Farm subsidies ? WTO needs to relook


Farm subsidies – WTO needs to relook

News: Finance minister, Smt. Nirmala Sitharaman recently urged the World Trade Organisation (WTO) to look at the issue of farm subsidies with an open mind.

What is the need to relook into subsidy norms?

o The viewpoints of the Global South and emerging markets have not been given equal weight as those of the developed nations in trade discussions.
o There is an issue with the reference price adopted under global trade norms - a WTO member country’s food subsidy bill should not breach the limit of 10% of the value of production based on the reference price of 1986-88. Subsidies for agriculture and poor farmers in developing countries were not counted at all and were frozen by the WTO. Food security is comparatively stronger in developed nations than in developing countries because of the unbalanced nature of trade agreements.
o The challenges on food security posed by the Covid-19 pandemic and Russia-Ukraine conflict have once again emphasized to relook the subsidy norms as food and fertilizer security have become more important now.
o As part of permanent solution, India has asked for measures like amendments in the formula to calculate the food subsidy cap and inclusion of programmes implemented after 2013 under the ambit of ‘Peace Clause’.

Peace Clause - Under the Peace Clause, WTO members agreed to refrain from challenging any breach in
prescribed ceiling by a developing nation at the dispute settlement forum of the WTO. This clause will stay till a
permanent solution is found to the food stockpiling issue.

What are subsidies under WTO?

Green Box - Green Box is domestic support measures that don’t cause trade distortion or at most cause minimal distortion. The Green box subsidies are government funded without any price support to crops. They also include environmental protection and regional development programmes. “Green box” subsidies are therefore allowed without limits (except in certain circumstances).

Amber Box - Amber box subsidies are those that can distort international trade by making a country's products cheaper in comparison to those of other countries. Example - Subsidies for inputs such as fertilisers, seeds, electricity, irrigation, and Minimum Support Price (MSP).

Blue Box - It is the “amber box with conditions” — conditions, designed to reduce distortion. Any support that would normally be in the amber box is placed in the blue box if it requires farmers to limit production. These subsidies aim to limit production by imposing production quotas or requiring farmers to set aside part of their land. At present there are no limits on spending on blue box subsidies.

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