of sowing season for some crops.
• Its main objective is to provide relief from the concerns of sales to farmers and procurement of cereals for public distribution.
• Presently 26 agricultural products under MSP [7 grains - paddy, wheat, barley, jowar, bajra, maize and ragi; 5 pulses- Gram, Arhar / Ture, Moong, Urad and Masur; 8 Oilseeds- Groundnut, Rapeseed / Mustard, Taria, Soybean, Sunflower seeds, Sesamam, Kusum seeds, Nieserseeds and other crops include Cornelia, Coconut, Raw Cotton, Raw Jute, Sugarcane (Reasonable and Beneficial Value) and VFC Tobacco. has gone.

Minimum Support Price Determination 

• While recommending the value policy of various commodities, the Agricultural Cost and Value Commission keeps in mind the various conditions (TOR) set in 2009.
• Accordingly, it analyzes-

♦ Demand and supply;

♦ Cost of production;

में Value trends in both domestic and international markets;

♦ Inter-crop value parity;

बीच Trade conditions between agriculture and non-agriculture;

का Potential impact of MSP on consumers of that product

• It may be noted that the cost of production is an important factor which is used as an input in the determination of MSP, but it is definitely not the only factor which determines the MSP.

How is the minimum support price measured? 

• The Ministry of Agriculture is studying the cost of agriculture in all states. This study shows how much the cost comes to a crop in a state. Keeping this study in mind, along with the rest of the other areas, the CACP gives a recommendation to the Government of India about the minimum support price of any crop.

Background

• Recently, the US questioned the basis of granting MSP subsidy and subsidy for cotton for wheat and rice.
• The US showed in the WTO application that in 2010-11, India's market value for rice was 70 percent higher than production value, and during this period, more than 60 percent of wheat for this period, 53 percent for cotton and Was up more than 81 percent.
• The US had raised another issue, in which the amount of 'elizible production' was kept at the center.
• Australia has also followed America to challenge India's value policy for sugarcane. Australia's main argument was that India would provide subsidies but it has not been declared before the WTO. However, according to the Sugarcane (Control) Order, 1966, India's long-term status has been such that it determines the fair and beneficial price for sugarcane, which pay the sugar mill to the farmers.

Subsidies provided by WTO member countries

• Subsidy provided by WTO members is calculated in terms of international prices, which are considered competitive prices.
• During the negotiation to adopt the AoA, the international price of each item was a fixed 'external reference value' (ERP), which was taken as an average of international prices during 1986-88.
• In developing countries like India, market value support for any crop can not exceed 10 percent of the total value of its production. However, in the context of India, this value has never been more than 10 percent. Yet the United States has been accusing India that market value support for many major crops is far above this limit.

Forward path

• The first observation indicates that there is a need for flexibility in policies for Indian agriculture in crisis, which is not available through the framework provided by the AoA.
• The Central Government should strive to bring structural changes in the agricultural sector, in which the interest of small and marginal farmers and landless laborers has been kept at the center.
• Countries like India need to focus again on the Doha Round talk. India needs a flexible policy to deal with the crisis-stricken agriculture sector. For this it is necessary to revive the WTO Doha Round.

Doha Round

• Doha Round is the latest round of business negotiations between WTO members.
• Widely aimed at reducing distortion in agricultural trade due to high tariff and other constraints, export subsidies and some other types of domestic assistance.

Source-business line